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charliezap

charliezap
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  • Despite Exxon Bumping Up Your Dividend In April, It Is Not A Buy [View article]
    Buy RDS.A in a taxable account and get a credit for Dutch tax withheld.
    Or buy RDS.A in an IRA and opt to get scrip instead of cash.
    Or buy RDS.B and get no tax deducted.
    Apr 14, 2015. 09:07 AM | 3 Likes Like |Link to Comment
  • Despite Exxon Bumping Up Your Dividend In April, It Is Not A Buy [View article]
    XOM is an energy company? How much coal, nuclear, hydro, wind, or solar does it produce?
    Apr 14, 2015. 08:57 AM | 1 Like Like |Link to Comment
  • Despite Exxon Bumping Up Your Dividend In April, It Is Not A Buy [View article]
    WSO, I agree. The article is long on unrelated inferences and guesses, such as:

    ""We have a couple of [dividend] guidelines. One is the very long-term growth rate of dividends of 6.4%. As the company is still highly profitable and has a low payout ratio, this will be considered a floor [for the 2015 dividend increase].""

    The reality is that, with earnings estimated to be down by 50%, 2015 is not an "average" year. Exxon will announce a minimal 2-3% increase, just to maintain the record.

    Another item of detraction from the author's credibility is the use of Price/Sales as a valuation tool. Integrated oil companies sell some of the crude they produce into their own refineries, and these sales are eliminated in consolidation. This distorts the comparison of P/S ratios among companies. P/S was invented during the dot com boom period, when analysts tried to rationalize the valuations of companies that had no earnings within the foreseeable future. XOM does not suffer from a lack of earnings, so P/S is nonsensical.
    Apr 14, 2015. 08:54 AM | 1 Like Like |Link to Comment
  • REITs: The 90% Rule Isn't That Big A Deal [View article]
    @Mark, re: "accounting earnings", yes, I mean GAAP earnings.
    Apr 13, 2015. 10:30 PM | Likes Like |Link to Comment
  • 56.55% Advantage To 5 REIT, Highest Yield Lowest Price April Dogs [View article]
    ARR is NOT a residential REIT. It IS a mortgage REIT is a mortgage REIT. As such, it belongs in the financial sector. You, and your source, are just plain wrong!
    Apr 13, 2015. 10:11 PM | Likes Like |Link to Comment
  • REITs: The 90% Rule Isn't That Big A Deal [View article]
    ""I find the earnings statement not very helpful, and non-GAAP measures such as FFO and AFFO potentially misleading . .."

    Bruce, I disagree with you as to FFO. It is a better measure of cash returns from a REIT than your "net op cash flow", which includes items such as working capital changes and does not strip out or separately identify one-time items.

    FFO, on the other hand, is fairly rigidly defined by NAREIT, and that definition, seems to be accepted by most reporting companies. Some may try to get around the NAREIT definition, but they use terms such as "core FFO", or "normalized FFO".

    http://bit.ly/1CPlZts

    AFFO is also a useful metric, but here one has to be aware that it might be defined differently, depending on the company or the analyst involved.
    Apr 13, 2015. 12:16 PM | Likes Like |Link to Comment
  • REITs: The 90% Rule Isn't That Big A Deal [View article]
    Bryce, I waited for a retort from ttone, but did not get it. He says he's a CPA for 45 years, so I still think he was talking about accounting earnings. I just don't see that accepts that unrealized gains can figure into "real earnings", from which dividends can be paid.
    Apr 13, 2015. 11:56 AM | Likes Like |Link to Comment
  • Exxon could be next in line for oil mega-deal, Morgan Stanley says [View news story]
    """Not true. Look at XOM's treasury stock hoards. Also look at its cash and debt rating. It could do a deal for BP with zero dilution."""

    If you are saying that an exchange of stock with BP would be accretive in terms of EPS, you are probably right, depending on the premium that XOM would have to pay, since XOM normally trades at a higher PE than BP.

