General Electric Looks As If It's Becoming The Shareholder-Friendly Company It Once Was [View article]
Chuck,
Thanks for the great article. I'd be interested in your thoughts regarding GE's very large long term debt. Their long term debt to net income ratio is greater than 17 years.
What Will $2 Million Get You In Retirement? [View article]
David,
My comment was in reference to "being a stay-at-home couple is no fun". Paying off a mortgage is fine but it could be financially beneficial not to. You would have to run the numbers when the time comes.
The Business Model Of The Dividend Growth Investor [View article]
"Real" inflation is at the individual level, not the CPI or some modification of it. My real inflation was -1.5% between 2011 and 2012. The choices you make decide what your real inflation is.
Dividend Stocks, Silver, And Safety [View article]
RAS,
"What is your definition of "superior results" - higher price return, higher income return, higher total return?"
For me, superior results is a reliable increasing stream of income.
"I don't see how reinvesting in companies that are *more* expensive, could achieve "superior" results to reinvesting in companies that are *less* expensive"
The less expensive companies could be less expensive for a good reason - something fundamentally wrong with a looming dividend cut. Granted we would strive to not hold such companies but nobody is perfect. The less expensive could be of lesser quality thus threatening the "reliable" portion of my superior results definition.
Dividend Stocks, Silver, And Safety [View article]
Rich,
"I notice you did not address most of the stats indicating CVS has the greater probability of providing better returns going forward compared to reinvesting dividends in CL. "
I can't comment on your stats that you believe indicate CVS has greater probability of providing better returns going forward. First, your stats appear to incorrect - CVS yields 1.5% not 3.2%. Second, I can't predict 5 years into the future and I don't believe analysts can either. One year EPS projections are typically fairly accurate but outside of that, I don't put a lot of value in longer term projections. And finally, as I stated company quality carries more weight for me and I just don't see CVS in the same league as CL currently.
"Nor did you flatly state reinvesting CL dividends is the best available of your investment alternatives today."
Nope, I was strictly referring to your example of what to do with CL dividends on Feb 15. If the only alternative was reinvest in CL or use the dividends to buy CVS, I would have reinvested in CL - higher quality company, better yield and valuation.
"I don't see that this conversation is going to reach an agreement, and suggest we agree to disagree."
No need to agree or disagree, there is no right or wrong when it comes to opinions. Thanks for sharing yours.
On Feb 15: CL traded at an average price of 109.36 vs a prorated* 5 year PE fair value of 98.96 which equates to a 10.5% premium.
CVS traded at an average price of 51.61 vs a prorated* 5 year PE fair value of 44.03 which equates to a 17.2% premium.
*prorated = prorated PE for Feb 1 using 2012 actual EPS and 2013 median estimate EPS.
CL trades today at a trailing PE of 120.19 / 5.15 = 23.33 and a forward PE of 120.19 / 5.72 = 21.01 prorated to today : 22.51
CVS trades today at a trailing PE of 57.49 / 3.03 = 18.97 and a forward PE of 57.49 / 3.98 = 14.44 prorated to today : 17.36
I'm not seeing where you are getting a yield for CVS of 3.2%. CVS pays 0.90 a year which works out to be 1.57%
Aside from valuation metrics and yield, the more important factor for me is company quality - yet another subjective variable! My company quality score for CL is 59% higher than CVS. Send me a PM if you'd like to discuss those metrics.
Your use of the term "robot DRIPing" tends to make me think you're almost intolerant of anyone that does so. FWIW, I'm somewhere inbetween.
I hope that's enough evidence for you to understand my opinion.
Dividend Stocks, Silver, And Safety [View article]
richjoy403,
An there's the rub - it's all opinions. IMHO (ohoh more opinions), the largest variable in the whole investment decision making process is valuation. Using your example investments of CL and CVS on Feb 15, 2013. Given that both stocks trade closer to their 5 year PE averages than a market PE of 15, CL was trading 10.5% above and CVS was trading 17.2% above their respective 5 year PE average. Therefore, IMHO, both were over valued but CL was at a better valuation than CVS. There is no proof one methodology is better than the other. As with most things in life, the truth likely lies somewhere in between.
