jdubrox's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/159668/comments http://seekingalpha.com/article/165726-why-exxon-should-significantly-increase-its-dividend?source=feed#comment-819467 819467
First of all, way to call it on the natural gas bit, seeing as XOM just agreed to the purchase of XTO most likely specifically for the company's natural gas interests. Unfortunately, XOM isn't using any of its cash to fund that purchase, and is instead diluting all XOM shareholders by buying XTO only with stock. The company has a huge treasury stock position as a contra-account to stockholders' equity on its balance sheet, about $165B as of 9/30/09. To use $41B of that amount to purchase XTO actually isn't a bad idea. The treasury stock account became that large to begin with, after all, as a result of share buybacks over the past however many years.

When you think about it, XOM has kept its dividend payout ratio lower than peers for two reasons:

1) The safety and security that investing in a company like XOM provides, a benefit that you pointed to yourself by referencing the report you read that said that during the height of the recession, XOM was a safer investment than the US government. Because XOM is such a solid company, it can afford to pay a lower dividend than fast-growing peers, much the same way that bond holders earn lower rates on bonds issued by safer companies with better credit ratings.

2) By not paying out extra cash as dividends for many years, the company has enabled itself to buy back stock. All the extra cash generated from operations has bought back this $165B of stock over time. It's now held as treasury stock, and is used for things like employee-stock plans, stock options as compensation, and for use in situations like the XTO purchase. These shares are already issued, but not outstanding.

So, share buybacks have helped XOM investors for many years because they've done the opposite of dilute. Now that the company wants to use all those bought-back shares for the XTO purchase, it will only be diluting current shareholders as much as they have been "un-diluted" by the buybacks in the past. In effect, if you've held XOM shares for all this time, then the net benefit that you've received from share buybacks by the company is being undone equally as much by the use of the shares previously bought back. It's a balancing act, that, in the end will yield a net effect equal to 0. It's only when XOM buys back shares and then retires those shares, that shareholders are actually benefited in an intrinsic way. Extrinsically, buybacks means positive goodwill and PR for XOM, and the share price will nudge a bit higher. But intrinsically, these buybacks have done no good for the longest while because XOM didn't retire the shares, and it using them instead to buy XTO.

You mentioned that it would have been nice if XOM had historically given more dividends, and conducted less share buyback activities. If they had just given out their extra cash to investors, they would need to come up with the funds to buy XTO another way. XOM's share buybacks have actually been a long-term investment in disguise. This is because those buybacks haven't been used to increase your position in the company intrinsically through retirement of the shares, but rather because the shares are being used to purchase XTO. Buy purchasing XTO with only shares, XOM isn't using up cash or issuing debt. The net effect is that the company is better off by $41 billion. If the cash had been given out as dividends, it wouldn't be inside the company (in this case in the form of treasury stock) for use on this purchase. Right now XOM would be attempting to raise $41B through debt offerings or redemption of short-term investments, and this would actually harm the company intrinsically and extrinsically. The treasury stock acts as an asset in this case, even though it is disguised as a contra-account to shareholders' equity on the balance sheet.

What it boils down to, is that the benefit you've received from share buybacks in the form of positive stock price movement over the past few years is being reset by the use of those shares to buy XTO. The dilution all XOM shareholders are experiencing now is a reset of all the positive gain experienced by the buybacks. The reset hurts, yes, but you are being benefited! Instead of $41B in dividends being lined in millions of XOM's investors' pockets right now, the money is still in the company, and your position in the company isn't harmed by the firm's need to raise these funds.

So, XOM is doing a decent job with its dividend program! It has long taken advantage of its solid position in the industry to offer lower returns by way of dividends. Ultimately, investors are still attracted to the strong company, and the company has more money in the long-run to spend on capex and acquisitions.

Cheers.]]> Wed, 23 Dec 2009 17:29:24 -0500
First of all, way to call it on the natural gas bit, seeing as XOM just agreed to the purchase of XTO most likely specifically for the company's natural gas interests. Unfortunately, XOM isn't using any of its cash to fund that purchase, and is instead diluting all XOM shareholders by buying XTO only with stock. The company has a huge treasury stock position as a contra-account to stockholders' equity on its balance sheet, about $165B as of 9/30/09. To use $41B of that amount to purchase XTO actually isn't a bad idea. The treasury stock account became that large to begin with, after all, as a result of share buybacks over the past however many years.

When you think about it, XOM has kept its dividend payout ratio lower than peers for two reasons:

1) The safety and security that investing in a company like XOM provides, a benefit that you pointed to yourself by referencing the report you read that said that during the height of the recession, XOM was a safer investment than the US government. Because XOM is such a solid company, it can afford to pay a lower dividend than fast-growing peers, much the same way that bond holders earn lower rates on bonds issued by safer companies with better credit ratings.

