Seeking Alpha


Send Message
View as an RSS Feed
View gjg49's Comments BY TICKER:
Latest  |  Highest rated
  • Moody's downgrades ADP on plan to fund buyback with debt [View news story]
    What makes ADP management think their stock is so inexpensive? ADP is a great company, but how great is the stock at this price? Maybe I am missing something, but the stock looks roughly fairly valued to me, so why take on this debt to buy back an average valued stock?
    Aug 28, 2015. 01:46 PM | Likes Like |Link to Comment
  • Berkshire For Retirement Income [View article]
    Excuse me, but these are catastrophic results.
    Our retirees' purchasing power appears to steadily decline even without inflation.
    Assuming 1% inflation per year, our retiree who "sells" $27,000 in year 25 will experience $0.58 of buying power compared to their year one income of $40,000. The only thing that does not make this a disaster retirement plan is if our retiree genuinely enjoys the taste of cat food.
    I am retired and own some BRK, hence I don't see BRK as a poison to a retirement plan. However, using BRK as the sole asset in the way you appeared to use it seems dangerous.
    Aug 25, 2015. 08:42 AM | 7 Likes Like |Link to Comment
  • Finding Value In Dividend Stocks (Part 1): Setting Up A Plan To Take Advantage Of The Correction [View article]
    Tax Novice,
    Note that VIG, Vanguard's dividend ETF, has been down over 10% for close to an hour this AM while the stocks that VIG holds are all down 3% to 5%. Recognizing panic is always difficult (we have to read the collective minds of millions of investors), but the anomaly that is VIG compared to its constituents this morning suggests that at least some panic has set in.
    Aug 24, 2015. 10:31 AM | 1 Like Like |Link to Comment
  • China confirms chairman changes at its big three telecoms [View news story]
    I have been involved in investing since 1972.
    I worked professionally in the investment business for one of the largest investment institutions in the U.S. (Though retired now for over nine years)
    This is THE weirdest business announcement that I have ever seen.
    I own a little CHL, but now it is clear to me that the shareholders of CHL do not really own CHL. I am not quite sure what owning shares in CHL means or who really "owns" CHL, but when the government just swaps out CEOs, it is clear that the shareholders don't own the company.
    Aug 24, 2015. 10:00 AM | 1 Like Like |Link to Comment
  • How To Convert A Portfolio Of Index Funds To Dividend Stocks? [View article]

    At some point the Fed will withdraw the punch bowl and the stock market will decline taking the dividend growth stocks down with them. Numerous DGIs have addressed this issue. Some call that situation an opportunity.

    Your second and third questions are really the same: what happens to one's plan if dividends are cut? First, by focusing on company's that have a history of paying and growing the dividend, you probably will have a management that is committed to paying and increasing the dividend. Your implication that this is not a guarantee is correct, but the CEO of JNJ who cuts that dividend will not be sleeping well at night as his or her job security will be minimal. Second, by focusing on high quality (admittedly a qualitative rather than quantitative benchmark) businesses, you likely again reduce the risk of dividend surprises. Finally, Robert Shiller's (finance professor at Yale) long term data indicates that during the 1930s depression aggregate dividends were reduced by only about 50% from their peak in 1929 to their lowest point in the late 1930s. This may sound grim, but it is better than the 90% reduction in stock prices (from their peak to the trough) and was even a smaller reduction in buying power as consumer prices declined by roughly 25% on average. This would seem to suggest that dividends in aggregate will likely not go to anywhere near zero. Further, if aggregate dividends do go to zero, where might you suggest putting your life savings?
    Aug 19, 2015. 09:57 AM | 5 Likes Like |Link to Comment
  • Precision Castparts: BOD Buys Back Shares At $250 Per Share, Sells Business At $235, Shareholders Should Vote 'No' [View article]
    Great example of a BOD composed of complete and total nitwits.
    One should be aware of where these nitwits may endanger your other investments. So, keep in mind that:
    Delaney is the chair of OGE energy;
    Donegan was a director of Rockwell Collins;
    Lyles is a director of General Dynamics and KBR Inc;
    Palmer retired in July from his position as CFO of Northrup Grumman (wonder what they paid to buy back stock);
    Wambold is a director of Cooper Tire and Rubber and Sealed Air;
    Wicks is CEO of OptumRX, part of United Health.