Dividend Stocks, Silver, And Safety [View article]
Key words "depends" and "could" - these are not proof. Your most under valued could be that way for a valid reason.
This statement is equally accurate:
DRIPing could achieve superior results because you're reinvesting in your winners as they keep running instead of reinvesting in those dividends in your under performers.
Dividend Stocks, Silver, And Safety [View article]
" I would point out there is no mathematical advantage to reinvesting dividends into the same stocks that paid them (it can amount to putting excessive emphasis on the trees, to the detriment of the forest). In fact, there may be great advantage to investing dividends elsewhere, into stocks selling at fair value or below, into stocks offering faster dividend growth, into stocks representing other market sectors, it can be less expensive to use limit-buy orders, and so forth."
Likewise, there is no mathematical advantage to investing dividends elsewhere. Neither methodology is provably superior. In Tim's case, he was referring to reinvesting during a steep downward decline which would likely mean that a DRIP would be reinvesting at fair value or below, thus removing any perceived benefit from switching horses.
Investment quality is also a factor in my DRIP or not-to-DRIP decision - unless the alternative investment is of equal quality or better and at a better valuation, my DRIP stays on.
An Underrated Technique From The Charlie Munger Playbook [View article]
Tim, thanks for another great article. I have a hard time understanding the logic of using valuation as a key metric when searching for an investment. The current price of KO stock has no effect on the quality of the company. I scan fundamentals looking for quality and only after a company makes it to my watch list do I look at valuation.
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
RAS,
Thanks for sharing your thought process on this trade. If you're feeling regretful about the trade and since this took place in an IRA with no tax consequences, couldn't you easily reverse the trade as if it never took place? (using todays prices, you could buy back your original 380 KMB and still have 17 shares of IBM as a bonus)
Guaranteed Retirement Accounts: Good Idea Or Not? [View instapost]
<rant> What has happened to taking personal responsibility? We've turned into a society that thinks we should get rewarded for spilling hot coffee on our self.
Life is a series of interesting decisions, take responsibility for your choices. </rant>
"Management has hinted that there won't be a dividend hike this year. That's good enough for me to move on, especially when I can get the same yield elsewhere and still get the dividend growth."
I'm curious as to what you're looking at for replacement. Yields on quality seem quite low at this point.
General Electric Looks As If It's Becoming The Shareholder-Friendly Company It Once Was [View article]
Thanks for the great article. I'd be interested in your thoughts regarding GE's very large long term debt. Their long term debt to net income ratio is greater than 17 years.
What Will $2 Million Get You In Retirement? [View article]
My comment was in reference to "being a stay-at-home couple is no fun".
Paying off a mortgage is fine but it could be financially beneficial not to. You would have to run the numbers when the time comes.
What Will $2 Million Get You In Retirement? [View article]
Depends on where that home is...
The Business Model Of The Dividend Growth Investor [View article]
Dividend Stocks, Silver, And Safety [View article]
"What is your definition of "superior results" - higher price return, higher income return, higher total return?"
For me, superior results is a reliable increasing stream of income.
"I don't see how reinvesting in companies that are *more* expensive, could achieve "superior" results to reinvesting in companies that are *less* expensive"
The less expensive companies could be less expensive for a good reason - something fundamentally wrong with a looming dividend cut. Granted we would strive to not hold such companies but nobody is perfect. The less expensive could be of lesser quality thus threatening the "reliable" portion of my superior results definition.
Dividend Stocks, Silver, And Safety [View article]
"I notice you did not address most of the stats indicating CVS has the greater probability of providing better returns going forward compared to reinvesting dividends in CL. "
I can't comment on your stats that you believe indicate CVS has greater probability of providing better returns going forward. First, your stats appear to incorrect - CVS yields 1.5% not 3.2%. Second, I can't predict 5 years into the future and I don't believe analysts can either. One year EPS projections are typically fairly accurate but outside of that, I don't put a lot of value in longer term projections. And finally, as I stated company quality carries more weight for me and I just don't see CVS in the same league as CL currently.
