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Nathan Kemalyan MD

Nathan Kemalyan MD
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  • Dividends Matter If They Matter To You [View article]
    that settles it then :)...I suppose the investor who avoids stocks that pay dividends must watch earnings, free cash flow, or something to keep him/her grounded when the price is gyrating two and fro. I certainly like rising earnings and rising dividends for that purpose. Like the author, I feel somewhat insulated from the emotions of the ticker tape if I refocus on the earnings and dividend story.
    I like watching the share count rise with my DRIPs, even when I don't specifically choose to purchase more shares in a given holding. When prices dip, as long as the earnings story stays intact, I know I'll simply accelerate my share accumulation via the DRIP. If I'm not confident enough in the earnings and growth story of a stock to reinvest the dividends, why should I own it at all? There are certainly enough stocks to choose from that every one in the portfolio can be a "high conviction" holding.
    Aug 16 12:49 AM | 3 Likes Like |Link to Comment
  • Dividends Matter If They Matter To You [View article]
    What a nice, long stream of "Amens" to dividends. The benediction has been given and we're marching out into the warm Sunday sunshine. The truth is, I don't continue to lurk around the SA DGI world to simply be reaffirmed in my belief that dividends matter. I come here to read articles, read comments and glean insight into the value and performance of individual stocks and investment strategies. I don't personally find the occasional drive-by shooter's article that we're all misguided, deluded or just plain stupid to be very helpful, but I am amused at how many persons try to "set him right" or to otherwise discredit the author. It seems just as worthwhile to me to simply ignore the article and let it die a natural death with zero comments. However, I do think there is some value in "reciting liturgy" of DGI principles periodically, so I enjoy a periodic reworking of the basics by one of the reliable authors in the space.

    I'm not as disciplined as some of our prolific authors in strictly analyzing my holdings on a calendar schedule, but I pay a lot of attention to news, quarterly and annual reports, and the commentary of others as I review my holdings. Reading SA and other sources assists me in staying personally familiar with the activities and performance of each holding. From a visceral standpoint, I'm way past enjoying the spectacle of combat between the dividend "yes" people and the dividend "no" people. I don't get any entertainment value anymore from sifting through that chaff for the bit of wheat that actually improves my insight into HOW to manage a dividend-centric investment portfolio.

    My two cents-worth is to stop taking the bait when one of the known or new gadflies throws out a baited hook. The deafening silence of NO comments would probably say more than 200 rebuttals. I'd much rather hear your latest evolution of thought on how you are managing your portfolio.
    Aug 15 12:39 AM | 8 Likes Like |Link to Comment
  • The Day I Sold Everything [View article]
    I survived the last big correction by taking personal control of my retirement portfolio and investing in stocks that I felt would pay me to own them over the long haul. So far, they've been paying, through price trends both up and down. It's damn difficult to avoid watching the value number; I haven't found a way to stop yet. But, watching the income number is at least partly an antidote to watching and worrying about valuation.
    If you're a news junkie you'll constantly think the world is coming to an end. In spite of wars, rumors of wars and centuries of conflict, it doesn't appear to be coming to an end yet. I look at "going to cash" as the equivalent of dressing in white, climbing to the top of the nearest mountain and waiting for the rapture...people have done it over and over for years, hasn't happened yet.
    I suppose there's nothing intrinsically wrong with "taking a break" from the market, as long as you know that your cash is losing value at a steady 2-3% per year.
    Jul 26 08:17 PM | 7 Likes Like |Link to Comment
  • Dividends Don't Matter In Retirement Either [View article]
    335 comments already...why pile on when I can't even bring myself to read them all....I like a few arguments that have been forwarded for why dividends matter TO THE COMPANY, not the individual investor. We all have our reasons why we like receiving dividends (if we're on that side of the argument).
    From the company standpoint, a few arguments; one is that the company produces a lot of cash and doesn't see a reason to spend all of that cash on attempts at growth. There may be other constraints on the market that suggest throwing more cash at growth won't yield a similar return as existing capital assets. Another is that they want to attract a certain type of owner. The dividend may attract the kind of investor who isn't trading all the time, which may help reduce volatility of the stock price. This has some implications for management.
    Another is that paying owners a portion of the revenues produced by the company may exert some discipline on management to choose their capital allocations more wisely. I agree that earnings drive valuation AND dividends. I also think that corporate culture is important and dividend payments say something about corporate culture that I believe is fundamentally positive. There are certainly a bunch of other things one can consider but a steady and rising dividend certainly says something about the values espoused in the board room about the relationship between owners and management.
    Jul 19 10:15 AM | 4 Likes Like |Link to Comment
  • Why I Prefer Dividend-Paying Stocks Like Wells Fargo [View article]
    There is market risk in dividend equities if you intend to sell. There may be risk to dividend payment if operational performance deteriorates, but market risk is meaningless for the long term holder. Reinvestment softens the market risk by the amount of the yield, until you begin harvesting dividends for living expenses. It's true that one can "DRIP" bonds if your brokerage will allow you to buy fractional lots, but the share count growth of a DRIPed mitigates against market risks in an accelerating fashion over time. There's really no substitute for compounding in mitigating against market risk, unless it's buying bonds at a steep discount to face value. That opportunity doesn't exist in today's market.
    Jul 16 11:38 PM | Likes Like |Link to Comment
  • $3,000 Annual AT&T Dividends Are Like An Aesop Fable Sprung To Life [View article]
    you can trust company management or you can trust yourself. In most cases, I reinvest. However, I like the fact that the companies I own let me choose how to allocate that portion of the capital.
    There are endless examples of company executives squandering good money on non-core assets and the like as they try to figure out what to do with excess cash, only to divest them later at significant losses. I like a company that minds it's knitting; sticks fairly close to core competence and lets me decide to use my share of the profits to diversify at the portfolio level rather than making those choices for me.
    Jul 15 10:23 PM | 2 Likes Like |Link to Comment
  • $3,000 Annual AT&T Dividends Are Like An Aesop Fable Sprung To Life [View article]
    I think a lot of people over-think their investment strategies. What you're describing is what I have been doing for the last several years, but not because I had some sort of penetrating insight; rather, because I like the KISS principle and use the DRIP feature to keep all of my holdings growing. The result is that positions in some apparently stodgy and mature companies have produces surprising gains in value within my portfolio. With a 5% dividend and dividend reinvestment program, it only takes a bit of earnings growth and a modest share buy-back program to produce superior per-share performance. The individual investor gets very respectable growth in his/her position and the resultant claim on future earnings and dividend payment, even if the company isn't growing all that fast.

