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  • ConocoPhillips: Investor Update On The Safe Dividend, Venezuela, Libya, And More [View article]
    Hi Michael,

    Here's the definition of our ratings:

    "Dividend Safety. We measure the safety of a firm's dividend by adding its net cash to our forecast of its future cash flows and divide that sum by our forecast of its future dividend payments. This process results in a ratio called the Dividend Cushion™.
    Scale: Above 2.75 = EXCELLENT; Between 1.25 and 2.75 = GOOD; Between 0.5 and 1.25 = POOR; Below 0.5 = VERY POOR."

    I guess we can add another bucket below 'Very Poor', perhaps something along the lines of 'Imminent Cut Expected,' a bucket that we don't expect ConocoPhillips to fall in. This bucket would be the firms that fall on our 'Dividend Yields to Avoid' list, which ConocoPhillips is not on:

    http://bit.ly/17flpsW

    We'll look into clarifying the subjective aspect of our definitions but the analysis remains unchanged. Again, it's perfectly fine to have one opinion of a firm's dividend and another of the firm's intrinsic value. Pasted below is answers to other FAQ:

    http://bit.ly/MtrQwH

    Thanks again for highlighting our work!

    The Valuentum Team
    Aug 26, 2013. 03:27 PM | Likes Like |Link to Comment
  • Why Some Investors Fail And 3 Top Stock Ideas [View article]
    Hi ChuckXX,

    We just recently added TEVA to our Best Ideas portfolio. Once concerns regarding Capaxone pass (maybe late 2014, early 2015), the sell side will be forced to remove "sell" ratings. We like the risk-reward at current levels, though it may be a few years before we see price-to-fair value convergence.

    All the best,

    The Valuentum Team
    Aug 26, 2013. 09:53 AM | Likes Like |Link to Comment
  • ConocoPhillips: Investor Update On The Safe Dividend, Venezuela, Libya, And More [View article]
    Hi Michael,

    See above. Thanks again.

    The Valuentum Team
    Aug 25, 2013. 06:29 PM | Likes Like |Link to Comment
  • ConocoPhillips: Investor Update On The Safe Dividend, Venezuela, Libya, And More [View article]
    Hi Michael,

    Excellent response.

    It's important to note that the analysis of a company's dividend has little to do with the analysis of a firm's equity value. If ConocoPhillips' slashed its dividend to $0 per share today, the firm's intrinsic value would not change. Yes, many income investors would sell shares, but the composition of the firm's equity value has not changed -- its future free cash flows.

    So, while we like ConocoPhillips, we can also have an opinion that its dividend is not as strong as those of others in our coverage universe. But again, we're really not disagreeing on anything here. We fully expect ConocoPhillips to continue raising its dividend through the course of the energy up-cycle.

    That said, ConocoPhillips can improve its Dividend Cushion score with better than expected future cash flow from operations and the retirement of debt. The firm can also improve its Dividend Cushion if the proceeds from asset sales come in better than expected. The Dividend Cushion is not a static figure. If ConocoPhillips continues to execute, we could see improvement in the measure over time.

    Keeping a close eye on changes to the measure is one of the more attractive attributes of our research offering for income investors. For example, the Dividend Cushion not only ranks the strength of firms' dividends, but also shows how the strength of the dividend is progressing over time. The Dividend Cushion is similar to a company's credit rating in this respect. For example, a firm can have excellent future prospects, awesome cash flow, but so much debt that its credit rating is junk. We're not at all saying ConocoPhillips ability to pay back debt is junk. However, we are saying that through the course of the energy cycle, its ability to keep RAISING its dividend is not as strong as others in our coverage, including Chevron.

    We'll also consider making some refinements with respect to our Dividend Cushion, and thank you very much for the suggestion. We're always looking to get better. As of today, however, the Dividend Cushion hasn't yet missed predicting a dividend cut in our universe (it even caught EXC, a steady eddy utility). We're not saying ConocoPhillips is going to cut its dividend. At its core, the Dividend Cushion shows the strongest firms on the basis of their future free cash flows relative to dividend payments, after considering their capital structure. All else equal, the larger the score, the stronger the cash flow relative to dividends and the stronger the balance sheet. ConocoPhillips' score is 0.2. Based on our ranking scale, this is 'Very Poor.' We like scores above 1.

    We'll continue to publish on Seeking Alpha for the time being, though we may not do so on Conoco for several quarters or next year. You can always visit our site to view the updated Dividend Cushion score on ConocoPhillips.

    Again, we fully expect ConocoPhillips to sustain its dividend. We're saying its dividend is not as strong as others on the basis of its free cash flow generation, capital requirements and balance sheet. It's also important to note that the board can really keep raising the dividend for a long time, as technically the board can raise it a minuscule 1/100 of a penny each year. But throwing that scenario aside, the Dividend Cushion tries to show just how much further capacity the company has to continue RAISING it after considering debt obligations.

