tk77mann's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/166194/comments http://seekingalpha.com/article/178492-creating-an-inflation-proof-source-of-income-in-retirement?source=feed#comment-810512 810512
Some companies, such as many utilities including ED, do not cover their dividends with their cash flows. They continue to borrow money and sell more shares to pay for capital spending. Their earnings are not often growing fast enough to cover the additional borrowing and dividend expenses, so eventually they either have to raise their prices (difficult politically and economically to do) and / or slash their dividends. When the dividends get cut, so do their stock prices, and we do not want to be on that ride when those wheels fall off.

Many stock analyses do not look at free cash flows and I think they leave out a serious piece of the investment data by doing so. ]]> Thu, 17 Dec 2009 10:45:15 -0500
Some companies, such as many utilities including ED, do not cover their dividends with their cash flows. They continue to borrow money and sell more shares to pay for capital spending. Their earnings are not often growing fast enough to cover the additional borrowing and dividend expenses, so eventually they either have to raise their prices (difficult politically and economically to do) and / or slash their dividends. When the dividends get cut, so do their stock prices, and we do not want to be on that ride when those wheels fall off.

Many stock analyses do not look at free cash flows and I think they leave out a serious piece of the investment data by doing so. ]]> http://seekingalpha.com/article/178026-high-monthly-income-from-canadian-oil-royalty-trusts?source=feed#comment-804961 804961
Goofus is also right about the currency conversion issue with CanRoys, although the Canadian dollar's value is closely tied to the value of oil and gas. And since the price of oil and gas is typically quoted in US dollars, when energy prices go up, the Canadian dollar goes up vs. the US dollar and the CanRoy distributions are worth more to US investors.

I think this is a good thing for CanRoy investors since these stocks help reduce currency fluctuation risk and since the US government is pumping so many dollars into circulation, with commodity inflation likely because of this.]]> Mon, 14 Dec 2009 10:16:00 -0500
Goofus is also right about the currency conversion issue with CanRoys, although the Canadian dollar's value is closely tied to the value of oil and gas. And since the price of oil and gas is typically quoted in US dollars, when energy prices go up, the Canadian dollar goes up vs. the US dollar and the CanRoy distributions are worth more to US investors.

I think this is a good thing for CanRoy investors since these stocks help reduce currency fluctuation risk and since the US government is pumping so many dollars into circulation, with commodity inflation likely because of this.]]> http://seekingalpha.com/article/174015-bill-ackman-s-pershing-square-q3-portfolio-update?source=feed#comment-767292 767292
I had never really looked at the stock before but added it to my wish list for investing. Between a ~7% FCF yield and their growth, it sounds both like a value / safe play plus will provide some dividend returns.]]> Thu, 19 Nov 2009 10:38:45 -0500
I had never really looked at the stock before but added it to my wish list for investing. Between a ~7% FCF yield and their growth, it sounds both like a value / safe play plus will provide some dividend returns.]]> http://seekingalpha.com/article/165626-mlps-in-good-shape-despite-credit-crisis?source=feed#comment-710410 710410
Seth Klarman is an under-the-radar value investment manager who runs Baupost Group, a mutual fund which has averaged 20% annual returns since he helped found the fund in 1983 or so. His fund now only invests for not-for-profits now to help them.

He wrote a value investing book, Margin of Safety, which is now out of print and sells used on ebay for ~$800 a copy. It describes his valuation and investment style, which is based on Ben Graham's approach.

Here is a link to one interesting article. finance.yahoo.com/news...

Here is a link to a speech he gave to finance students which also describes his work and approach to investing. We should all be so thorough and analytical when picking investments.

www.gurufocus.com/news... ]]> Fri, 09 Oct 2009 11:20:14 -0400
Seth Klarman is an under-the-radar value investment manager who runs Baupost Group, a mutual fund which has averaged 20% annual returns since he helped found the fund in 1983 or so. His fund now only invests for not-for-profits now to help them.

He wrote a value investing book, Margin of Safety, which is now out of print and sells used on ebay for ~$800 a copy. It describes his valuation and investment style, which is based on Ben Graham's approach.

