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  • Dividend Increase: GE On Tap To Bring Good Things To Investors [View article]
    I'd be happily surprised if GE increased the dividend from 88 cents to $1 (13.6%). The payout ratio is already 60%, and that's high for a cyclical company...given the very slow-growth world economy, 96 cents (9.1%) looks more likely to myself.

    Nov 22 06:13 PM | 5 Likes Like |Link to Comment
  • Discount Higher Yields At Your Own Peril [View article]
    Thank you laker, I appreciate your support. It's 85% a case of one-size does-not-fit-all.

    IMO, the need for SWAN is of great importance to retirees, and drives many of our decisions...we've accepted elevated risk through our early investing decades--risk has now paid-off, and we've earned our way to 'financial independence'.

    As 'prudent men' (now having fewer years and diminished energy to overcome portfolio mistakes), as we move from our 50s, into our 60s and 70s, we tend to modify our goals to give increased weight to preservation of capital.

    Thus, when company XYZ has encountered major problems, cuts its dividend, and its share price is in decline, all investors must choose in real-time (without luxury of hindsight 4 or 5 years following) to either 'fight or flee'.

    It should not be unexpected that many retirees would seek sleep-well opportunities elsewhere. (If one ignores serious problems in one company, does it not suggest a pattern extending more broadly?)

    Of course, younger investors might (or might not) conclude differently as to fight or flee--but I am reminded, there are many tasty fish in the sea.

    p.s. Keep in mind, the risk-tolerance of a couple tends to be that of the more conservative member...serious woe descends upon the shoulders of the retiree whose spouse discovers their living standard may be affected by the lack of prudent portfolio management ('Yes, I knew, but I assumed' neither prudent, nor acceptable).
    Nov 22 03:45 PM | Likes Like |Link to Comment
  • Recent Buy: BHP Billiton [View article]
    I'm long BBL, and continuing to build a position at favorable declining prices.

    I offer this GENERAL and UNIVERSAL caution...
    It is dangerous to accept at face value the quotes of any CEO as the basis upon which to build a position in any company--he is exceptionally well-compensated to cast all internal and external change in the most favorable light (and in the case of BBL, it is likely similar spin was applied to the buying of the assets now to be divested).

    The 10-year chart above may be useful to those who bought Billiton 10-years ago, but of less value to those buying today. Note: One reason this is may be important...BBL, like Caterpillar and others, greatly benefited from Chinese construction the Three Gorges Dam, and 5 new multi-million population cities (plus numerous smaller cities) above the now much higher Yangtze River during the worldwide recession starting late 2007--thus greatly affecting the 10-year chart.

    A chart of greater value might compare BBL to S&P500 since the day the divestment was announced (August 19th) did the market react to the CEO's announcement? According to Finance.Yahoo, at $52.15 today, BBL is -25.5%, and the market is +4.7% since August 18th, the day before the announcement. It has also been appropriately observed BBL's -30% under-performance may also be affected by a decline in (non-precious) metals prices, and oil.

    Nonetheless, the market did not react nearly so positively to the divestment as did the CEO...BBL closed August 18th at $68.19, the 19th at $63.95 (-6.2%), and rebounded by 1.2% on the 20th, before entering a prolonged decline to the present $52.15 (-25.5%). At a minimum, this is in part a reaction to intended changes affecting fundamentals (and declining demand for mined ores is also fundamental)...together or separately, they are not 'noise'.

    IMO, a fair assessment might conclude (a) BBL's dividend is not in danger (and it would seem capex and other expenditures would be reduced going forward); (b) China's new stimulus is unlikely to provide a boost to BBL as did their previous stimulus, as this one is not aimed at major construction; (c) BBL's recovery is likely a long slog (and L-shaped, rather than V-shaped); and (d) viewing 3-year trends in Morningstar's Key Ratios page, it is apparent BBL has deteriorating trends in Revenues (-2.2%), Operating Income (-9.8%), Net Income (-16.4%), and EPS (-15.3%). These are the metrics that greatly impact future EPS and DGRs, and may have influenced the BoD toward divestments.

