prudentinvestor

Preview from Europe: Stocks Consolidate, But Financials Hit a Speed Bump

The link to the history of the credit card was interesting, but the author stopped at the present, short of predicting its future. So here is an attempt:

As fees and interest since purchase become mandated by government, most people who always pay their balance in full will cut back both on the number of cards they carry, and their usage. These people will increasingly return to cash transactions or bank electronic payments or debit cards.

The people who cannot afford to pay their bills will become the main users of credit cards, so, cards will increasingly be viewed as an indication of a poor financial condition, the very opposite of the image that was painstakingly cultivated by American Express.

The flight of those who pay in full, and the increasing usage by those who cannot pay, will lead to a spiral of higher rates, higher defaults, and, possibly, to the demise of the industry as we now know it, after its 65-year lifespan.

Preview from Europe: Pigs Scare the Market Bulls

"..... there does appear to be some underlying resilience to the recent rally, presumably helped by the positive earnings surprises ...."

et tu Mole ? I cannot fathom the notion that when revenues are down 20-40%, and earnings down by 40-80%, we should rejoice because of the "positive surprise" that they are "higher than expected". I imagine that those who did the "expecting" were being clever, hoping all will celebrate and drink the kool-aid.

Merck / SGP: Will the Pharma Megamergers Continue?

The market voted on the unwisdom of the deal for MRK shareholders, sending MRK down almost 8%. I suspect MRK will now cut their dividend, and the shares will be further pulverised in response. Managements and boards are failing to realise that the dividend is the most important reason to own a share in any company over the next few years, as the expectation of stock appreciation is no longer sufficient.

Very foolish of MRK's management to pay such a premium for SGP, and exceptionally irresponsible to pay such a large percentage in cash. In this environment, cash should be conserved to support the dividend. They have not learned from the DOW/ROH debacle, nor from the decimation of PFE's shares following their equally reckless buyout of WYE and dividend cut.

(disclosure: own shares in MRK, SGP, PFE and WYE)

12 Attractive Companies That Also Pay a Dividend

I thought NOK just "suspended" their dividend.

Now that cutting dividends is de rigeur, even companies that don't need to cut them will jump on the bandwagon and take cover in the fact that others are cutting. Executives want all the available cash to buy back shares, so that their options can come back into the money. Paying dividends to the owners (i.e. the shareholders) is too old-fashioned, as it reduces the executives' loot, disguised as options.

On Mar 01 11:56 AM YoMama wrote:

> JNJ and NOK might be the safest payers on this list. Three more to
> consider is PG,KFT and MCD for safety and regular increases. If you
> put stock price movements above the dividends in importance your
> better off staying in cash .

Barron's: Best Dividend Plays for 2009

Do you really think the WHR dividend is "reasonably secure"!? How about the pharmas? PFE just halved theirs, so how can you be sure that BMY or MRK or others will not? How about tobacco, where we have glimpses of potential new litigation? You already mentioned that T and VZ may be at risk due to high payout ratios, so I will not add them here.

Bottom line is that very few are "reasonably secure". Even those that should be, really are not, since crony boards prefer to cut dividends before they touch executive compensation. After all, the recent business model has become that the real owners of a company, the shareholders, always get short shrift, while their employees (the management) busily reward themselves with the shareholders' money. This sorry state of affairs is an additional discount factor you have to apply when investing in dividend stocks.

Here Come Pharma's 'Me-Too' Mergers

I have long-standing positions in both WYE and PFE.

In the recent past, I substantially increased my holding of WYE, when it dropped to what I believe is a good approximation of its true intrinsic value, $27-$30/share. So, as a WYE shareholder, I am very pleased to receive such an astonishing premium.

As a PFE shareholder, however, I am shocked to see the dividend halved, for the sake of paying an absurd premium for WYE. Yet another example of incompetent management making cowboy decisions, enabled by a board of zombie directors, and by banks trying to "lend money" to satisfy TARP!

One would have thought that in any decent system of corporate governance, a decision to acquire a competitor for over $60bn would be contingent upon a shareholders' vote, but, I understand that our incompetent, loose-gun-on-the-deck employees (PFE's management), who manage OUR COMPANY on OUR BEHALF, already signed a deal, with a $4bln breakup fee, without consulting us.

So, when you say there are more deals to come, I hope that the companies in which I hold stock are the ones who get acquired by idiots who run other companies. Owning stock in the acquiring company has mostly been a losing proposition for its shareholders.