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  • Ensco Slashes Dividend, But Here's Why I'm Not Selling [View article]
    If I still held ESV, I believe I would sell following this dividend cut for the reason that investors will be reluctant to bid the drillers up to there former levels because the Saudis have now demonstrated they have the capacity to knock them down at will. Investor expectations of attractive total returns are reduced.

    Feb 27, 2015. 03:09 PM | 2 Likes Like |Link to Comment
  • Rate Increases May Come, But Realty Income Dividends Keep Piling Up [View article]
    Tax -- You are welcome.
    Feb 27, 2015. 06:26 AM | 1 Like Like |Link to Comment
  • Rate Increases May Come, But Realty Income Dividends Keep Piling Up [View article]
    << Could you comment on what you look at to help determine price appreciation? >>

    Tax -- Hopefully, this will address your query:

    Your question looks simple enough, but quickly leads to a lengthy response. I've developed the following overview, followed by the details and examples...

    My core portfolio is no different that of DGIs (earlier I pointed out some major differences in managing our portfolios). Typical DGIs and myself can agree our core portfolios are weighed to the conservative side of risk/return (e.g., almost all our positions are low beta & standard deviation; are large caps; are in non-cyclical sectors; have investment grade credit ratings, and low debt:equity; have long earnings and dividend histories; and so forth).

    Many of us are fond of stating our belief the companies we've selected for our core portfolios will...should...might.... our portfolios above our point of maximum-pain* during a deep and prolonged bear market. Therefore we don't need to hold the traditional counter-equity asset class (bonds), whose price traditionally advances as stocks decline in price.

    The least of us thinks himself a near-genius stock-picker in this 6-year bull market. However, the 2008-09 bear market was deep--but not prolonged--its duration was only 18-months. Thus our various will-should-might beliefs are only half-tested among those who actually maintained their strategy through the last bear market.

    Therefore, just like I build a position in a series of limit-buys, I'm also willing to reduce a position in a series of limit-sells...and I want to do so BEFORE reaching my point of maximum-pain. (IMO, the missed-opportunity 'costs' of taking profits early is preferable to the risk of waiting to take actual losses at the point of maximum-pain. (Mine's a more active portfolio management designed to preserve wealth, as opposed to maximizing dividends or capital gains.)

    Yesterday’s comment included: “When I find a dividend-paying company that offers significant price appreciation, I don't defer buying until it has established a record of 20, 10, or even 5 years of consecutive dividend increases”. I also don't automatically sell (or avoid) a company that has cut dividend”. That comment applied to my Opportunistic Portfolio. I'll expand upon that comment:

    These opportunistic companies have made mistakes; their earnings may have declined;many investors have abandoned them; their share prices are significantly below their former levels (and FV); sector rotation might be a factor--and I have reason to believe the company will fix its problems, will not cut its dividend, and their prices have bottomed or are approaching bottom. Such companies may have been growth companies, and are now value stocks.

    My process starts with limiting my downside risk. I want dividend-paying companies with investment grade credit ratings having the potential to deliver attractive total returns (distributions + price change) within my strategy and suggesting little added risk--taking the long-view, one might consider these companies to be mis-priced. I limit my position size to about 75% of that I consider normal for core positions. I do not invest in IPOs, or micro-caps, nor the Googles, Netflexes, or Facebooks that have produced wealth for many investors (and congratulations to those that have done so successfully!).

    From there it is a matter of determining the probability the assumed potential will be realized in a reasonable period (usually up to 2 years). In my experience, companies that lead their industries sometimes make mistakes--but those having the above characteristics (paragraph above) usually have the ability to correct their mistakes and lead again.

    Success in these opportunistic buys is not limited to selecting well the companies bought...portfolio results are also shaped by avoiding costly mistakes such as reaching for maximum returns in low-probability investments and speculations.

    At this point, you’re wondering if I’ll ever get to those examples:

    Oct. 2011: Started a position in MSFT. Avg. shr cost = $26.78 (incl. commissions) in a period when company was being criticized for lack of innovation and keeping up with new technologies. (Closed today @$44)
    Trimmed 3 times on its way up, including once at a price higher than today’s.
    75% of original shares remain. Received over $3,300 in dividends to date.

    Nov. 2012: Started a position in CSCO. Avg. shr cost = $19.83 some 14 years after it was the most valuable company on the planet(!), and in a period of declining top and bottom line. Note CSCO only begin paying a dividend in 2011. (Closed @$30)
    Trimmed twice on way up, including @ $29.88 today.
    90% of original shares remain. Received over $1600 in dividends to date.