    All of which is to conclude, IMO the probabilities somewhat favor BBL as embarking on a long-term program, and taken with the state of world economies--immediate improvement is unlikely. Nonetheless, BBL may be a worthy selection for income investors not expecting the 10% DGRs reflected in the 3 and 5-year averages (more like 3%?). BBL is an attractive candidate to patient G&I investors seeking out-of-favor value stocks for long-term total return. However, as indicated by the recent price decline, entry-price is important to total returns.

    As always, complete your own due diligence!

    Nov 22 12:47 PM | 2 Likes Like |Link to Comment
  • DealBook: When activist investors aim at strong companies, America loses [View news story]
    It cuts both ways!

    IMO, most often, it is the relative weight of the arguments put forth by the activist and the target company that eventually win the votes of shareholders. (Activists have also been known to seek only enough greenmail to go away.)

    Nonetheless, I clicked on the link to the full article. Mr. George says there is a problem...but neither he nor others are proposing a solution.

    Until I have a solution to consider, I have no way to judge the better condition--the status quo, or the proposed solution.

    Nov 22 10:43 AM | Likes Like |Link to Comment
  • A Scandal That Should Shock Nobody [View article]
    In the 1980s, My wife and I owned 5 non-traded real estate partnerships. (I've tried to put that disaster out of my mind, so I don't recall exactly what they were labeled--but not REITs).

    Along came the Income Tax Reform Act of 1986, which included Reagan's tax-cuts and reduced brackets; but also many other changes, including reform to passive losses in real estate, and wham-bam! (no thank you) ma'am...those investments were immediately almost worthless.

    Which is only to say, when in the throes of horse-trading to pass major tax legislation, Congress can and does change the rules on tax-favored investments --and MLPs, REITs, and some provisions of ROTHs, seem to be in the cross-hairs of some in Congress (hopefully not enough).

    Nov 22 10:25 AM | Likes Like |Link to Comment
  • A Scandal That Should Shock Nobody [View article]
    I was very fortunate, I exited my position in ARCP with a minor loss in capital, and a bit larger gain in dividends. I've also made several comments regarding the risks (and potential rewards) of speculating in ARCP under present conditions.

    Nonetheless, I am troubled by the above article, reputedly written in the name of a reputable organization of Certified Financial Analysts.

    To be blunt: I find the article lacking in professionalism. (Jokes are amusing, this article reflects negatively on both the authoring organization and SA.)

    For example, though loosely connected to ARCP, at least 85% of the content is directed at the perils of non-traded REITs (and repeated references to up-front fees of up to 15%); it contains almost zero information directly addressing the news at ARCP; it's reference to Nick Schorsch is comparable to a 'drive-by'; and it's Bernie Madoff straw-man is clearly over-the-top (at least pending the results of official investigations).

    IMO, SA should have standards culling-out articles of this (very low) quality before publication...absent that, editors should remove them upon monitoring the comments and re-evaluating the suitability of the article as representing the intent of SA's editorial policy.

    Nov 22 09:35 AM | 13 Likes Like |Link to Comment
  • Discount Higher Yields At Your Own Peril [View article]
    MBN -- Thanks for your comment.

    IMO, knowledgeable investors can (and do) disagree, and disagreement should not to be discouraged--and never extend to harassment.

    Ideally, I can cover my views in 3 exchanges, at that point the author should have the last word.

    Nov 21 07:05 PM | 2 Likes Like |Link to Comment
  • The Long Case For CVS [View article]
    EG -- I offer my congratulations on the overall quality and depth of analysis in your first article (and BTW, you selected an excellent company to cut SA your teeth on). It seems this may be the product of a team effort.

    I've owned CVS for about 2 years, and my total returns are outstanding...without question, this horse is pulling my wagon from day one, and seldom rests.

    You may not know there was substantial mashing of teeth and unpleasant discourse surrounding the decision by CVS Health to drop tobacco from its shelves...but it is already very difficult to fault that decision.

    Regardless of one's personal view of the Affordable Care Act, as an investor, one must recognize the CVS focus on health is playing to that strength.

    I'm looking forward to your team's next article. If you are accepting nominations, I'd enjoy the collegiate finance view of BBL and/or MO. (As a grasp of the downside risk is equally important, I'd also like to see a few sentences outlining your assessment of the most likely threats to your thesis.)

    Nov 21 06:33 PM | 1 Like Like |Link to Comment
  • Wells Fargo Is An Attractive Income Investment In The Financial Industry [View article]
    JW -- Thank you.