    As an independent investor, you should consider ALL of these people dangerous to your wealth (E.g. You should automatically vote AGAINST Lyles if you own GD)
    Collectively, they voted to buy back shares at $250 on the open market only to sell them to Buffett for $235--where is their wisdom? Where is their fiduciary responsibility to shareholders?

    PCP is also a very good example of the questionable value of buying back stock. Next time some stock-jockey shill argues that a stock buyback is so wonderful, keep in mind how well the BOD of PCP allocated scarce capital resources.

    BTW, Thanks for writing this article and highlighting this totally incompetent BOD.
    I only bought PCP after the Berkshire deal was announced. The actions of this incompetent BOD have not hurt me, but I find the gross incompetence of this board as disgusting.
    Aug 14, 2015. 01:39 PM | 3 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]

    I can't speak (or blog) for r2sj, but r2sj seems to be stretching a serious issue into something seemingly malicious. KMI is far from a house of cards. KMI's current cash flows roughly cover the current dividend.

    However, Mike N (our host author) noted the "safety" issue. KMI's debt could threaten the dividend payments within a few quarters if circumstances all line up in a certain way. Plains All American's management yesterday suggested that the probability (or possibility) of those circumstances aligning is worth considering and growing (by even mentioning them, they give some level of credibility to the non-zero probability of those things all occuring). KMI's business may differ considerably from PAA, but KMI also carries a much higher level of debt relative to the ability to service the debt. At March 2015, PAA carried net debt that approximated 3.7 times their latest 12 months operating cash flow. PAA's management did not quantify how badly cash flows might be hurt by the confluence of all the negative circumstances; for sake of discussion, consider that a 20% reduction in operating cash flow would move their net debt to cash flow to 4.6 times--still a seemingly comfortable investment grade level. KMI carried net debt equal to 9.6 times latest 12 months operating cash flow--these numbers may be distorted by all the reorg last year. Nevertheless, the possibility exists that a 20% reduction in cash flow would move the net debt to 12 times operating cash flow; that looks likely to be a trigger for debt downgrades to junk status.

    My biggest apprehension in all this is that if this set of circumstances occurs over the next 18 months, Rich Kinder will be forced to cut the dividend (that is not a prediction, but I look at the probabilities for events to occur, and I would currently put that at a 10% to 20% probability) and if he does cut the dividend due to debt downgrades, he will cut it in a pretty big way, just as GE was forced to in 2008. Kinder will know that a) the debt level has become a millstone around his neck and that b) he will have lost trust or credibility (just as Immelt has), so he will opt to save the company and create a financial cushion by slashing the dividend, not just trimming it marginally.

    I own KMI though it is roughly my 20th largest position (it was around number five a couple of months ago, but I sold the KMI that came via KMP because a) I had a tax benefit via the loss as the basis on KMP was adjusted upwards with the transaction and b) I noticed the high level of debt and regarded that as dangerous (KMI's net debt to operating cash flow is higher than any of the other 60 companies I own.) KMI is not a house of cards, but historically other companies have non-maliciously overlevered themselves into dividend cuts (e.g. see CTL). Perhaps the question is not whether one can trust Rich Kinder, but how infallible (or fallible) is he??
    Aug 6, 2015. 05:37 PM | 11 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]

    Joel Stern was one of the "inventors" of the idea of free cash flow back in the early 1970s. According to his original definition, one should use "maintenance" capital spending from operating cash flow to get to free cash flow. For the first six months of 2015, KMI spent $245 million in maintenance capital spending to continue to generate their operating cash flows. Using Stern's definition of free cash flow, KMI generated $2.2 billion in free cash flow and paid $2 billion in dividends.