2) By not paying out extra cash as dividends for many years, the company has enabled itself to buy back stock. All the extra cash generated from operations has bought back this $165B of stock over time. It's now held as treasury stock, and is used for things like employee-stock plans, stock options as compensation, and for use in situations like the XTO purchase. These shares are already issued, but not outstanding.

So, share buybacks have helped XOM investors for many years because they've done the opposite of dilute. Now that the company wants to use all those bought-back shares for the XTO purchase, it will only be diluting current shareholders as much as they have been "un-diluted" by the buybacks in the past. In effect, if you've held XOM shares for all this time, then the net benefit that you've received from share buybacks by the company is being undone equally as much by the use of the shares previously bought back. It's a balancing act, that, in the end will yield a net effect equal to 0. It's only when XOM buys back shares and then retires those shares, that shareholders are actually benefited in an intrinsic way. Extrinsically, buybacks means positive goodwill and PR for XOM, and the share price will nudge a bit higher. But intrinsically, these buybacks have done no good for the longest while because XOM didn't retire the shares, and it using them instead to buy XTO.

You mentioned that it would have been nice if XOM had historically given more dividends, and conducted less share buyback activities. If they had just given out their extra cash to investors, they would need to come up with the funds to buy XTO another way. XOM's share buybacks have actually been a long-term investment in disguise. This is because those buybacks haven't been used to increase your position in the company intrinsically through retirement of the shares, but rather because the shares are being used to purchase XTO. Buy purchasing XTO with only shares, XOM isn't using up cash or issuing debt. The net effect is that the company is better off by $41 billion. If the cash had been given out as dividends, it wouldn't be inside the company (in this case in the form of treasury stock) for use on this purchase. Right now XOM would be attempting to raise $41B through debt offerings or redemption of short-term investments, and this would actually harm the company intrinsically and extrinsically. The treasury stock acts as an asset in this case, even though it is disguised as a contra-account to shareholders' equity on the balance sheet.

What it boils down to, is that the benefit you've received from share buybacks in the form of positive stock price movement over the past few years is being reset by the use of those shares to buy XTO. The dilution all XOM shareholders are experiencing now is a reset of all the positive gain experienced by the buybacks. The reset hurts, yes, but you are being benefited! Instead of $41B in dividends being lined in millions of XOM's investors' pockets right now, the money is still in the company, and your position in the company isn't harmed by the firm's need to raise these funds.

So, XOM is doing a decent job with its dividend program! It has long taken advantage of its solid position in the industry to offer lower returns by way of dividends. Ultimately, investors are still attracted to the strong company, and the company has more money in the long-run to spend on capex and acquisitions.

Cheers.]]> http://seekingalpha.com/article/131217-shareholder-communications-kudos-to-ge-s-immelt-dominion?source=feed#comment-465443 465443
Well, GE has cut the dividend by 70% and lost its AAA credit rating. These were two of my biggest reasons for investing in GE to begin with. I feel lied to, and I even found an article about the class-action lawsuit against GE that has recently cropped up, claiming the company made fraudulent claims about its dividend and misled investors. Just a few weeks before cutting the dividend is when Immelt made his comment. Not all that much changed in those few weeks, and there's no way that he couldn't have seen this dividend cut coming.

I think that GE's leadership may be impaired, but I'm not on the board so I can't say for sure. I don't know how much of what's happening to GE is Immelt's fault. It could be that anybody running GE right now would be experiencing the same pain, but nobody knows. I decided not to buy more GE stock, especially since analyst estimates for earnings over the next few years are looking like sub-$1 earnings per share. And have you looked at GE's balance sheet lately? Talk about drowning under long-term debt...

Anyways, I read the proxy statement and annual report, too. They were delivered to me in the mail from my broker. I thought that a lot of the shareholder proposals were good, actually. A lot of those proposed items were items that would reveal GE's management's true performance. And what do you think the "Directors" recommended? They recommended that shareholders vote against every single one of them. The justifications were baloney, in my opinion, and it's obvious that the leadership is trying to hang onto their MASSIVE salaries, pensions, and fringe benefits for as long as they can. Eventually the underperforming members of GE's executive staff will be hung out to dry, much the same way they have left their company out.]]> Thu, 16 Apr 2009 13:39:52 -0400
Well, GE has cut the dividend by 70% and lost its AAA credit rating. These were two of my biggest reasons for investing in GE to begin with. I feel lied to, and I even found an article about the class-action lawsuit against GE that has recently cropped up, claiming the company made fraudulent claims about its dividend and misled investors. Just a few weeks before cutting the dividend is when Immelt made his comment. Not all that much changed in those few weeks, and there's no way that he couldn't have seen this dividend cut coming.