Here is a link to one interesting article. finance.yahoo.com/news...

Here is a link to a speech he gave to finance students which also describes his work and approach to investing. We should all be so thorough and analytical when picking investments.

www.gurufocus.com/news... ]]> http://seekingalpha.com/article/164680-are-high-dividends-sustainable?source=feed#comment-703809 703809
I look at the Net Debt to EBITDA ratio of stocks to see if their debt loads are too high. For me a ratio of anything less than 4 : 1 in a stable industry is a fairly safe bet. But GD is absolutely correct, you have to watch all of your investments to keep losses to a minimum.]]> Mon, 05 Oct 2009 12:20:07 -0400
I look at the Net Debt to EBITDA ratio of stocks to see if their debt loads are too high. For me a ratio of anything less than 4 : 1 in a stable industry is a fairly safe bet. But GD is absolutely correct, you have to watch all of your investments to keep losses to a minimum.]]> http://seekingalpha.com/article/164680-are-high-dividends-sustainable?source=feed#comment-703708 703708
You are missing the wonderful benefit of depreciation when looking at dividend sustainability of companies like CTL and WIN. In 2008 CTL had a depreciation expense of $523.8M (all of which is a non-cash expense), versus Capital Expenditure spending of $220.3M. Their Free Cash Flow from this difference (~$300M) is more than enough to cover the $220M in dividends they paid out in 2008. And this does not even include their profits for 2008. With their extra cash flow they bought back $332M worth of stock in 2008, a real bargain since they were also reducing the dividends they have to pay in the future.

Some folks might argue the CTLs and WINs of the world might not be able to keep up spending less than they are depreciating. There are two strong factors that will be used to keep their FCF strong. The first is that these are old line companies with assets invested in the 1980's, 1990's, and recently that have still not been depreciated over their 30 year lives. (These are mainly wireline telecom companies.) The second factor is every time they buy another telecom company they get an entire new slug of assets to be depreciated.

In CenturyTel's case, they just bought Embarq. Even though Embarq had depreciated its assets over the decades, these same assets get written back up to the purchase price and now CTL gets to depreciate them again over the next 30 years. And CTL's cash flow goes on and on.

WIN has recently bought two smaller competitors so they are following a similar strategy (with economy of scale efficiencies thrown in, to boot).

So please do not only look at the Dividend Payout Ratio when looking for sustainable dividends. A Dividend Payout Ration based on Free Cash Flow is at least, if not more, as important.]]> Mon, 05 Oct 2009 11:13:02 -0400
You are missing the wonderful benefit of depreciation when looking at dividend sustainability of companies like CTL and WIN. In 2008 CTL had a depreciation expense of $523.8M (all of which is a non-cash expense), versus Capital Expenditure spending of $220.3M. Their Free Cash Flow from this difference (~$300M) is more than enough to cover the $220M in dividends they paid out in 2008. And this does not even include their profits for 2008. With their extra cash flow they bought back $332M worth of stock in 2008, a real bargain since they were also reducing the dividends they have to pay in the future.

Some folks might argue the CTLs and WINs of the world might not be able to keep up spending less than they are depreciating. There are two strong factors that will be used to keep their FCF strong. The first is that these are old line companies with assets invested in the 1980's, 1990's, and recently that have still not been depreciated over their 30 year lives. (These are mainly wireline telecom companies.) The second factor is every time they buy another telecom company they get an entire new slug of assets to be depreciated.

In CenturyTel's case, they just bought Embarq. Even though Embarq had depreciated its assets over the decades, these same assets get written back up to the purchase price and now CTL gets to depreciate them again over the next 30 years. And CTL's cash flow goes on and on.

WIN has recently bought two smaller competitors so they are following a similar strategy (with economy of scale efficiencies thrown in, to boot).

