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Phenom1

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  • Retired Dividend Investors Are Deluded By Yield On Cost [View article]
    While I agree that looking backward at YOC may have limited usefulness, I think that planning forward with a focus on future YOC is very valuable. That is largely because it forces the income investor through the mental rigors of analyzing future dividend growth, earnings growth and safety.
    Apr 26, 2015. 09:49 AM | 1 Like Like |Link to Comment
  • Retired Dividend Investors Are Deluded By Yield On Cost [View article]
    mbn - I think I know where you are coming from. However, a "bond substitute with some growth attached" might be advisable for some folks. Everyone's situation is different.

    Perhaps one only needs 4% from their portfolio to live more than well. Then a stock like "T", with a little growth attached, might be a good deal. After all, 5.5% from T leaves 1.5% to be reinvested, not to mention any further growth that T generates.

    I'll exaggerate to make a further point. If I found a SOLID bond (not likely today) which spun off eight percent, that should clear the hurdle for most investors. Well, what about a stock strategy (e.g., covered calls) that spun off an average eight percent per year?

    My point is that you can find "growth" in a number of ways. I (and the author) find it in increasing dividends, regardless of whether they come from each company organically or from portfolio upgrading. I also use covered calls to enhance income. Is that growth? You bet. When that extra income is turned into more shares of a solid company, that grows my dividends.

    Stock prices ebb and flow. Why not use that natural action to grow your income?
    Apr 24, 2015. 03:20 PM | Likes Like |Link to Comment
  • Retired Dividend Investors Are Deluded By Yield On Cost [View article]
    Good article George, pointing out the reality of the math.

    I'd like to share two comments:

    1) The relevant question is always "Where is the best place for my money right now?" That includes, of course, tax impact.

    2) The investor, especially the retiree like myself, needs to be absolutely certain that the dividend of the stock being purchased is no less safe than the one sold. In other words, yield and growth are not the only factors affecting the decision. Dividend safety also plays a big role.

    Recently, I faced the same decision that you address in the article. My employer stock, whose dividend is ultra-reliable, got below a 2.8% current yield last summer. So I sold about 15% of it from my IRA, and replaced it with a basket of REITS with double the yield (but slower historical growth). I required the basket in order to give myself reasonable assurance that the dividend would be reliable.

    A simple Excel spreadsheet drove the point home for me. Using my projected dividend growth rates, it would take twelve years for the stock that was sold to pay a larger dividend than the stock basket which I purchased.

    I'm happy with the transaction thus far, but would not hesitate to sell the basket if the dividend yield, safety & growth could be upgraded.
    Apr 24, 2015. 11:50 AM | 4 Likes Like |Link to Comment
  • Despite Exxon Bumping Up Your Dividend In April, It Is Not A Buy [View article]
    Sounds nice, but I think $0.72 much more likely until the longer term oil picture clarifies.
    Apr 14, 2015. 10:17 AM | Likes Like |Link to Comment
  • Despite Exxon Bumping Up Your Dividend In April, It Is Not A Buy [View article]
    when it becomes economical, they will produce plenty.
    Apr 14, 2015. 10:15 AM | Likes Like |Link to Comment
  • Despite Exxon Bumping Up Your Dividend In April, It Is Not A Buy [View article]
    Entire article can be summarized as follows: "Earnings estimates (no attribution, no data) point lower, so dividend must not be sustainable (no quantification or logical argument)".

    As long as ROCE is in double digits, the dividend can be increased in the mid-high single digits for the duration.
    Apr 13, 2015. 11:30 PM | 2 Likes Like |Link to Comment
  • Exxon Mobil Corporation Overvalued, Dividend Not Sustainable [View article]
    Obviously Energy Tech lives in an enclave where cars come equipped with windmills and are distributed freely to all residents of emerging-market economies.
    Apr 13, 2015. 12:30 PM | Likes Like |Link to Comment
  • Exxon Mobil Corporation Overvalued, Dividend Not Sustainable [View article]
    Rex has stated that they ran the numbers for their projects down to $40/bbl. XOM has consistently been more conservative than the other majors, which should benefit it on a relative basis.

    A previous author said it best. "Imagine if WMT had to buy their inventory five years in advance". But XOM maintains optionality in what it produces and when. It also engages in production sharing agreements which put a floor under revenues in a low price regime. Not to mention their refining and chemicals businesses which stabilize cash flow.

    To buy this author's thesis, you have to believe that energy supply/demand imbalances will continue in one direction over a very long period of time. History and basic economics tell us otherwise.
    Apr 11, 2015. 01:35 PM | 2 Likes Like |Link to Comment
  • Exxon Mobil Corporation Overvalued, Dividend Not Sustainable [View article]
    I hate to pile on, but gotta make one other point.

