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  • Buying Aixtron Should Pay Off Handsomely For The Patient Investor [View article]
    Excellent article CW, sump up everthing thing about AIXG.


    My question is that when you use the DCF model to evaluate the company stock price, do you use the current dividend amount or you use the expected EPS?

    The second question is what is your expected dividend amount for the future under the worse case scenario?
    Dec 1, 2011. 07:52 PM | Likes Like |Link to Comment
  • Apple Seems Like 2 Rapidly Growing Companies [View article]
    Philip, thank you for sharing your method with us.

    The EPEE will be a better ratio to replace for the PE ratio. For the Apple case, since income from investment is small, we can obtain the EPEE directly from substracting PE ratio from Cash per share / Earning ration. For example, with price at $376 and PE around 13.43, Cash per share = 88, and EPS= 28, we have:

    EPEE= 13.43 - 88/28 = 10.29
    Dec 1, 2011. 07:27 PM | Likes Like |Link to Comment
  • Using Cash Flow To Predict Dividend Cuts [View article]
    Valuentum,

    Thank you for your excellent article. You make some really good points about why companies may cut their dividends and the future performance of those companies.

    One question that I want to ask is ABT with dividend cushion of 2.3 and excellent rating, but future dividend growth seems to be sluggish. ABT had a great dividend growth track record for the past 15 years; however, the next 4 years seem to be tough when we look at the expected dividend growth for the company. How is it going to affect your rating for the company?

    The second question is what cause the slow down of dividend growth? Is it because you expect the growth of the health care industry will be slow, or it's the general direction of the economy for the next few years?

    Thank.
    Dec 1, 2011. 06:36 PM | 1 Like Like |Link to Comment
  • Is Yield On Cost Really Important To Dividend Investors? [View article]
    Thank for your reply Rich.

    I'm aware of the pluses and minuses of having d-g stocks in a portfolio. When I talked about 10% capital gain, yeah, I assume that investor would have to sell the stock after 1 year of holding it. However, your response is really helpful. I think that while investing in growth stock may generate higher return, the risks and input efforts from investor are also higher, so may be it's not appropriate for many investors.

    again, thank for your response Rich.
    Nov 30, 2011. 12:43 AM | Likes Like |Link to Comment
  • How To Play Wal-Mart [View article]
    Thank Jim.

    One suggestion for your article. I think you don't need to list every item that Walmart is selling. I assume that most people understand about Walmart, thus what you did was just redundant.

    Second, I feel like you tried to list everything that is related to Walmart. For example, the combination of all fundamental factors give readers little inputs about how to value or Play Walmart. You need to put in some of your opinions so that we can either agree or disagree with what you wrote. It's the way that you interpret the information that is matter and attract readers.

    Lastly, I think that you are over-reliant on experts or other people opinions. While it give us, the average investor, some sense of security that other experts also like the stock, it does not give us the reason why we also should like the stock. And the fact that most of readers at SA come here to learn something new, reliant on experts' opinions is not a good thing to start with.

    So, just some thoughts. Hope it help with your article.
    MT.
    Nov 30, 2011. 12:21 AM | Likes Like |Link to Comment
  • How To Play Wal-Mart [View article]
    Thank Jim.

    One suggestion for your article. I think you don't need to list every item that Walmart is selling. I assume that most people understand about Walmart, thus what you did is just redundant.

    Second, I feel like you tried to list everything that is related to Walmart. For example, the combination of all fundamental factors give readers little input about how to value or Play Walmart. You need to put in some of your opinions so that we can either agree or disagree with what you wrote. It's the way that you interpret the information that is matter and attract readers.

    Lastly, I think that you are over-reliant on experts or other people opinions. While it give us, the average investor, some sense of security that other experts also like the stock, it does not give us the reason why we should. And the fact that most of readers here at SA come here to learn something new, reliant on experts' opinions is not a good thing to start with.

    So, just some thoughts. Hope it help with your article.
    MT.
    Nov 30, 2011. 12:18 AM | Likes Like |Link to Comment
  • Is Yield On Cost Really Important To Dividend Investors? [View article]
    Yeah, perhaps I was a little negative when I wrote the previews above. I just want to bring some different views about YOC here so other investors can decide for themselves how best to use it. While I think YOC maybe a good tool to evaluate your dividend companies, its helpfulness is limit at that, nothing more. Like you had pointed out above, investors who focus their views solely on YOC may fail to see other better investment opportunities elsewhere. It's dangerous to when one becomes complacent and fail to look forward.