So please do not only look at the Dividend Payout Ratio when looking for sustainable dividends. A Dividend Payout Ration based on Free Cash Flow is at least, if not more, as important.]]> http://seekingalpha.com/article/132377-nobody-knows-what-bank-stocks-are-really-worth?source=feed#comment-473305 473305
If we can not determine the quality of their balance sheets, we can not reasonably predict their earnings, and their cash flows are impossible to use for valuation, banks as an investment class are an unpredictable crap shoot.
]]> Wed, 22 Apr 2009 17:28:24 -0400
If we can not determine the quality of their balance sheets, we can not reasonably predict their earnings, and their cash flows are impossible to use for valuation, banks as an investment class are an unpredictable crap shoot.
]]> http://seekingalpha.com/article/132121-why-i-m-making-first-american-my-top-position?source=feed#comment-471905 471905 Tue, 21 Apr 2009 19:26:06 -0400 http://seekingalpha.com/article/130605-a-closer-look-at-the-neglected-sub-sector-of-energy-refiners?source=feed#comment-461628 461628 Mon, 13 Apr 2009 12:27:28 -0400 http://seekingalpha.com/article/130456-must-know-criteria-for-picking-inflation-proof-high-dividend-stocks?source=feed#comment-459223 459223 www.kindermorgan.com/i...), they have a risk analysis for cash flow changes based on oil price changes. Buckeye Pipeline (BPL) is a pipeline company that takes no ownership of oil and therefore has no exposure to oil price fluctuations.]]> Fri, 10 Apr 2009 15:16:07 -0400 www.kindermorgan.com/i...), they have a risk analysis for cash flow changes based on oil price changes. Buckeye Pipeline (BPL) is a pipeline company that takes no ownership of oil and therefore has no exposure to oil price fluctuations.]]> http://seekingalpha.com/article/129612-ge-still-a-compelling-proposition-for-value-investors?source=feed#comment-453477 453477
I think Value Investors want a significant margin of safety, and GE has a huge, unpredictable downside. There are just too many other low debt, fairly recession-resistant, high cash flow businesses to invest in to take a chance on GE.]]> Mon, 06 Apr 2009 12:04:17 -0400
I think Value Investors want a significant margin of safety, and GE has a huge, unpredictable downside. There are just too many other low debt, fairly recession-resistant, high cash flow businesses to invest in to take a chance on GE.]]> http://seekingalpha.com/article/127284-using-covered-calls-to-replace-usb-dividend-barron-s?source=feed#comment-436843 436843 Mon, 23 Mar 2009 13:02:05 -0400 http://seekingalpha.com/article/124637-wells-fargo-jumps-on-the-dividend-cutting-wagon?source=feed#comment-418251 418251
Since banks' balance sheets hide so many toxic loans and their profitability is undependable, I am moving out of these shares into more dependable stock investments. I believe lots of other investors are doing the same, which will keep bank share prices down for a LONG time. Not going to be fooled a second time . . . .]]> Sun, 08 Mar 2009 15:14:45 -0400
Since banks' balance sheets hide so many toxic loans and their profitability is undependable, I am moving out of these shares into more dependable stock investments. I believe lots of other investors are doing the same, which will keep bank share prices down for a LONG time. Not going to be fooled a second time . . . .]]> http://seekingalpha.com/article/124307-williams-coal-seam-gas-royalty-trust-income-you-can-believe-in?source=feed#comment-414242 414242
Would love the income, but is it worth the IRS paperwork every year?]]> Thu, 05 Mar 2009 10:59:48 -0500
Would love the income, but is it worth the IRS paperwork every year?]]> http://seekingalpha.com/article/124093-us-bancorp-cuts-dividend-by-88?source=feed#comment-412793 412793
I sold my USB this morning. My trust in financial stocks is down even more than I ever thought possible. There are a lot of other companies with transparent financial statements paying a decent dividend with cash flows that cover the dividends. ]]> Wed, 04 Mar 2009 12:01:37 -0500
I sold my USB this morning. My trust in financial stocks is down even more than I ever thought possible. There are a lot of other companies with transparent financial statements paying a decent dividend with cash flows that cover the dividends. ]]> http://seekingalpha.com/article/119630-an-estimation-of-expected-dividend-growth-rates?source=feed#comment-382453 382453
Thanks for all of this great work.]]> Tue, 10 Feb 2009 11:55:47 -0500
Thanks for all of this great work.]]> http://seekingalpha.com/article/119283-nine-companies-buck-the-trend-raise-dividends?source=feed#comment-381231 381231
What companies do you recommend for better (but still safe) dividend yields? Thx.
]]> Mon, 09 Feb 2009 12:56:14 -0500
What companies do you recommend for better (but still safe) dividend yields? Thx.
]]> http://seekingalpha.com/article/116256-four-oil-giants-to-keep-an-eye-on-barron-s?source=feed#comment-366010 366010
Don't forget oil is priced in dollars, not pounds, so even if the pound crashes BP's earnings and dividends will be issued in dollars. This will be a good thing for UK investors of BP shares.