    I think you have exposed a component of DGI that most writers haven't been focusing on; the effect of share-buybacks on per-share performance. Most writers have framed the dividend/share repurchase argument as an "either-or" issue. It seems to me one should consider them in more of an "and" context.
    I'm a little less interested in top-line company performance than I am in my own per-share and position performance. That means that certain companies who have declining rates of earnings growth or dividend growth could still be worth purchasing because company policy is driving the share count down relentlessly. I can see the next iteration of the "chowder rule" coming along where yield plus dividend growth plus percent share repurchase produces the final number.
    Jul 14 09:34 PM | 1 Like Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    Yeah...I know how hard it is to keep reading articles that say "the same thing over and over again"...sort of like attending church and hearing the same stories out of the Good Book revisited repeatedly over the years. Except that, revisiting time-tested principles of investing repeatedly is how adults actually learn. Children learn that way too, for that matter. So, I keep on reading and every so often I pick up a new wrinkle on how to think about my investment strategy or come across another company I haven't previously considered. More importantly, I get updated information on the companies I already own. I don't do all that much original research, in fact. I almost always read something someone else has written and then go examine the available date to confirm or refute what has been claimed. It's just one of may available ways to monitor my holdings. I'm constantly assessing writers' claims against what I have learned to be sound investing principles.
    This individual self-managed portfolio director has concluded that monitoring a portfolio takes a commitment to, well, monitoring. I'm glad to rely on the fact that others are willing to write articles, particularly articles centered around a theme I'm interested in reading. Occasionally someone wanders by and lobs a bunch of critique into the middle of the conversation and the chorus of responses reminds me why I keep reading. We're reciting principles of investing that innoculate us from the temptation to stray from a disciplined and prudent path into the minefields of momentum investing, market timing and other forms of off-track betting.
    A few months back, I drove by the Coca Cola bottling plant in Ndola, Zambia...just checking in on my emerging market foriegn investments :)
    Jul 12 09:07 PM | 4 Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    woulda, coulda, shoulda...would you have been a position to distinguish the prospective performance of CLversus KMB? I have to accept the limits in my investing prowess and go with a basket of companies; some "best in class" choices in each sector and a few more that have higher growth prospects in addition to a dividend kicker. There's a potential opportunity cost to every investment decision. Since I'm not clairvoyant, I can't identify that single best investment with no opportunity cost and I wouldn't want a portfolio of only one holding anyway. I don't want to pay some manager 1% every year to pick the basket and I'm not cut out to be a passive ETF investor, so my version of active management is working hard on the front end and then trusting the whole portfolio to perform. Selective re-investors may be eking out a few more performance points at the cost of more work. DRIPS work for me because I'm making a portfolio bet rather than a whole bunch of sequential reinvestment bets. I'm paying plenty of attention to new additions; there just aren't that many lately. I don't have time to repeatedly ask which of my "first team" portfolio should get the divvies each time around. That's the reason why Dave's "there's more than one way to skin the cat" emphasis is so comforting; this works for me and I'm not competing with you or any index. The simple rules seem to work pretty well; save a lot, control your expenses, protect your principal, get a steady dividend paycheck and spend most of your time sitting on your hands, investment-speaking. The several variations on the theme make for endless posting entertainment, but aren't make-it-or-break-it issues when the goal is an adequate and rising stream of income.
    Jul 9 12:27 AM | 3 Likes Like |Link to Comment
  • Dividend Growth Investing: Is It A Strategy Of Cliches? [View article]
    hmm...seems we're running out of gas for new insights into the DGI world. All the comment streams are degenerating down to sniping contests. I'm not sure there IS an ideal strategy for a high P/E market. If the snipers really had better ideas, they'd have enough to do writing about their superior strategies rather than snipe.

