Seeking Alpha

Smarty_Pants

Smarty_Pants
Send Message
View as an RSS Feed
View Smarty_Pants' Comments BY TICKER:
Latest  |  Highest rated
  • My Dividend Growth Portfolio: 2014 Review And 2015 Preview [View article]
    "I love my dividents too, don't want to discriminate. (Sounds vaguely like teeth, or maybe a chewing gum for middle schoolers.)" - DVK

    Given it's a CNBC label, it might not be intended as a flattering term.

    I'm thinking that dividents could be the marks left when dividends 'hit' your account. After several decades of dividents any portfolio would be all nicked and dinged up. Who would possibly want that? The horror!
    Jan 10, 2015. 12:56 PM | 5 Likes Like |Link to Comment
  • My Dividend Growth Portfolio: 2014 Review And 2015 Preview [View article]
    Thanks for another 'predictable' update DVK.

    The steady progression of your growing income has now become somewhat less than exciting, except when you consider that you set those income goals nearly 6 years ago and have hit every one of them in stride while outpacing the SPY in TR with a ~30% lower portfolio Beta.

    I imagine that there are many investment professionals out there that would consider making a pact with the Devil to do the same for their customers over the same time frame.

    Outstanding!!
    Jan 5, 2015. 07:21 PM | 13 Likes Like |Link to Comment
  • A Demonstration Of How Dividend Growth Investing Outperforms [View article]
    "But I still think it has nothing to do with how fast they grow their earnings and their dividends." - PTI

    True, but the current valuation of any stock you buy is what enables out-performance in the long run. The low rate environment tends to reduce the number of undervalued stocks to choose from. Still, you are correct, as long as the stocks one buys are fairly or under valued the low rate environment is not a driving factor in future performance.
    Jan 1, 2015. 04:55 PM | Likes Like |Link to Comment
  • My K.I.S.S. Dividend Portfolio: 4th Quarter 2014 Update And Year-End Review [View article]
    Great job with the portfolio and equally as great with the update. A 3.5% yield with 10+% dividend growth is a portfolio that many professional money managers would envy.

    Your indexing exercise is providing much needed real-world data to use for realistic comparisons given you are adding money and reinvesting exactly the same in your indices as in your real portfolio.

    I feel that it would be a great addition to provide a series of income goals going forward that are based on anticipated expenses in retirement. Your dividend income is already so significantly ahead of your original estimates as to make them of little consequence.

    Even with 15+ years to retirement you can make a worst case estimate of your spending needs (housing, student loan payments, utilities, food, travel, etc.) at retirement, then use that to generate an annual series of equal growth income levels to use as goals. Then your real world portfolio numbers can be compared to that series when evaluating how well you are doing each quarter or year.

    For instance, your current annual dividend income is $35,206 at age 50.

    Let's assume that you estimate your annual income needs at age 65 to be $12,000 per month (just picking a number out of the air). That's $144,000 annually. You can calculate that you would need to increase your dividend income by 9.85% each year to reach that goal. Then you can generate a table of annual income levels to meet by starting at $35,206 and increasing each year's amount by a factor of 1.0985 to establish a series of annual dividend income goals.

    Those annual income goals will enable you to compare actual performance to "what you need" and make adjustments (like saving more, or figuring out how to cut expenses in retirement) as you go. Having that kind of feedback along the way will give you better control over guiding your plan to meet your needs.
    Jan 1, 2015. 04:49 PM | 2 Likes Like |Link to Comment
  • A Demonstration Of How Dividend Growth Investing Outperforms [View article]
    "You say dividend stocks are more popular during low rate environments. What does that have to do with their growth rate? Do they grow their earnings faster due to low rates? Don't non-dividend paying companies enjoy the same benefit? So I don't really understand what you mean." PTI quoting B-H-R

    Not trying to put words into B-H-R's mouth but here's my take on his statement about dividend stocks in low interest rates environments.

    The argument would go something like this:

    When 1 year risk free interest rates are below the rate of inflation, as they are now, investors have a difficult time growing the purchasing power of their savings with bonds. So, they instead put their bond money into dividend stocks in order to earn more income than they can get in (safer) short term bonds (longer term bonds carry extra risk should rates or inflation rise and principal be lost).

    This generates 'extra' demand for dividend stocks and tends to push their prices into overvalued territory. Once rates rise again these investors will, in theory, pull all their money out of dividend stocks and put it back into bonds putting downside pressure on DG type stocks.