The major oil companies are a good hedge against the looming inflation we are facing with the huge monetary influx being spent to prop up the economy, IMO. ]]> Sun, 25 Jan 2009 20:30:52 -0500
Don't forget oil is priced in dollars, not pounds, so even if the pound crashes BP's earnings and dividends will be issued in dollars. This will be a good thing for UK investors of BP shares.

The major oil companies are a good hedge against the looming inflation we are facing with the huge monetary influx being spent to prop up the economy, IMO. ]]> http://seekingalpha.com/article/112409-penn-west-still-shaky-after-cutting-distribution?source=feed#comment-363052 363052
I am still looking for other sectors to invest in to try to fight the (huge) looming inflation since I think we will still have low consumer demand carrying on from the recession. I keep coming back to oil and gas stocks since gold, for example, is a "want" not a "need" for people. And we will still be dependent on oil and gas for another decade at least so demand for oil and gas will be there.]]> Thu, 22 Jan 2009 11:18:55 -0500
I am still looking for other sectors to invest in to try to fight the (huge) looming inflation since I think we will still have low consumer demand carrying on from the recession. I keep coming back to oil and gas stocks since gold, for example, is a "want" not a "need" for people. And we will still be dependent on oil and gas for another decade at least so demand for oil and gas will be there.]]> http://seekingalpha.com/article/115277-how-the-government-forced-bofa-to-marry-merrill-lynch?source=feed#comment-359105 359105 Sun, 18 Jan 2009 13:01:04 -0500 http://seekingalpha.com/article/114242-why-it-s-wise-to-sell-on-dividend-cuts?source=feed#comment-353385 353385
Besides the Payout Ratio, I look at the Free Cash Flow versus the total Dividends paid out every quarter. On the Yahoo Finance Cash Flow page for every stock you can see where a company's cash went to per quarter and per year. If Net Income plus Depreciation is significantly higher than Capital Expenditures plus Dividends Paid, then there is more assurance the dividend is fairly secure. (No guarantees, though, especially in this business climate.)

On the Cash Flow pages you can also see if the company has been buying back stock or selling more, and/or issuing more debt or paying it off. A number of companies are issuing more stock and/or more debt to have the cash to pay their generous dividends. Unless their business and profits increase they will have to eventually cut their dividend.

The companies I really like are the ones that increase their dividends AND buy back stock AND pay down debt regularly. Safest stocks around for my money.]]> Mon, 12 Jan 2009 11:43:32 -0500
Besides the Payout Ratio, I look at the Free Cash Flow versus the total Dividends paid out every quarter. On the Yahoo Finance Cash Flow page for every stock you can see where a company's cash went to per quarter and per year. If Net Income plus Depreciation is significantly higher than Capital Expenditures plus Dividends Paid, then there is more assurance the dividend is fairly secure. (No guarantees, though, especially in this business climate.)

On the Cash Flow pages you can also see if the company has been buying back stock or selling more, and/or issuing more debt or paying it off. A number of companies are issuing more stock and/or more debt to have the cash to pay their generous dividends. Unless their business and profits increase they will have to eventually cut their dividend.