    **richyou, thank for your contribution here. I just want to ask how do you think about dividend growth and capital gain. To me, a 10% YOC and 10% capital gain have the same effect to investor(If we exclude commission from selling stock and assume tax amount on both situations are the same). We don't need to limit ourselves to dividend companies but we can also look at non-dividend but growing companies.

    I recognize that to retired investors, dividend is their main source of income; therefore, having big part of their investment in non-dividend company for longer period of time may cause some problem. However, if we can find someway to balance the portfolio and make sure that investors have the right balance between dividend and growing companies, it will optimize the result. My understand that most dividend companies is slow growth, but safer. Therefore, it's suitable for retired investors who cannot afford risks in their retirement accounts. However, with careful selection and some kind of active management, investors can limit their risks why increase their chance of getting higher return.
    Nov 29, 2011. 01:03 AM | Likes Like |Link to Comment
  • Is Yield On Cost Really Important To Dividend Investors? [View article]
    Robert,

    You are right that your YOC 10 years later would be 10%; however, your ultimate need is the future dividend growth of 12.79%. The YOC is just one small part of the calculation and it has little influence on your decision making. You even don't need to know YOC and still can calculate the dividend growth needed.

    I think the use of YOC is just to give you some sense of how well your investment in DG companies have grown. It's a tool to evaluate PAST performance, that's all. When you need to make a decision to invest in any dividend company, the current yield + Future dividend growth will decide your YOC in the future. If the company you buy cannot increase its dividend by 12.79% a year, then your YOC will be less than 10%. So, pay closed attention to future dividend growth when you evaluate a company, not on YOC.
    Nov 28, 2011. 05:16 PM | 3 Likes Like |Link to Comment
  • Is Yield On Cost Really Important To Dividend Investors? [View article]
    Robert, thank for sharing your information. However, I think you was confused dividend growth with YOC. In fact, YOC has little to do with the way you calculate future dividend.

    If you look back at your example, you need $100,000 in income when you retire in 10 years, and you have $1,000,000 to invest today. You have some companies with current dividend yields about 3% in mind. So, you know that in order to have $100,000 in the future, you need to invest in company that will increase its dividend by about 12.79% annually for the next 10 year. The last part is just to find the company that fits your requirement. All of the steps above have nothing to do with YOC. You don't need YOC, and YOC shouldn't bear any influence on your investment decision. What you need is to find company that WILL increase dividend by 12.79% annually for the next 10 year.

    Again, we can look at past dividend growth to gauge future dividend growth, but as always, past performance does not guarantee future performance. In addition, YOC does not show past dividend growth, so it's wrong to use it to just future dividend growth of the company.

    You also need to adjust your numbers above. It should start with $30,000 and end with $101,837.

    However, I like what you said at the beginning, YOC is "backward looking" and "not actionable"
    Nov 28, 2011. 04:51 PM | 2 Likes Like |Link to Comment
  • Is Yield On Cost Really Important To Dividend Investors? [View article]
    Oh, I just merely pointed out some limitations of the YOC, it not just all about inflation. Of course, when we take into account inflation, we need to do it consistently for all other companies. And for any investor, real return is what is important, not nominal return.

    I also suggested that any investors who purchased MCD in 1999 and held it until now, today real YOC is just 2.88%. By looking at YOC only, investors might decide that MCD was not the good investment for the period between 1999 to present. That when they made mistake in investment because YOC failed to include any capital gain/loss that would have occur if investors sold the stock in today price. If we include capital gain, MCD would yield about 7% compounded annually.

    That why i brought this up. YOC does not show investors a truth return on an investment. When investors try to compare stocks, YOC doesn't give much information, thus unhelpful in decision making.
    Nov 28, 2011. 03:42 PM | Likes Like |Link to Comment
  • Is Yield On Cost Really Important To Dividend Investors? [View article]
    To sum it up, Yield On Cost (YOC) equals with dividend yield of the first year. Over the time, if the company increases its dividends, then YOC will increase.

    There are some limitations of YOC. First, it applies only for dividend companies.

    Second, it ignores any change in stock price. Assume that investor only holds the stock because of its dividend income, then they YOC is a good indicator to use to evaluate how dividends have grown compared with initial cost. But most investors would sell the stock at some point in the future. Their returns on the stock would be: Capital gain/loss at the point of sell + Accumulated Dividends. That when YOC can be misleading to investors. A truth returns for a stock must include both capital gain (loss) + YOC. If investor focus solely on YOC, then he just look at the picture with one eye.