    I bought WFC 18 months ago, and my total returns are very competitive. I don't look for WFC to set the world afire--nor to tank. WFC has a good reputation, and is fulfilling its role in my portfolio (and I don't need to monitor it as closely as some other positions).

    Nov 21 06:09 PM | 3 Likes Like |Link to Comment
  • Discount Higher Yields At Your Own Peril [View article]
    OK Eli, you last thought is quite different from the article...but also it is time to let this go.

    Enjoy your weekend.

    Nov 21 03:49 PM | Likes Like |Link to Comment
  • Intel Investor Meeting Generates Big News [View article]
    Yes indeed, WB did write that article...30 years ago, in 1984, when WB was only a millionaire.

    As a follow-up, you might comment on how Charles Munger, who joined WB a few years before that article has influenced WB's views on investing.

    In fact, Munger's influence altered many of WB's early views, and have helped WB move from millionaire to billionaire.

    Nov 21 03:42 PM | 1 Like Like |Link to Comment
  • Intel Investor Meeting Generates Big News [View article]
    Following this link to a comment today from a well-known DGI author, which reinforces the oft-stated DGI rule requiring 5-yr minimum annual dividend increases:

    "There is a significant difference between stocks "that pay a dividend" and what are known as "dividend growth stocks."

    A "dividend growth stock" has to be "growing" the dividend on an annual basis and doing that over a period of time. For many DGI's that is a 5 year history."
    Nov 21 02:13 PM | 2 Likes Like |Link to Comment
  • Discount Higher Yields At Your Own Peril [View article]
    Eli -- I certainly agree to your new comment regarding diversification (and I own 55 companies)...but unfortunately, your article only compared 2 companies, and the word 'diversification' doesn't appear (thus I addressed the problems in your article, not your post-article comments).

    In most cases, those 'blunders' referenced in your article can be moderated by getting out of a deeply troubled company and into a safer one...there are no rules requiring investors to stick with a problem company, in fact as demonstrated in your example, all the benefits of compounding work just as well (often better) in moving to JNJ, or another company.

    Clearly, you must admit, as a company bought for income, BP has not provided the better income for the last 5 years (from 2010 forward); furthermore, it will require some years longer for BP to catch up to JNJ since cutting its dividend. From your own chart, BP provided 34% less income since cutting its dividend compared to JNJ ($9.03 vs $12.11).

    p.s. It should not be necessary to congratulate an author for interacting with readers "all week", but as you seek kudos--congratulations.
    Nov 21 02:06 PM | 2 Likes Like |Link to Comment
  • A 4% Dividend Yield Portfolio With A 10% DGR Is Good Enough For Me [View article]
    Butterfly -- I didn't object to the author's discussing it. Alexander called him out for misleading the reader as to labeling as "yield" what he seems to have meant to be YOC (and I agreed). Perhaps the author will elaborate to clear up the confusion.

    Incidentally, can you agree...just as it is inappropriate to use 1-year's dividend growth to assume the 5-year DGR, it is also inappropriate to use the 5-year DGR to assume the 10-year DGR?
    Nov 21 10:29 AM | 1 Like Like |Link to Comment
  • A 4% Dividend Yield Portfolio With A 10% DGR Is Good Enough For Me [View article]
    Robert --The Wall Street adage "trees don't grow to the sky" (the tallest tree on earth is <400 feet high, whereas the tallest building is over 2,700 feet high) is usually associated with EPS growth rates and the law of large numbers, in which it becomes progressively more difficult for large companies to maintain past growth rates of X% to support of their high p/e ratios (AAPL being only one example, p/e=50 in 1999; 28 in 2007; and now 18).

    In this case, Alexander is using the adage to refer to the erroneous yield assumptions in the author's paragraph 3, in which he projects the portfolio's 5-yr DGR to produce a 10+% yield in 10 years! As you know, yield is the dividend divided by the stock price, and is not directly related to DGR, as it can also rise from 4% to 10% or greater due to a declining stock price (e.g.; check out the drillers!).

    If we assume the author was referring to dividend return on investment, or D-ROI (or YOC), he should have described it correctly, and we wouldn't be discussing it.

    Nov 21 09:48 AM | 2 Likes Like |Link to Comment