I think that GE's leadership may be impaired, but I'm not on the board so I can't say for sure. I don't know how much of what's happening to GE is Immelt's fault. It could be that anybody running GE right now would be experiencing the same pain, but nobody knows. I decided not to buy more GE stock, especially since analyst estimates for earnings over the next few years are looking like sub-$1 earnings per share. And have you looked at GE's balance sheet lately? Talk about drowning under long-term debt...

Anyways, I read the proxy statement and annual report, too. They were delivered to me in the mail from my broker. I thought that a lot of the shareholder proposals were good, actually. A lot of those proposed items were items that would reveal GE's management's true performance. And what do you think the "Directors" recommended? They recommended that shareholders vote against every single one of them. The justifications were baloney, in my opinion, and it's obvious that the leadership is trying to hang onto their MASSIVE salaries, pensions, and fringe benefits for as long as they can. Eventually the underperforming members of GE's executive staff will be hung out to dry, much the same way they have left their company out.]]> http://seekingalpha.com/article/108640-the-cyber-monday-meltdown?source=feed#comment-318576 318576 Mon, 01 Dec 2008 23:42:58 -0500 http://seekingalpha.com/article/105857-ge-hits-12-year-low-time-to-stock-up?source=feed#comment-305761 305761
I understand what you mean about being a "major buyer." A poll would show that roughly $65,000 is a lot of money to about 99.8% of our population. I congratulate you on your major buy. You're right that you've put a lot of capital into GE. I surely hope this is the bottom... When the company released the statement today once-again guaranteeing their dividend through 2009, I myself picked up some shares too. Not quite as substantial a purchase, but I definitely bought big (in terms of my own goals and horizons).

I agree with previous commenters that UTX does seem more financially sound on paper. However, I, like yourself, will gladly take my almost 8% dividend on my GE shares and compound it for years to come. Not only that, the company will likely begin to raise the dividend again in 2011 at the latest. For sure, they won't lower it- GE has a reputation to maintain.

Investors and wannabe-investors alike have been giving GE quite a bad wrap lately because of its financial difficulties. Advice to them: get over it. Only 45% (at the most) of GE's revenue comes from their financial services business. GE's other business (Media, Infrastructure, Healthcare, etc.) are thriving, in general. Demand for nuclear power plants and jet turbines continues to grow at double-digit pace. Once GE gets its finances under control, investors will see the light and realize that all along the fundamentals have been there. GE has laid off very few workers, and maintains a healthy cash position, continuously gobbling up competitors (thanks partly to infusion from the Berkshire team).

Matt, you're a smart investor. As I bought GE today, I told myself, "people are going to look back on today and say, 'I watched GE sink to $14.75 a share that day, and I. sat. out. ..only to realize later on that it was one of the biggest mistakes of my life to have done so.'" I've seen the light and I know that you have too. Earnings growth will return... it will because GE is a solid company with solid leadership- they're already making the hard decisions (as evidenced by dumping certain divisions).

The fundamentals are there, but an irrational market abuses its only rational players. We're the rational players and it's time the irrationality ended. Buy.

Disclosure: Long GE, of course.]]> Fri, 14 Nov 2008 01:26:08 -0500
I understand what you mean about being a "major buyer." A poll would show that roughly $65,000 is a lot of money to about 99.8% of our population. I congratulate you on your major buy. You're right that you've put a lot of capital into GE. I surely hope this is the bottom... When the company released the statement today once-again guaranteeing their dividend through 2009, I myself picked up some shares too. Not quite as substantial a purchase, but I definitely bought big (in terms of my own goals and horizons).

I agree with previous commenters that UTX does seem more financially sound on paper. However, I, like yourself, will gladly take my almost 8% dividend on my GE shares and compound it for years to come. Not only that, the company will likely begin to raise the dividend again in 2011 at the latest. For sure, they won't lower it- GE has a reputation to maintain.

Investors and wannabe-investors alike have been giving GE quite a bad wrap lately because of its financial difficulties. Advice to them: get over it. Only 45% (at the most) of GE's revenue comes from their financial services business. GE's other business (Media, Infrastructure, Healthcare, etc.) are thriving, in general. Demand for nuclear power plants and jet turbines continues to grow at double-digit pace. Once GE gets its finances under control, investors will see the light and realize that all along the fundamentals have been there. GE has laid off very few workers, and maintains a healthy cash position, continuously gobbling up competitors (thanks partly to infusion from the Berkshire team).

Matt, you're a smart investor. As I bought GE today, I told myself, "people are going to look back on today and say, 'I watched GE sink to $14.75 a share that day, and I. sat. out. ..only to realize later on that it was one of the biggest mistakes of my life to have done so.'" I've seen the light and I know that you have too. Earnings growth will return... it will because GE is a solid company with solid leadership- they're already making the hard decisions (as evidenced by dumping certain divisions).

The fundamentals are there, but an irrational market abuses its only rational players. We're the rational players and it's time the irrationality ended. Buy.