    Dec. 2012: Started a position in INTC. Avg. shr cost = $20.76 when top and bottom lines were declining, the company was severely criticized for not investing in mobile and tablet technologies. INTC paid the same 22.5 cent dividend for 10 quarters--and many DGIs sold it. (Closed @$33.50)
    Trimmed 6 times on the way up, including 3 times at prices higher than today’s.
    75% of original shares remain. Received over $2,000 in dividends to date.

    I have 10 additional opportunistic positions, such as GE, DOV, & BBL (which is where I keep my cyclicals), as well as 40 core positions.

    Hopefully you now have a sense of what I had in mind when I referred to “a dividend-paying company that offers significant price appreciation”.

    Should have added questions, either ask or send PM.


    * Investor psychology is the subject of many studies. Investors sell at their point of maximum-pain. That point varies among investors, some sell at a principle loss of 8%, some 20%, some 40%, some 60%, and some ride a stock down to much greater losses.
    Feb 26, 2015. 04:53 PM | 5 Likes Like |Link to Comment
  • Rate Increases May Come, But Realty Income Dividends Keep Piling Up [View article]
    Tax -- It's taking a while to construct an adequate reply to your question...please bear with me, I'll have it completed later.

    Feb 26, 2015. 11:17 AM | 2 Likes Like |Link to Comment
  • Tech Giant For Sale [View article]
    Thanks Steve -- You summed up my views also.

    Feb 25, 2015. 09:21 PM | 1 Like Like |Link to Comment
  • Medtronic Inc. Dividend Stock Analysis [View article]
    Thanks D4L -- Medtronic is an excellent example of the difference between your focus on income, and my focus on total returns.

    Whereas you have outlined MDT's score by your metrics and found it not eligible for your portfolio; I have found it an outstanding performer in my portfolio...

    You ask: "Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond?" My response is why not? MDT entered the last recession with a quarterly dividend of 13 cents, did not cut it, and today pays 30.5 cents. MDT's 5-yr DGR is greater than 8%. MDT's total returns are +9.5% YTD; +39.3% for 1 yr; +29.3% for 3 yrs; and +14.1% for 5 yrs (each of those also exceeds the market's performance).

    Yet in spite of MDT's past outstanding performance, even today, analysts are bullish on MDT. S&P Capital IQ has a 12-month price target of $89, a 3-yr EPS CAGR of 8%, and rates MDT "A" for investment quality.

    It appears like the 3 blind men who encounter an elephant, SDIs can view the same company quite differently.

    Feb 25, 2015. 04:42 PM | 5 Likes Like |Link to Comment
  • Why Kellogg Is Obsolete [View article]
    h -- K's earnings release included a section on free cash flow. K's cash position remains strong at $1.2 billion. That's an improvement over 2013, and almost matches 2012's peak. K has also bought back shares, and now has a share float of about 353 million shares (compared to 416 million in 2004).

    IMO, K's dividend is not in danger.

    OTOH, Project K will require investment. Should K not right the ship and resume growth, cash will leak, the share price will decline, dividend increases will be quite modest and eventually would be cut. However, it is way premature to be thinking along those lines.

    Feb 25, 2015. 03:22 PM | 2 Likes Like |Link to Comment
  • AT&T's DirecTV Purchase Will Pay Dividends For Shareholders [View article]
    << S&P and Moody's reduced their credit rating on AT&T from A to BBB... >>

    Bruce -- I made the mistake of assuming the author had his facts correct.

    Paul has provided the correct rating, as well as the best source (thanks Paul).

    Feb 25, 2015. 12:27 PM | Likes Like |Link to Comment
  • Rate Increases May Come, But Realty Income Dividends Keep Piling Up [View article]
    Happy -- You are welcome. Should you have another question, you can PM me anytime.
    Feb 25, 2015. 12:17 PM | 2 Likes Like |Link to Comment
  • Rate Increases May Come, But Realty Income Dividends Keep Piling Up [View article]
    Happy -- According to your profile, you are a DGI (a fine strategy). I am a Growth & Income investor, and about 20-yrs your elder.

    Therefore, I'll preface my response to your question, as you may find little of value to yourself in my portfolio management practices...

    I own the same companies as DGIs, but there are some differences in how I manage my portfolio compared to the more passive practices of many DGIs...

    A few briefly described examples: I invest for long-term total return (BOTH legs), rather than solely to build an income stream, yet my growing income stream exceeds my expenses. I am not a 'rule-based' portfolio manager; thus much of my portfolio management is based upon experience and comfort zone. When I find a dividend-paying company that offers significant price appreciation, I don't defer buying until it has established a record of 20, 10, or even 5 years of consecutive dividend increases. I also don't automatically sell (or avoid) a company that has cut dividend.