    One might rightly ask why Stern's definition is better. Think of an entity that owns five apartment buildings. The five apartment buildings have all been paid for (regardless of financing--and a mortgage is just a financing vehicle) and now owned by the entity. If the entity now decides to buy three more apartment buildings, one should not consider the capital investment in the new buildings when trying to assess the cash flows (or, as Warren Buffett calls it: "owner's earnings") of the original five buildings. The cost of a new roof on one of the original five buildings (maintenance capital spending) should be included when assessing the cash flows.
    Jul 29, 2015. 03:02 PM | 3 Likes Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]
    Scoots' suggestion of using EPD or MMP as an alternative is worth considering. KMI has greatly increased their debt relative to cash flow (their ability to pay the debt looks increasingly iffy--this is the cause of the credit downgrades). KMI's net debt equals 9.6 times the latest twelve months operating cash flow--that is toooooooooo high to be sustainable. MMP' debt is less than 3 times operating cash flow and EPD 's is around 5 (that is reasonable). PAA is also a candidate at around 4 times operating cash flow.
    One other thought: as a retiree, I plan as if I will live to 100. I am 65, so a loss of 1% of the portfolio kind of implies that now I am only covered to 99 years and 9 months, rather than 100. I own KMI, but reduced it (similar to your second option) a couple of months ago. I sleep better now but will monitor the position very carefully.
    Jul 28, 2015. 10:12 AM | 1 Like Like |Link to Comment
  • Should You Follow Icahn Out Of Netflix? [View article]
    I did not read your article.
    I have been a NFLX subscriber since 2002 (I think). What used to be a great service has become an absolute POS (piece of s...).
    I can't get to my DVD Queue (for me the most valuable long run reason for NFLX) and navigating the "now it's faster and easier than ever to find something great to watch" is, well, impossible.
    Reed Hastings, go f yourself !!!
    Jun 28, 2015. 09:35 PM | Likes Like |Link to Comment
  • Merger Arbitrage Forum (PART 2) [View instapost]
    Thanks for the link to the EU announcement.
    --Normally I am just part of the woodwork here, watching mostly everything that goes on.
    Jun 15, 2015. 02:23 PM | Likes Like |Link to Comment
  • Bond Investors Beware, History Is Not On Your Side [View article]
    Very very provocative article. Thanks.

    One undeniable fact emerges from this article: something IS different this time. (Not only are the rates the lowest ever, the strangest anomaly seems to be NEGATIVE interest rates--the government promises that you DO NOT get back all of your principle at maturity !!)

    The question is: what IS really different that has led virtually the entire world to ACT (invest) differently than over the past several hundred years?
    Apr 15, 2015. 09:21 AM | 2 Likes Like |Link to Comment
  • Mr. Valuation Says Digital Realty Is A Right REIT At A Right Time For Your Retirement Portfolio [View article]
    A REIT in an IRA will generate NO US federal tax consequences (that applies to the buy, the hold, and the sale of a REIT).
    And You are correct that an MLP in an IRA can have notable tax consequences--either from holding or selling an MLP.
    Hope this helps.
    Apr 3, 2015. 01:29 PM | Likes Like |Link to Comment
  • Chevron Stock At The Magic 4% Yield Mark [View article]
    Congrats, that sounds great....And the CVX that is put to you at $70 has a 6% yield (unless the dividend gets cut--a highly unlikely event).
    Mar 21, 2015. 10:03 AM | 1 Like Like |Link to Comment
  • Chevron Stock At The Magic 4% Yield Mark [View article]
    Nice energy list.
    Suggest you take a look at CLB (if you are willing to own NOV currently) as well.
    I own "nibbles" of both CLB and NOV mostly to help me pay attention, but I want and expect to build considerably larger position in each at about 25% below current prices over the next four to six months. (I expect earnings to be weak for both companies through at least the first half of 2015, so I expect further deterioration in the stock prices.)
    Mar 21, 2015. 09:53 AM | Likes Like |Link to Comment