    I keep scanning the news streams, looking for new ideas. I'm currently coming to the conclusion that the best ideas are the ones already in the portfolio. I can either collect dividends as cash and wait for something big to happen, or broadly reinvest in my best ideas and understand that the incremental investments I am making across the board today are not at the most favorable valuations.

    The problem with holding cash is, I'm making a bet on the direction of the market, suggesting that I know when a correction is near. Actually, I don't know that, in spite of the fact that this is a historically long run-up. It could get quite a bit "historically longer" while I'm sitting on cash. If I keep purchasing broadly and there's a down-draft, my higher share count will qualify me for more dividends to be reinvested at lower prices. I have seen no compelling arguments whatsoever for attempting to guess the time of a correction and holding cash for that event. Reinvesting dividends in both higher and lower valuation times results in that "averaged price per share" that tends to be lower than the result of purchasing in blocks.
    I'm going to happily keep collecting and reinvesting those dividends, secure in the knowledge that "time in the market" is a better predictor of investing success than "timing the market".

    Perhaps it's just time to go away for a while, hope the snipers wander off and find something else to entertain themselves and sneak back in September or October, see if there's anything new to talk about.
    No offense Dave, but it seems that what new articles are attracting these days mostly is flies...
    Jul 8 01:42 AM | 11 Likes Like |Link to Comment
  • You Are Responsible For Your Investing Decisions [View article]
    I spent years trustng the broker because I was too busy...until I finally calculated my actual return on investment and realized the broker was earning more than I was on my investments. At that point, after I fired him, I spent countless hours reading. I purchased newsletters, cruised the Motley Fool, eventually found SA. l think it took me about 1500 hours before I began to develop my own sensibility about the world of investing and another 1500 hours before I felt somewhat competent to avoid major errors in strategy. I would guess I'm now at 5000 hours invested in education about my investments over 10 years time. Maybe I'm just slow, and I could have gotten there alot faster if I had happened upon a dividend strategy earlier in my wanderings, but I don't think it's easy for the average person to self-educate on a preferred strategy.
    Someone once said that mastery of a profession requires a 10,000 hour investment. If you expect to be the equal of a professional advisor, you have to acquire a professional's skill. I know I'm not there, so I restrict myself to a fairly strictly defined set of investment principles. Like DVK, that excludes the vast majority of potential investments from my pick-list. Fortunately, following a DGI, buy and monitor approach to investing now demands much less of my time than the process of finally finding it and learning how to do it.
    Jul 3 12:23 AM | 12 Likes Like |Link to Comment
  • A Current Review Of Dividend Safety Superstars - Part Two [View article]
    I'm re-reading some postings as the bull-run continues to extend. More and more folks are talking about cash positions as hedges against a correction. I have some real internal conflict with that, as no-one I trust has ever claimed they can time the market and I just can't stand letting cash sit idle. The best compromise I can think of are cash covered puts, but one can hardly sell a put at 10% out of the money and expect to make any premium return at all.

    So, the next compromise would be to invest in the most "defensive" issues available; consumer defensive, so to speak. I already have a pretty healthy chunk of utilities, mega-cap consumer staples.

    Perhaps the best approach is to remember that buying new shares is fundamentally purchasing future earnings and dividends, so a 10-15% correction will eventually yield to a 10-15% recovery and beyond, and the only difference is that I won't have "timed the market" with my next purchases. Owning those shares before the correction will entitle me to dividends through the correction at a somewhat higher yield. Perhaps that will mitigate against the opportunity loss of not purchasing at a lower price.