    We're not that enthused by the capacity to keep raising it through the course of the economic cycle. But by no means does it mean the firm will cut the dividend. Our rating system highlights its safety as 'Very Poor'. Several firms with 'Very Poor' ratings have cut them, but not everyone of the firms with 'Very Poor' ratings have. We cover over 1,200 companies.

    Thanks again for your time Michael.

    All the best,

    The Valuentum Team
    Aug 25, 2013. 06:27 PM | Likes Like |Link to Comment
  • ConocoPhillips: Investor Update On The Safe Dividend, Venezuela, Libya, And More [View article]
    Yes, we want readers to come to our site. We want them to learn about our processes and the rigors that go into our analysis. We're proud of what we do, and we want to share it.

    Our president Brian Nelson has taught hundreds of equity and credit analysts across several continents, both independent and buyside. Why would we not stand by our work and encourage others to take a look?

    But most importantly, we want Michael to know that we appreciate his work and efforts in this article. It is not easy to put an article together. We also appreciate him mentioning our Dividend Cushion. However, we would have liked it even more if he would have shot us an email first before publishing on it.

    For example, we could have shown how it has an excellent yield (meaning only that it is above average), but not a safe long-term payout as explained in our future assumptions w/r/t COP versus CVX:

    http://seekingalpha.co...

    But, in any case, thank you for the mention.

    All the best,

    The Valuentum Team
    Aug 24, 2013. 08:42 PM | Likes Like |Link to Comment
  • ConocoPhillips: Investor Update On The Safe Dividend, Venezuela, Libya, And More [View article]
    Please read below. Thanks!
    Aug 24, 2013. 02:30 PM | Likes Like |Link to Comment
  • ConocoPhillips: Investor Update On The Safe Dividend, Venezuela, Libya, And More [View article]
    Very good points Michael.

    We think non-core asset sales make sense within the context of the Dividend Cushion and are captured within the Dividend Cushion framework. Investors have to be cognizant that non-core asset sales, while a source of cash when completed, will also have an impact on future cash generation by reducing operating cash flow from what it otherwise would have been, as these assets are no longer part of the company.

    The Dividend Cushion captures these non-core asset sales by giving ConocoPhillips credit in future cash generation (essentially these non-core assets are still embedded in future operating cash flow). Once these asset sales are completed, however, the numerator of the Dividend Cushion will still be largely unadjusted as asset sales flow to the balance sheet in the form of cash, but future cash flows are adjusted lower due to lower cash generated from a lower asset base. The Dividend Cushion takes the sum of future free cash flows (CFO less capex) + the net debt of the firm and the divides this sum by future cash dividends paid. The measure is completely forward looking.

    Remember, we're focused on the long-term. So selling assets up front is great for near-term cash flow, but it is merely bring cash forward. Importantly, however, if ConocoPhillips can sell these assets for a premium than what we are modeling as the present value of their future cash flows, then we could not only see upside in our estimate of ConocoPhillips Dividend Cushion score but also its fair value estimate. The Dividend Cushion score is not constant, as future assumptions often change when the facts change.

    Regarding your second quarter analysis, we liked ConocoPhillips' second quarter and thought it was the best among its major peers:

    http://bit.ly/13Oy3Ab

    Still, we're laser-focused on the fundamentals and cash-flow generation, and while we like ConocoPhillips a lot, we don't fudge our numbers just to support a popular opinion. We're completely independent.

    Thanks for bringing us up in your article. We think the more people know about the Dividend Cushion, the better it will be understood and applied in practice as what we consider to be a very valuable tool for dividend investors.

    Kind regards,

    The Valuentum Team
    Aug 24, 2013. 01:59 PM | 1 Like Like |Link to Comment
  • Distribution Coverage Deteriorates At Linn Energy [View article]
    Hi LaChic,

    Have you been to our website?

    If not, you're missing all, not some, of our research on LINE.

    Thanks for reading.

    The Valuentum Team
    Aug 24, 2013. 01:45 PM | Likes Like |Link to Comment
  • ConocoPhillips: Investor Update On The Safe Dividend, Venezuela, Libya, And More [View article]
    Mike,

    We'd be honored if you may also write articles on how the Dividend Cushion predicted the following firms' cuts. We can also point you to the relevant Seeking Alpha articles, where applicable.

    SuperValu (SVU), Roundy’s (RNDY), Dover Downs (DDE), Strayer (STRA), Exelon (EXC), Cliffs Natural (CLF), Pitney Bowes (PBI), and CenturyLink (CTL), JC Penney (JCP)

    We love the exposure!