    Lastly, what you mentioned above is nominal YOC. We need to adjust it with annual inflation. What interesting to investors is the real return on their investments. Therefore, real YOC would give investors a better view about how well dividends have grown during since they first bought the stock.

    Talking about inflation, although MCD has consistently increased its dividend during the past 13 years, investors who had purchased the stock did not do any better if we only look at the investment through YOC metric. We started with YOC in 1999 = 0.52% and ended with 7.28%. Assume that annual inflation was 3% during the last 13 year, real YOC in 1999 would be -2.48% and real YOC in 2011 would be only 2.88%. Notice that investors received negative YOC in 1999 because YOC was less than inflation rate. Again, we haven't considered any real return on capital, which would increase the real return for investors.
    Nov 28, 2011. 12:07 PM | 2 Likes Like |Link to Comment
  • Micro Cap, High Dividend Stocks: Waiting for Payback [View article]
    Good point Surf,

    In my Fundamental Finance class that I'm taking right now, we do a little search about stock market. WHX appeared in the list and most students bought that company without further investigation.

    For WHX, it is easy to evaluate the company since its future revenue is predetermined base on the natural resources the company holds. I actually did not buy the stock because I believed it was overvalued.
    Nov 22, 2011. 09:44 PM | Likes Like |Link to Comment
  • Micro Cap, High Dividend Stocks: Waiting for Payback [View article]
    Thank DD for your information.

    You are correct that the disadvantage of the payback period is that it ignores time value of money. However, the growth rate of dividend is somewhat compensates for the time value of money.

    I think that the main drawback of research is that it can be misleading to investor. Your study is based on past dividends and there is no guarantee that dividend will continue for the future. Take one example form SBLK, Shipping, Greece. Some investors may just look at the payback period and think that SBLK is the good stock to buy with the shortest payback period. However, looking at the payout ratio may tell a different story. SBLK almost paid 100% dividend from its current year income. So, there is little room for dividend to grow if net income stays the same in the future. Also, high payout ratio means little fund to reinvest in the company, tight cashflow. In addition, EPS growth rate in the past 5 years thus has little meaning. What happen if EPS growth rate in the past 5 year came mainly from the company increased its payout ratio. If it was the case, then net income might not increase at all in the past 5 year. That is not mention the company is based in Greece.

    Although future dividend is uncertain for all kind of company. One need to look at the company business and future prospect before he/she can decide to invest based on the payback period.

    Anyway, thank DD for sharing your information.
    Nov 22, 2011. 01:50 PM | 1 Like Like |Link to Comment
  • Day Trading Vs. Long Term Investing: Apple's Last Full Cycle As An Example [View article]
    Thank Victor and happy Thanksgiving to you and your family too.

    Thanks for sharing your trading with us. Surely, there are no thing wrong with being a short term trader if it fits your personality, trading style, and you are making money with it. Like I said, short term trader needs a lot of experience to guide him; otherwise, there are a lot to do. Sometimes, experience does not come by reading one or few books. Reading book does help, but practice makes perfect and help horn trader skill.

    I am thinking that for younger and just started investor, he/ she should learn to become a long term investor before he/she can move on to short term trading. It is because for starters, they don't have a lot of experience, discipline, patient, and huge capital to invest. If they choose to become a short term trader without any experience or discipline, this can be a huge mistake. That is not to mention that the amount of work they need to put in to become a day trader. Too much work would obscure their minds, makes them become jumpy, nervous, and lead to further mistake down the road. The main important for starters is that they learn and get experience from their trading. If they get too busy with their work, they cannot think and learn from what they are doing.

    That is what I thought. There are a lot to learn from trading.

    happy thanksgiving everyone
    Nov 22, 2011. 10:31 AM | Likes Like |Link to Comment
  • U.S. Sovereign Debt: Pulling Down GDP [View article]
    Lawrence,
    I like your argument and I think we can agree on many points that you had written above. I did consider the crowding out effect where the government and private sector have to compete for the same resources. However, during a recession, it seems that government may be the only entity that can and able to plug the gap, thus crowding out effect does not occur.

    You seem to suggest that matching government spending with new taxes would not increase government debts. It is true; however, that would not likely to help the economy. In fact, I would rather want the government to obtain new debts and not taxing people during the tough time. There are few ways government can help revive the economy and still not impose any new cost on businesses and consumers.
    Nov 21, 2011. 12:23 AM | Likes Like |Link to Comment
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