The companies I really like are the ones that increase their dividends AND buy back stock AND pay down debt regularly. Safest stocks around for my money.]]> http://seekingalpha.com/article/113408-genentech-s-trastuzumab-dm1-shows-great-promise-in-treating-breast-cancer?source=feed#comment-347811 347811 Tue, 06 Jan 2009 15:58:42 -0500 http://seekingalpha.com/article/111718-choosing-dividend-stocks-wisely?source=feed#comment-336147 336147 PWE) had a 50% increase in their barrel of oil equivalent (BOE) in the nine months ending 9/30/08. In the third quarter of 2008 they drilled 98 wells with a 98% success rate. (See finance.yahoo.com/news... )

CanRoys expose investors to the price swings in the oil market, but given the world's use of oil in the short term, I still think CanRRoys are a useful asset to own. And priced pretty cheaply now, too.

]]> Mon, 22 Dec 2008 18:13:51 -0500 PWE) had a 50% increase in their barrel of oil equivalent (BOE) in the nine months ending 9/30/08. In the third quarter of 2008 they drilled 98 wells with a 98% success rate. (See finance.yahoo.com/news... )

CanRoys expose investors to the price swings in the oil market, but given the world's use of oil in the short term, I still think CanRRoys are a useful asset to own. And priced pretty cheaply now, too.

]]> http://seekingalpha.com/article/111718-choosing-dividend-stocks-wisely?source=feed#comment-335809 335809
The governments of the world are rapidly pumping lots of money into the economy to minimize further economic damage, but they are priming the pump for some serious inflation to come. CanRoys, since they are almost pure asset plays, will likely have inflated incomes and higher dividends resulting from the inflation years (decades?) to come.

I think CanRoys and dividend growth stocks are both part of a reasonably balanced dividend portfolio.]]> Mon, 22 Dec 2008 12:04:10 -0500
The governments of the world are rapidly pumping lots of money into the economy to minimize further economic damage, but they are priming the pump for some serious inflation to come. CanRoys, since they are almost pure asset plays, will likely have inflated incomes and higher dividends resulting from the inflation years (decades?) to come.

I think CanRoys and dividend growth stocks are both part of a reasonably balanced dividend portfolio.]]> http://seekingalpha.com/article/110761-nine-notable-dividend-increases?source=feed#comment-331387 331387
Some reports on DEO do the same thing, also resulting in reported yields that are too high. ]]> Tue, 16 Dec 2008 17:11:04 -0500
Some reports on DEO do the same thing, also resulting in reported yields that are too high. ]]> http://seekingalpha.com/article/110270-cramer-s-mad-money-is-your-dividend-safe-12-10-08?source=feed#comment-326637 326637 Thu, 11 Dec 2008 15:19:12 -0500 http://seekingalpha.com/article/80527-nine-high-yield-telephone-stocks-calling?source=feed#comment-326431 326431 Thu, 11 Dec 2008 11:53:38 -0500 http://seekingalpha.com/article/110091-bp-strong-earnings-growth-through-dividends?source=feed#comment-325583 325583 Wed, 10 Dec 2008 11:53:25 -0500 http://seekingalpha.com/article/102326-new-accounting-practices-will-boost-bank-equity-values?source=feed#comment-293542 293542
The bottom line is companies have to minimize illiquid assets whose values are not easily judged. ]]> Wed, 29 Oct 2008 12:17:20 -0400
The bottom line is companies have to minimize illiquid assets whose values are not easily judged. ]]> http://seekingalpha.com/article/72496-who-s-to-blame-for-the-commodities-boom?source=feed#comment-151730 151730
World demand for commodities is not going to be limited by the rest of the world, who wants our lifestyle and quality and choice of products.

The US standard of living is coming down whether we like it or not. We have to pay the piper for our economic excesses. ]]> Wed, 16 Apr 2008 13:14:31 -0400
World demand for commodities is not going to be limited by the rest of the world, who wants our lifestyle and quality and choice of products.

The US standard of living is coming down whether we like it or not. We have to pay the piper for our economic excesses. ]]>