    We seem to get ourselves all wrapped up around this issue of timing; part of the emotional baggage of investing that needs to be exorcised. Still, I hear the sages saying "buy at a discount, or no higher than fair value". Problem is, fair value is a range and an estimate, not a fixed point, and the consensus is that valuations across the board are a bit stretched. Only two ways to correct that; wait for higher earnings or watch prices fall again. If earnings falter, you can bet what will happen to prices.

    It's trouble in paradise, puzzling what to do with cash and a "rich" market. Perhapse I could model a "return for holding cash"; a projection of the reverse time value of money that describes a correction of various magnitudes occurring at various points in the future, followed by an average recovery; that might make the "hold cash or invest" question a little easier to parse...

    Who is the wizard with spreadsheets that knows how to do that? I'll give it a try, but probably won't be worthy of publishing.
    Jun 29 11:05 PM | 3 Likes Like |Link to Comment
  • Is Residential PV Solar More Trouble Than It's Worth? [View article]
    I find it pretty unhelpful to bash the rooftop solar industry, since bashing does nothing to change the social, political and market dynamics that are at work. It makes a lot more sense to spend that effort attempting to understand how the storage problem might be solved, or how to link the intermittency of renewable power production to energy consuming processes that won't destabilize the grid. We humans have an endless capacity for innovation and we have barely started grappling with potential solutions to the intermittancy problem.

    I don't mean to sound trite, but if solar power production peaks at noon and the air conditioning demand peaks at 4 pm, how about turning that solar-derived electricity towards producing some "cool" that can be used between 3 and 5 pm to cool the home when the cooling is needed most? Remember good old ice? There's a similar technology being installed on industrial roofs today that takes advantage of cheaper power at night to make ice to provide cooling during the day. My home is full of low-voltage DC lighting. I can purchase a refrigerator that runs on DC current. How much deep cycle DC storage will $20,000 buy me a decade from now?

    Some of the reasons that rooftop solar has captured the imagination of the public have already been hashed over ad-nausea in pages like this; governmental policy, tax subsidies, net metering, etc. etc.
    What hasn't been adequately appreciated is that the individual consumer WANTS to do something to reduce dependence on fossil fuels and nuclear energy and is willing to invest sizable chunks of personal capital for the satisfaction that he/she is making some kind of a difference. That's a tremendously powerful social force and it would make a lot more sense to figure out how to harness it than to denigrate it. I can't go out and install a 150 foot pole and a wind turbine on my urban lot, but I have 3000 square feet of rooftop that can be put to work. 100 years ago people bought cars before there were adequate roads to get from one city to another and a short 40 years thereafter the interstate highway system was largely in place. I don't expect it will be much different in 40 more years with an electrical grid that can manage tens- and hundres-of -thousands of intermittent producers of electricity. You and I may be in the hereafter, but I think the grid will have evolved quite a bit by then.

    It's all very complex, and demands significant evolution in our behavior and consumer technology all along the power production and consumption chain. What will drive all this change is not the economics of commercial power production and delivery, but rather the behavior of millions of people who are DEMANDING that the industry allow them to participate in distributed energy production.
    Perhaps we can get past the bashing and on to envisioning more innovative ways to prepare for what a whole lot of people clearly want and are willing to buy at significant cost...
    Jun 27 02:02 AM | 5 Likes Like |Link to Comment
  • AT&T: Compelling Even Without Growth [View article]
    I would call this one a "sleeper". You buy it for the yield, and unexpectedly it continues to provide very significant total return based on very modest dividend growth and price appreciation. Throw in a modest share repurchase program and you're pushing 10% total return. This performance is based on something people just keep doing more and more of; phone calls, text messages and mobile internet searching.
    Jun 19 10:28 AM | 2 Likes Like |Link to Comment
  • McDonald's: What Would The $20 Billion Cash Return Plan Mean To Dividend Growth? [View article]
    Nice analysis.

    The key take-home message here is that the individual investor can fare significantly better than the organic growth of the company, given that dividend reinvestment and the effect of share buy-backs drive up the value per share and the dividend per share of a mature and predictable cash producing enterprise.
    I find this far more appealing than trying to divine out which tech company is likely to grow more rapidly or which high-yield, high risk mortgage REIT is likely to predict interest rate spreads more accurately.
    I think the world's population will continue doing what they do every day and drop in for another hamburger in the hustle-bustle of their daily lives, so my investment is about as secure as it can be in any equity.
    This process can repeat itself until there are no more sellers of shares, which will be a long, long time from now, if ever. I think my grandkids kids will be eating at McDonalds long after I'm pushing up daisies.
    Jun 19 10:09 AM | 1 Like Like |Link to Comment
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