    I only buy when priced at FV or below. I never DRIP dividends because those monies should be invested at FV or below--just like other monies. I focus on my total portfolio, and don't hesitate to trim positions when overvalued (or become uncomfortably large). I don't track YoC on a position basis because doing so puts the return of the position ahead of the return of the portfolio. I put far more emphasis on a company's ability to grow its net income, and less on assumptions as to its 10-year or longer dividend growth.

    Moving on to your specific overvaluation question..."At what price do you consider O overvalued enough to sell?"

    First, like yourself, I rarely sell a position unless monitoring suggests it will soon encountered significant deterioration in fundamental metrics (only rarely does that event sneak-up on me); more importantly, I trim 5% to 10% of a portion of a position when it has become overvalued, or grown to become uncomfortably large. If it continues to advance 5% or more further into over-valuation, and without justification, I'll trim again at a higher price.

    I twice trimmed a greatly over-valued O in May of 2013, and applied the proceeds to an under-valued position. A few months later (October) I bought back several times the trimmed shares when O's price had significantly declined.

    This year I've twice trimmed O, and will likely buy back more shares if it declines to FV as I believe it will, but if not, that's OK too.

    I assume you are looking for a formula--but I have none to offer. There are too many factors in play to arrive at a one-size-fits-all approach to timming. For example, in the short-term O responds to investor's view or concern related to changes in interest rates (far more so compared to a PG, a JNJ, or a XOM), so a rule formula applied to O might not fit those others.

    Feb 25, 2015. 08:05 AM | 7 Likes Like |Link to Comment
  • AT&T's DirecTV Purchase Will Pay Dividends For Shareholders [View article]
    GCGV -- Thanks for an excellent discussion of T's positives.

    Agreed, T is an appropriate investment for income investors. However, T is not limited to value investors. Because T is trading in its FV range, it is also broadly attractive to the portfolios of many value investors, as well as G&I investors like myself.

    T's moves to grow via acquisitions of Direct TV and Mexican wireless carriers offer potential new growth markets in Latin America.

    Over 1,750 Institutions own about 53% of T's 5.2 billion share float, and have recently increased their holdings (a strong positive).

    Positives include all the factors discussed in the article; however, T is not risk-free. It does have significant debt coming due, and it's reduced BBB credit rating (combined with higher rates) will make new debt even more expensive. A continuing price war fostered by smaller wireless service providers going after the customers of T and VZ will reduce revenues of the giants.


    p.s. One added minor/major point:
    You can of course define T in the negative: "T is not a growth company".
    However, I prefer the more accurate definition: "T is a slow-growth company"

    As you know, growth of T's top and bottom lines is essential--without growth, T cannot maintain and improve its BBB credit rating, its price/earnings multiple, its reasonably safe payout ratio, and a host of other important metrics essential to the dividend growth essential to attracting many institutions and SDIs.
    Feb 25, 2015. 05:54 AM | 7 Likes Like |Link to Comment
  • Why Kellogg Is Obsolete [View article]
    Breakfast trends are moving against K. Kellogg is well aware of this, and is taking a variety of actions to better position themselves (that effort will likely take another year).

    IMO, the above effort to prove "Kellogg Is Obsolete" is more hyperbole than fact.

    Long: K (and others in the Packaged Foods Industry: KRFT, MDLZ, & UL)

    Feb 24, 2015. 03:29 PM | 1 Like Like |Link to Comment
  • Dominion Resources Provides Secure Future To Growth-Seeking Investors [View article]
    Long D (also NEE and SO).

    Bought D almost 4 years ago. Total Returns were excellent until recently; the utes have stagnated, and the cyclicals and techs have moved into the harness to pull my portfolio wagon while the utes rest.

    Feb 24, 2015. 03:21 PM | Likes Like |Link to Comment
  • Dividend Cuts Coming Fast And Furious In 2015 [View article]
    AG -- Thank you for the article.

    Some 6 and 5 years ago, we had a periodic article series titled Dividends In Danger (since discontinued).

    It would be helpful to many if you were to put your Dividend Death Watch into a periodic article series.

    IMO, it is not necessary that you bat .400 -- only that you list your process and your target companies. From there, the reader could follow-up with his own process and conclusions.

    Feb 24, 2015. 02:30 PM | 3 Likes Like |Link to Comment
  • Medtronic Is Competitive On Key Sustainability Metrics [View article]
    I can't speak to Medtronic's ESG/GHG, and/or gender metrics (and frankly investing due diligence is complicated enough w/o those additions). However, I can speak to my outstanding total returns (+150%) since investing in MDT about 3.5 yrs ago.
    Feb 24, 2015. 02:11 PM | 2 Likes Like |Link to Comment