    There's probably some merit to this point for anyone who buys DG stocks without considering valuations. As Chuck Carnevale continually points out, only buy stocks at fair or undervalued prices. In a low rate environment it is probably more difficult to find those undervalued DG stocks, but not impossible.

    Low rates probably make implementing a DG strategy more challenging, but it can still be done IMHO.
    Jan 1, 2015. 04:13 PM | 1 Like Like |Link to Comment
  • A Demonstration Of How Dividend Growth Investing Outperforms [View article]
    "I did the same thing and after a while I had to set my goals higher. Now I end up having to increase my goals and spending plan by the dividend increases each week." - as10675

    I hate when that happens (NOT!).
    Dec 30, 2014. 08:16 PM | 5 Likes Like |Link to Comment
  • A Demonstration Of How Dividend Growth Investing Outperforms [View article]
    "If that is a reference to me" - Miguel Arnot

    No, it is not a reference to you. It is a reference to many others, each of whom appears to be impervious to factual or logical arguments and who have in many instances regressed from an exchange of information and learning to name calling for those who embrace DGI. They are the ones who have coined terms like 'zealot' and 'Magic Pants' in their debates on the topic. For folks like that I find it difficult to avoid using sarcasm when claiming that the only way they can understand the topic is by using their own ridiculous terms in as outlandish a manner as I possibly can.

    I apologize to you if you felt I was in any way implying that you were such a person. I welcome anyone who is open minded enough to acknowledge that DGI is an investment approach that might be suited for many types of investors, even if they don't use DGI themselves or only use it in some partial manner. To each his own.

    Most folks are here to exchange ideas and learn. Some however, are only here to express their opinion and put down anyone who holds one that is different. I welcome the former and tolerate the latter.
    Dec 30, 2014. 08:03 PM | 2 Likes Like |Link to Comment
  • A Demonstration Of How Dividend Growth Investing Outperforms [View article]
    "DGI is a magical cure to investing. It allows you to receive income regardless of whether the market goes up or down without selling principal. And you can buy additional shares when the market goes down, thereby increasing your yield, which - magically - produces more income." - Miguel Arnot

    Most anti-DGI types respond better to the "Magic Pants" explanation than to factually supported logic.

    Every calendar quarter I reach into the pocket of my "Magic Pants" and there is more money to spend or invest as I see fit. So far, the amount of money which magically appears doesn't seem to be correlated to the prices of the stocks I own and generally it winds up being more money than appeared the year before. Sometimes a LOT more.
    Dec 30, 2014. 12:38 PM | 6 Likes Like |Link to Comment
  • Memo To Prospect Capital Management: Aggressively Buy Back Discounted Shares [View article]
    I'm not entirely sure you can ignore the items you "netted down".


    Look at PSEC's balance sheet. It holds mostly long term assets, which I imagine might not be very liquid at face value (which is the price PSEC would have to get for your analysis to hold true).


    In order to get face value PSEC would have to sell off the best quality assets. Selling off lesser quality assets (payments in arrears, etc.) might fetch less than 80 cents on the dollar of accounting capital, which would negate the gains you suggest in the article.


    While you will see improvements in NAV and NII based on a mathematical evaluation, is that really a significant gain if PSEC has to sell off its best assets and reduce the overall quality of its portfolio in the process? If the remaining assets have a higher chance of defaulting, then your mathematical gain may not be so desireable in the long run, especially if the economy slows in any significant manner.


    I am long PSEC myself, and I can't claim to be so knowledgeable regarding their operations to answer my own questions with any certainty, but I feel that there is likely an unacknowledged set of risks with what you propose. It's probably not as black and white as it appears at a first glance. PSEC's asset mix may not support such a maneuver.
    Dec 29, 2014. 03:19 PM | 2 Likes Like |Link to Comment
  • Raytheon Just Keeps Growing [View instapost]
    Great addition for your portfolio Norman!

    Your Example position shows a 14.8% CAGR over 6 years.

    Over the same period SPY returned 12.57% CAGR.

    Your RTN has outperformed SPY by nearly 2.25% annually. Not too shabby for a 'stockpicker'.
    Dec 28, 2014. 03:23 PM | 1 Like Like |Link to Comment
  • Dividend Growth Calculator For Retirement Balance Projections [View article]
    As far as I know you can post any kind of file. It's basically an online storage folder that you can make accessible to anyone.
    Dec 28, 2014. 03:12 PM | Likes Like |Link to Comment
  • Dividend Growth Calculator For Retirement Balance Projections [View article]
    "If you want the DGC, just send me your email through the SA message system, and I can send the zip file to you."

