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Smarty_Pants

Smarty_Pants
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  • A Real Dividend Growth Machine: 2014 Review [View article]
    After reading your first article some time ago I immediately started following your writings. Every new article continues to prove that was a wise choice to make. Your investing execution is spot on too. Thanks for taking the time to share with everyone here on SA.

    In addition to being happy to see you are doing very well I must admit that it's no surprise to me. You have established a framework for investing success that few bother to attempt and it will pay off in the end. Congrats and keep it going.

    Have you laid out a series of portfolio goals (income or total value) over the years until you reach retirement age? If so comparing your results to that series of goals would probably be a positive addition to your reviews, IMHO.

    If you can continue to compound the current portfolio value at 8.8% CAGR you will reach Chowder's $3 Million goal by age 65. Getting there by age 60 would require a CAGR of 10.5%. 13.1% CAGR gets you there by age 55.

    Congratulations. You've put yourself in a quite favorable position at your age. Well done and please keep posting your reviews going forward. Lots of younger folks will be able to see it's possible that way and that can't be a bad thing.
    Jan 12, 2015. 07:17 PM | 6 Likes Like |Link to Comment
  • Year-End Review Of Dividend Growth Investing Vs Total Return Investing [View instapost]
    Thank you for posting your data. It is a rare case when anyone who is still examining the comparison between TR/indexing and DGI provides actual data to contrast.

    Your balanced approach looks to be about 5% ahead of DVK's model DGI portfolio based on the data presented, but that's not the whole story.

    To take things a step further I would point out that your two-fund approach provides a yield of around 1.5% vs DVK's yield of around 4%. That's a pretty significant difference in income generated (that might not matter to some, but it's still a difference once retirement hits).

    In addition, your two-fund approach has a blended beta around 1.15 while DVK's portfolio has a beta closer to 0.7.

    Given the large difference in beta, it is not surprising that the two-fund approach had higher TR than DVK during the strong bull market period between 2009 and 2014. The two-fund combination should have outperformed by a great deal more than 5% in order to offset the higher risk that will likely show itself in the next market downturn.

    I haven't done the math, but on a risk adjusted return basis I believe that DVK's portfolio performance would exceed the two-fund approach you show here.

    It will be interesting to see how the two approaches fare as time passes. The next significant downturn might change things somewhat.
    Jan 11, 2015. 05:57 PM | Likes Like |Link to Comment
  • My Dividend Growth Portfolio: 2014 Review And 2015 Preview [View article]
    "But then what would we do with the dividend cuts?" - rashbaugh

    Cue the Magic Pants self-repair kit....
    Jan 11, 2015. 05:02 PM | 3 Likes Like |Link to Comment
  • My Dividend Growth Portfolio: 2014 Review And 2015 Preview [View article]
    "Smarty, don't tear the magic pockets in your Magic Pants when you are buffing, or they might lose their magical quality." - DVK

    Dave ...... They're Magical!! That makes them impervious to almost everything. I think somewhere in the back pocket is a self-repair capability, just in case I run into kryptonite.
    Jan 11, 2015. 05:00 PM | 3 Likes Like |Link to Comment
  • My Dividend Growth Portfolio: 2014 Review And 2015 Preview [View article]
    "The dividend agnostic people will now call them dividents because they put a dent in a companies book value or some other such nonsensical thing." - Chowder

    Not to worry. I've got Magic Pants. I buff those dividents right out with 'em. Leaves my portfolio looking like new. ;-)
    Jan 10, 2015. 02:19 PM | 8 Likes Like |Link to Comment
  • 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 | 14 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
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