    But if you are saying that if XOM issued treasury stock in exchange for BP shares it would not add to shares outstanding, you are dead wrong. In fact, it would not matter if XOM issued new stock or treasury stock in an exchange. The reason: stock held in treasury is not counted in shares outstanding -- until it gets taken out of treasury.

    http://bit.ly/1Ahdxbt

    XOM buying BP would be a very bad idea. Besides BP's uncertain liability issues, it would involve taking on the US government, the UK govt, and possibly the Russian govt. It would create an unmanageable monster and a clash of cultures. XOM is already large enough to take on any oil project that may come along!
    Apr 13, 2015. 07:15 AM | 1 Like Like |Link to Comment
  • Exxon could be next in line for oil mega-deal, Morgan Stanley says [View news story]
    Scooter, I don't really understand your comment. On the one hand, you seem to be suggesting that Exxon should be acquiring midstream assets. On the other hand, you seem to suggest that Exxon should spin its midstream assets off into a MLP, like Shell did? Which is it?
    Apr 12, 2015. 08:36 AM | 1 Like Like |Link to Comment
  • REITs: The 90% Rule Isn't That Big A Deal [View article]
    Kenyatta, in the rare instance where a REIT owns a building that becomes fully depreciated, there is no impact on cash flow when the accountants stop making the non-cash depreciation charge. Actually GAAP earnings (which are ignored by most REIT investors) will increase, but there will be no depreciation to add back, so FFO is unaffected. Also unaffected is the ability to pay dividends.

    There is no immediate impact on taxable income either when the building is fully depreciated under GAAP, if one assumes that the depreciation period used for GAAP is less than the IRS rule of 39 years (straight line) for commecial buildings.
    Apr 12, 2015. 08:07 AM | 3 Likes Like |Link to Comment
  • Exxon could be next in line for oil mega-deal, Morgan Stanley says [View news story]
    Scooter, it would make more sense to spin out its existing pipeline assets into a midstream MLP than to take on more low return pipeline assets by taking over a Williams or an EPD.

    Exxon already has midstream assets. There is no way they would go out and acquire more. Exxon prides itself on ROE and ROA. Exxon's low debt ratio cannot lever up pipeline returns to an acceptable level.
    Apr 11, 2015. 07:39 PM | 1 Like Like |Link to Comment
  • REITs: The 90% Rule Isn't That Big A Deal [View article]
    """Ultimately, the dividends absolutely do come from earnings. Management can mess with the shareholders from year-to-year, but overall, no earnings, no dividends."""

    ttone, I can understand where you are coming from as a CPA, but the fact is that for equity REITs dividends can exceed GAAP earnings over an extended period of time. And the problem with GAAP earnings is that it does not account for a significant portion of "owner income" that comes in the form of unrealized appreciation of the properties.

    When a REIT pays dividends, they may be characterized as: 1) ordinary income, 2) return of capital, or, 3) capital gains. The latter results from a sale of assets. A return of capital occurs when cumulative dividends exceed retained earnings.

    I once owned a REIT, Town and Country Trust - TCT, which owned apartments, mainly in and around Baltimore. The apartments were well-located and well-maintained, and rents grew from year to year. So did NOI and FFO. With the growth in NOI, the value of the apartments also grew. While the property values were growing, the book value was declining, as the accountants wrote down the book cost year after year through depreciation.

    TCT paid fat and growing dividends, but TCTdid not have any problem maintaining a steady growth in the dividend stream, because, with the growing cash flow and asset value, it was also able to refinance its debt in increasing amounts. Due to the combination of fat dividends and asset depreciation, the book value of TCT became negative. TCT continued to pay dividends, now mostly as a return of capital.

    Eventually, TCT was taken out in a merger with another REIT. TCT holders received the equivalent of around $40 per share (I don't recall if it was cash or stock).
    Apr 11, 2015. 04:18 PM | 1 Like Like |Link to Comment
  • REITs: The 90% Rule Isn't That Big A Deal [View article]
    Mark, you are right about triple nets. Though one can imagine a scenario where a 10-year lease expires and it takes some leasehold improvements to get it rented up again -- the latter is probably more true if an office building is involved as opposed to retail.

    I looked at Citi's weekly REIT report, which tabulates AFFO adjustments for 140+ REITs. For most triple nets, the adjustments are minimal. But for sectors such as office, mall, shopping center, and hotel the adjustments to FFO can be quite significant -- 15% to 30% or more.
    Apr 11, 2015. 11:14 AM | 1 Like Like |Link to Comment
  • Omega Healthcare Is A Classic Textbook Model Of Repeatability [View article]
    Yahoo (and other services) got it wrong. They took the partial dividend of $0.36 as the new quarterly rate, and are miscalculating current yield as a result.
    Apr 11, 2015. 07:41 AM | 1 Like Like |Link to Comment
  • REITs: The 90% Rule Isn't That Big A Deal [View article]
    Pablo, yes, some portion of cash flow must be used for maintenance capex. That is why some analysts go the extra step of deducting maintenance capex from FFO to get AFFO. AFFO gives a better fix on just how much cash flow is available for distribution as dividends. (There may be other adjustments to get to AFFO, but maintenance capex is the main item.)
    Apr 11, 2015. 07:37 AM | 3 Likes Like |Link to Comment
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