"Nor did you flatly state reinvesting CL dividends is the best available of your investment alternatives today."
Nope, I was strictly referring to your example of what to do with CL dividends on Feb 15. If the only alternative was reinvest in CL or use the dividends to buy CVS, I would have reinvested in CL - higher quality company, better yield and valuation.
"I don't see that this conversation is going to reach an agreement, and suggest we agree to disagree."
No need to agree or disagree, there is no right or wrong when it comes to opinions. Thanks for sharing yours.
Dividend Stocks, Silver, And Safety [View article]
CL 5 year PE : 19.0
CVS 5 year PE : 14.2
Source for the 5 year PE's is Morningstar:
http://bit.ly/11ov9RV
http://bit.ly/12hPQvw
On Feb 15:
CL traded at an average price of 109.36 vs a prorated* 5 year PE fair value of 98.96 which equates to a 10.5% premium.
CVS traded at an average price of 51.61 vs a prorated* 5 year PE fair value of 44.03 which equates to a 17.2% premium.
*prorated = prorated PE for Feb 1 using 2012 actual EPS and 2013 median estimate EPS.
CL trades today at a trailing PE of 120.19 / 5.15 = 23.33 and a forward PE of 120.19 / 5.72 = 21.01 prorated to today : 22.51
CVS trades today at a trailing PE of 57.49 / 3.03 = 18.97 and a forward PE of 57.49 / 3.98 = 14.44 prorated to today : 17.36
I'm not seeing where you are getting a yield for CVS of 3.2%. CVS pays 0.90 a year which works out to be 1.57%
Aside from valuation metrics and yield, the more important factor for me is company quality - yet another subjective variable! My company quality score for CL is 59% higher than CVS. Send me a PM if you'd like to discuss those metrics.
Your use of the term "robot DRIPing" tends to make me think you're almost intolerant of anyone that does so. FWIW, I'm somewhere inbetween.
I hope that's enough evidence for you to understand my opinion.
Dividend Stocks, Silver, And Safety [View article]
An there's the rub - it's all opinions. IMHO (ohoh more opinions), the largest variable in the whole investment decision making process is valuation.
Using your example investments of CL and CVS on Feb 15, 2013. Given that both stocks trade closer to their 5 year PE averages than a market PE of 15, CL was trading 10.5% above and CVS was trading 17.2% above their respective 5 year PE average. Therefore, IMHO, both were over valued but CL was at a better valuation than CVS.
There is no proof one methodology is better than the other. As with most things in life, the truth likely lies somewhere in between.
Dividend Stocks, Silver, And Safety [View article]
This statement is equally accurate:
DRIPing could achieve superior results because you're reinvesting in your winners as they keep running instead of reinvesting in those dividends in your under performers.
Dividend Stocks, Silver, And Safety [View article]
Likewise, there is no mathematical advantage to investing dividends elsewhere. Neither methodology is provably superior. In Tim's case, he was referring to reinvesting during a steep downward decline which would likely mean that a DRIP would be reinvesting at fair value or below, thus removing any perceived benefit from switching horses.
Investment quality is also a factor in my DRIP or not-to-DRIP decision - unless the alternative investment is of equal quality or better and at a better valuation, my DRIP stays on.
An Underrated Technique From The Charlie Munger Playbook [View article]
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
Thanks for sharing your thought process on this trade. If you're feeling regretful about the trade and since this took place in an IRA with no tax consequences, couldn't you easily reverse the trade as if it never took place? (using todays prices, you could buy back your original 380 KMB and still have 17 shares of IBM as a bonus)
Guaranteed Retirement Accounts: Good Idea Or Not? [View instapost]
What has happened to taking personal responsibility? We've turned into a society that thinks we should get rewarded for spilling hot coffee on our self.
Life is a series of interesting decisions, take responsibility for your choices.
</rant>
Let's Start From The Beginning [View instapost]
Let's Start From The Beginning [View instapost]
"Management has hinted that there won't be a dividend hike this year. That's good enough for me to move on, especially when I can get the same yield elsewhere and still get the dividend growth."
I'm curious as to what you're looking at for replacement. Yields on quality seem quite low at this point.