    The Valuentum Team
    Aug 24, 2013. 11:39 AM | Likes Like |Link to Comment
  • ConocoPhillips: Investor Update On The Safe Dividend, Venezuela, Libya, And More [View article]
    Hi all,

    We fully expect ConocoPhillips to continue raising its dividend through the course of the upswing in the energy price cycle. But while ConocoPhillips is extremely shareholder-friendly with respect to the dividend, we still prefer Chevron as a dividend growth idea because it has a stronger balance sheet (we think Chevron's stronger balance sheet will come in handy during the downturns of the cycle). And even though ConocoPhillips' production advancements and reserve replacement are better, when it comes to dividend analysis (which is a portion of our entire equity suite on a company--it's 1 page out of COP's 18 page report on our website), we prefer firms with a stronger balance sheet, especially in a commodity-producing industry.

    We hope this clarifies things. Like most dividend growth investors, we're looking for firms that will continue to raise their dividends in each of the next 10-20 years. The board can raise its dividend up until the point that it cannot. We like to look at the financial statements of firms to ascertain whether the strength of the financials can actually support the board's moves over the long haul.

    The 'Dividend Cushion' is an excellent predictive tool. Please read more about it at the following location -- it has empirically predicted every dividend cut that has occurred in our coverage universe. It is both a ranking system and an objective predictor (where the score stands relative to 1)

    http://bit.ly/124FCv4

    Again, we apologize for any confusion with respect to our case on ConocoPhillips, and we'll work to clarify our analysis in future pieces. However, this doesn't change our analysis. ConocoPhillips can receive a better Dividend Cushion score if its production comes in better than expected and it continues to retire debt.

    The goal of the Dividend Cushion is to compare and rank the strength and safety of a firm's dividend on the basis of expected future free cash flows and the balance sheet, after considering dividend increases. The higher the Dividend Cushion score, the better. It is objective to a degree, though it factors in our subjective future operating assumptions in our discounted cash flow model.

    Thanks for the mention in the article!

    The Valuentum Team
    Aug 24, 2013. 11:23 AM | Likes Like |Link to Comment
  • Distribution Coverage Deteriorates At Linn Energy [View article]
    Thank you all again for reading!

    We love your comments. But let's keep them clean. You certainly can disagree with us, but things can get a bit out of hand when you start attacking our firm directly.

    We're also available at home. If you're really interested in working with us and getting to an answer, then let us know personally.

    All the best,

    The Valuentum Team
    Aug 23, 2013. 03:41 PM | Likes Like |Link to Comment
  • Distribution Coverage Deteriorates At Linn Energy [View article]
    Hello,

    For those on the message boards that are sometimes influenced by commenters. We'd like you to look at our call on the mREITs, and also the list of dissenters and their abrasive comments on these articles. What you'll find is a research firm that stood alone...and correct, despite repeated insults and aggressive tactics by commenters. Please take any and all comments with a grain of salt. There's a reason why we're not ashamed to stand by our work. It's darn good.

    Here's our call on the mREITs to fall from the top in Sep 2012:

    http://seekingalpha.co...

    And here's where we pounded the table on the mREITs fall late May:

    http://seekingalpha.co...

    The commenters on the latest mREIT article above and some of there comments were as follows:

    Mobile Preacher
    Chris Davis
    Peter Scansson
    REIT Analyst -- SA pro "this is written as if you did not know how convexity and volatility hedging work. I find it a little irritating to have to spell out basic stuff like that to people with "securities" in their name."
    Sting71 "Your report ignores the increase in interest spread."
    meridian6 - "this is the most worthless article"
    richbar - "this is one of the worst analysis"
    northhills24 - "Rich... sounds like someone is looking for clients."
    dharmabear
    Robin Heidersheit
    Bryce_in_TX
    Dasnny4Sense54
    DSandman999
    Jack Rice
    Jack Bolly
    horatioatthegate "This IS an "ambush piece," and anyone who knows anything about AmReits can see right through it. Pity is gets so many many clicks."
    Alphatag - "This article comes across like an infomercial wherein the author(s) are trolling for subscribers to a newsletter."
    hectorsector "It is a hallmark of dishonest or unscrupulous touts to take quotes out of context and use them as a basis for making their own unsubstantiated claims."
    Gtarras
    Dingolo
    Dividend Slueth
    ephort

    Thank you for reading!

    The Valuentum Team
    Aug 23, 2013. 12:01 PM | 2 Likes Like |Link to Comment
  • The Mortgage REIT Business Doesn't Work ... [View article]
    Thanks Danny4sense54! We appreciate the recognition on this fantastic call!
    Aug 23, 2013. 11:51 AM | Likes Like |Link to Comment
  • The Mortgage REIT Business Doesn't Work ... [View article]
    Here's one dated at the peak Sept 2012. We were way ahead of this one:

    http://seekingalpha.co...

    Thanks!
    Aug 23, 2013. 11:49 AM | Likes Like |Link to Comment
  • Distribution Coverage Deteriorates At Linn Energy [View article]
    Seriously?
    Aug 23, 2013. 11:18 AM | Likes Like |Link to Comment
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