Disclosure: Long GE, of course.]]> http://seekingalpha.com/article/97357-ge-not-that-different-from-you-and-me?source=feed#comment-265172 265172
Why do you comment as such, when recently you posted the following:

"I WOULD NORMALLY BE THE LAST PERSON TO DEFEND MR. IMMELT BUT THIS TIME I THINK GE'S RESULTS MIGHT HAVE BEEN BEYOND HIS CONTROL.ALTHOUGH HE HAS TO TAKE THE HEAT FOR THE MISS I BELIEVE THE FINANCIAL SECTOR MELTDOWN AND ECONOMIC SLOWDOWN WERE THE MAIN CONTRIBUTORS TO THIS."

You seem to contradict yourself, and the capital letters don't make you look smarter.]]> Thu, 25 Sep 2008 16:17:54 -0400
Why do you comment as such, when recently you posted the following:

"I WOULD NORMALLY BE THE LAST PERSON TO DEFEND MR. IMMELT BUT THIS TIME I THINK GE'S RESULTS MIGHT HAVE BEEN BEYOND HIS CONTROL.ALTHOUGH HE HAS TO TAKE THE HEAT FOR THE MISS I BELIEVE THE FINANCIAL SECTOR MELTDOWN AND ECONOMIC SLOWDOWN WERE THE MAIN CONTRIBUTORS TO THIS."

You seem to contradict yourself, and the capital letters don't make you look smarter.]]> http://seekingalpha.com/article/97357-ge-not-that-different-from-you-and-me?source=feed#comment-265171 265171 Thu, 25 Sep 2008 16:16:01 -0400 http://seekingalpha.com/article/97357-ge-not-that-different-from-you-and-me?source=feed#comment-265170 265170
On 5/28/08 Immelt purchased 115,000 shares of GE at about $30.60/share. That means he spent $3.5 million of his own AFTER-TAX money to purchase these shares. To my knowledge, he hasn't sold any shares since, and his stake stands at roughly 1,562,000 shares.

Do you have ANY idea how much money he's lost in the last year on his own company's stock? No- the answer is that you clearly have NO idea how much of a fiscal impact this is having on Immelt's own retirement portfolio.

1) He's not going anywhere. They're not going to give him the boot because he's handling GE's credit issues as well as anyone could. The market has a much larger hand right now in GE's financial success than Immelt does.

2) Since GE's peak last fall at around $42 per share, to where it stands right now at about $25.50, Immelt finds himself presently sitting on an unrealized loss of more than $20,000,000.

So let me say once more: you have no idea what you're talking about. It's ignorant investors that keep wise ones from making the right investing decisions.

I will proudly collect my 4.85% dividend yield of $1.24/share per year on my long position in GE. The company has announced its intention to maintain its present dividend, and you can rest assured they'd never cut it. Tell me what you're earning in your savnigs account. If its anything close to the national average, then my GE shares are yielding ten times as much income each year than your savings account is.

Oh yeah, and I'm beating inflation.

]]> Thu, 25 Sep 2008 16:15:09 -0400
On 5/28/08 Immelt purchased 115,000 shares of GE at about $30.60/share. That means he spent $3.5 million of his own AFTER-TAX money to purchase these shares. To my knowledge, he hasn't sold any shares since, and his stake stands at roughly 1,562,000 shares.

Do you have ANY idea how much money he's lost in the last year on his own company's stock? No- the answer is that you clearly have NO idea how much of a fiscal impact this is having on Immelt's own retirement portfolio.

1) He's not going anywhere. They're not going to give him the boot because he's handling GE's credit issues as well as anyone could. The market has a much larger hand right now in GE's financial success than Immelt does.

2) Since GE's peak last fall at around $42 per share, to where it stands right now at about $25.50, Immelt finds himself presently sitting on an unrealized loss of more than $20,000,000.

So let me say once more: you have no idea what you're talking about. It's ignorant investors that keep wise ones from making the right investing decisions.

I will proudly collect my 4.85% dividend yield of $1.24/share per year on my long position in GE. The company has announced its intention to maintain its present dividend, and you can rest assured they'd never cut it. Tell me what you're earning in your savnigs account. If its anything close to the national average, then my GE shares are yielding ten times as much income each year than your savings account is.

Oh yeah, and I'm beating inflation.

]]> http://seekingalpha.com/article/81576-ge-more-bad-news-to-come?source=feed#comment-186958 186958
Talk about written on a whim...]]> Tue, 17 Jun 2008 08:50:24 -0400
Talk about written on a whim...]]> http://seekingalpha.com/article/66799-time-to-short-financial-stocks-starting-with-bofa?source=feed#comment-121642 121642
Good luck with that one.]]> Mon, 03 Mar 2008 15:05:24 -0500
Good luck with that one.]]>