    This author has no clue about the capital investment cycle in the oil business. He says "Going forward, expect reduced cash flow from operating activities and reduced capital expenditures that will of course reduce the future revenues" without a shred of evidence to back it up. Actually cash flow from operating activities will have a tailwind in the near term because the capex peak has been reached and it remains to harvest the profits. Of course that is dependent on a number of other factors, but the capex peak is a tailwind.
    Apr 10, 2015. 07:23 PM | 6 Likes Like |Link to Comment
  • Exxon Mobil - The Company That Buys High And Sells Low [View article]
    @User - Before someone can ask for advice, they have to state their goal. Why are you in a quandary?

    Why not just enjoy the dividends and watch them grow? One does not and probably should not buy XOM for a quick trade. You are obviously being consistent with that paradigm since you are a long term holder. I also own many shares from a low cost. Taxes do NOT inhibit me from selling if I thought their business model was broken. It isn't, so I won't.

    My goal is to have XOM's growing dividend fund my retirement expenses. What's your goal?
    Apr 10, 2015. 10:24 AM | 2 Likes Like |Link to Comment
  • Exxon Mobil - The Company That Buys High And Sells Low [View article]
    This article is so wrong-headed, I hardly know where to start.

    I think its biggest oversight is that the author presumes to think that XOM management doesn't know that energy projects take a long time to grow to fruition. In fact, these are multi-decade investments whose short term timing is a lower priority factor in the decision, yet that is presumably what the author seems to find fault with.

    Here is one example of opinion without factual basis:
    <<Unfortunately for the shareholders, the projects with the above expenses were planned with forecasts for oil to remain above $100 for the foreseeable future and hence these projects are condemned to provide poor returns if oil remains suppressed for a prolonged period.>>

    The not-so-subtle implication is that a crude oil price of $100+/bbl is required for these projects to payout. Nonsense. I challenge the author to provide FACTUAL evidence backing up that statement.

    XOM's capital discipline requires that project returns be run across all price regimes before making a decision to proceed. Management's conservative posture is precisely why XOM took so much flack for not expanding production while other's were riding the bull. XOM aims for ROCE at the twenty percent level, and while they have fallen short recently, they remain well ahead of their competition. And a high ROCE over time is what pays our ever-increasing dividend.

    Again, I am not arguing that the decisions cited were optimal. I am simply pointing out that it is very easy to criticize when facts and perspective are not brought into the discussion.
    Apr 2, 2015. 07:25 PM | 11 Likes Like |Link to Comment
  • Exxon Mobil: Return On Capital Employed (ROCE) And Valuation [View article]
    Yes, thanks again, Kyler.
    Mar 27, 2015. 04:42 PM | Likes Like |Link to Comment
  • Exxon Mobil: Return On Capital Employed (ROCE) And Valuation [View article]
    Production and proven reserves are two different things.

    A company explores to develop proven reserves. XOM's PR have been steadily beating their replacement rate over that time period.

    Those reserves are then produced if and when the investment economics make sense. Whether one chooses to produce or not is based on a variety of different factors and constraints, but one thing that XOM does have is optionality, i.e., the ability to produce different wells and fields at different times and locations throughout the world.

    As a shareholder, I'm rather happy that they did NOT ramp up capex to produce more in past years, but rather peaked awhile back. As a result of that smart capital allocation, they will now have the opportunity to purchase some decent assets on the cheap from those who took the other course. They will also have the opportunity to develop new fields during a buyers market for oil services, using their size to achieve even further economies of scale.
    Mar 27, 2015. 04:36 PM | Likes Like |Link to Comment
  • Exxon Mobil: Return On Capital Employed (ROCE) And Valuation [View article]
    Kyle - Would you please connect the dots for me on your last sentence? Thanks.
    Mar 26, 2015. 05:52 PM | Likes Like |Link to Comment
  • Exxon Mobil: Return On Capital Employed (ROCE) And Valuation [View article]
    Excellent article, making the case for XOM's value based on high ROCE rather than weaker metrics. I love the WMT analogy.

    But I would also be a little more tentative about the marginal producer cost. The Saudis and OPEC are currently demonstrating a willingness to keep prices low, even at a great cost to them. They think that it's the winning play in the long run if they can keep higher cost oil (e.g., Canadian tar sands, Kashagan, etc.) off the market. I have my reservations about that, as the alternative would be to produce about half the oil for the same revenue, but that is their current decision.

    While the Saudis and other Gulf producers indeed have a MPC in the low teens, they also have bloated national budgets to feed. It is estimated that the Saudis require $93/bbl oil to keep their fiscal budget in the black. They do have over $700B of reserves to tap into, but how long they will remain willing to do so is another story. The situations of other countries all get worse from there.

    Nonetheless, for reasons that the author expounds, plus XOM's commitment to shareholders and my own longer term view that current prices are not forever, XOM is the core stock in my portfolio.
    Mar 26, 2015. 04:18 PM | 1 Like Like |Link to Comment
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