    Why not just post it to Google Drive for everyone to download if/when they want?

    You can set up a Google Drive account for free and post your spreadsheet(s) there:

    https://drive.google.com
    Dec 28, 2014. 11:24 AM | 1 Like Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    "I would also add that you can create a pretty quick amortization table in Excel, then add a column for extra principle paid. It won't be perfect your current balance but in most cases it will take you to within a couple pennies. If you set up the schedule correct you can see how much interest you're paying off and how that trickles down to future payments. The month of payoff shows at hte bottom of the spreadsheet and is pretty fascinating to watch pay down." - ScottU

    I did something very similar. I set up my spreadsheet with each month's amortized balance due, interest, and principle when I was 7 years into my 30 years of payments, and I put an X next to all the payments I had already made.

    Each month after that, I paid the full mortgage payment (X off another row) and then added the principle amount for the following month to my payment (X off the following month too). I highlighted the second month's interest payment so that I could easily see my savings, since I didn't have to pay that amount of interest.

    The interest payment from every other month was thus eliminated. When I got 24 months of extra principle paid off I went back to my regular monthly 30 year payments.

    In addition, the last two years of payments are eliminated completely, which are mostly principle repayments and add up to a great deal more than the extra principle I pre-paid earlier in the loan.

    As an example, for a $100,000 30 year fixed interest loan at 6.125% the monthly payment (principle & interest) is $607.61.

    Starting in year 7 and pre-paying an extra month of principle for two years costs $4,011.43 (that's about $167.15 per month extra).

    The 24 skipped interest payments during those two years total $10,571.21 (immediate savings). The 24 eliminated payments at the end of the loan (loan is paid off in 28 years) total $14,582.64.

    Making the extra $4,011.43 in principle payments saved $25,153.85, or over 25% of the initial loan amount.

    The total interest on the 30 year payment stream is $118,740.15.

    This reduces the total cost of the mortgage nearly 10% from $218,740.15 to $197,597.73 and the loan is paid off in 28 years.
    Dec 23, 2014. 02:23 PM | 3 Likes Like |Link to Comment
  • Update: Gold Resource Leases Second Nevada Property [View article]
    I agree. GORO is a good deal at $3, with a 4% yield and a solid chance of a much higher price, not to mention the potential for a higher dividend if the price of gold rebounds. I doubled up.

    It appears that their Q3 earnings stumble was due to withholding higher grade ore until after they have their new dore poring capability running. That resulted in a hit to revenue in Q3, but will result in cost savings when that ore is processed in Q4. Their cash flow in Q3 seems pretty solid, so a one-off earnings miss due to implementing a process improvement isn't a sign of financial distress to me.

    I'm hoping for an increase to the dividend as a best case, and a rebound up to the $5 to $6 range in price when the earnings miss for Q3 is seen as a non-event by the market. Meanwhile I'll happily DRIP my 4% yield.
    Dec 20, 2014. 03:18 PM | Likes Like |Link to Comment
  • Update: Granite Wash Sale Is No Reason To Buy Linn Energy [View article]
    "Instead, Linn needs to seriously slash its distribution, by at least 50%, to preserve $1 billion in cash over two years, and it also should postpone some growth cap-ex to hoard as much cash as possible" - Author

    I was under the impression that "hoarding cash" is not allowed for MLP entities. They're required to pay out 90% of their income in order to retain their MLP status. If they use the cash generated from cutting the dividend to buy back debt at a discount (which is an interesting concept) they still won't have any more cash 'sitting around' for spending in the out years.

    I'm sure there must be subtleties to the 90% of income rule, but it seems to me that nearly all of any dividend reduction must be spent on something to stay within the 90% bounds. As I understand it, 'hoarding' cash isn't an option beyond 10% of their income (which wouldn't buy very much time after the hedge book fizzles out, presuming that oil stays below $60 per bbl until the end of 2016).

    Can anyone explain the mechanism by which cutting the dividend now will help pay expenses in 2017? The only means I can see are:

    1) maintain or increase growth cap-ex so there is more oil to sell at the lower prices
    2) buy distressed properties from nearly BK oil patch companies at accretive prices
    3) Buy their debt issues in the after-market to retire it at a discount

    What other options exist to stabilize cash flow beyond the expiration of the hedges? The 'savings' gained by cutting the dividend have to go somewhere in the reasonably near term.
    Dec 17, 2014. 06:51 PM | Likes Like |Link to Comment
COMMENTS STATS
2,875 Comments
5,966 Likes