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  • Are Dividends Irrelevant, Or Even Harmful? (Part II) [View article]
    Most debates on this issue centre on whether management could do a better job growing the company (hence raising stock prices) by keeping the cash otherwise distributed as dividends.

    All such arguments are unconvincing unless the authors present empirical facts. Have we not read somewhere studies that show that the total returns of dividend stocks are higher than the same for their non-dividend brethren?

    What other measure should we consider? Average beta for the two types? Average peak-to-trough declines for the two types? Surely some enterprising with access to a fine database could could put this data together and end these debates?


    Jan 18, 2012. 08:15 AM | Likes Like |Link to Comment
  • Exelon: Now's The Time To Buy This Dividend Payer [View article]
    I'd be interested in a comparison of what I consider to be better utilities, like CNP, WEC, NST, NGG, and maybe CPL.

    Any chance that you'll park your GTi long enough to consider such an article?

    ANd -- if I may ask a personal question -- what got you interested in investing at such a young age? You'll be RICH!!!
    Jan 17, 2012. 10:29 PM | Likes Like |Link to Comment
  • If Apple Declares A Dividend, Watch Those Put Options [View article]
    To confirm, a point I was not aware of, if you sell a put (not exercised yet) you pay the dividends anyway? To whom, the put buyer?
    Jan 17, 2012. 08:52 PM | Likes Like |Link to Comment
  • A Utility Basket For Dividends And Growth [View article]
    Ah, the yield on cost. Does one factor in capital gains in the YoC calculation?

    For example, I buy a stock at $100, for its 5% dividend yield ($5.00), and it rises to $150. I sell the stock and invest the $150 (ignore tax and commissions) into a new stock yielding 4%.

    At first glance I have lowered my dividend yield from 5% to 4%, but because I invest the capital gain of $50 as well as my original $100 investment, I receive dividends of $6.00 (4% X $150). So, is my new YoC 6%?
    Jan 17, 2012. 08:42 PM | Likes Like |Link to Comment
  • A Utility Basket For Dividends And Growth [View article]
    I love your overall strategy.

    I have a question about stock picking, but first a general request.

    I am hoping that you will soon produce articles giving more details about your put and call strategies. Practical details like how to choose the optimum combination of expiry date, premium, and strike price would be useful to neophytes like me. Where the premium is low, commissions eat up a large part of potential profit. Yet to get higher premiums one must choose expiry dates further into the future, which exposes the investor to greater risk that the option will be exercised.

    Is there a calculator available for all this, or do you simply go through each stock and do the arithmetic manually?

    As for picking individual stocks for the portfolio, I give DUK low marks as a short-term and as a longer-term stock.

    Short term, I don’t see much headroom for price increases. DUK’s P/E is 15.44, which Schwab says is above the norm for utility stocks, and it is trading close to its 52-week high. Its price a few years back does not seem as important a consideration.

    Longer term, DUK does have a nice current dividend yield, but its dividend growth rate has actually declined over the past 5 years, so other utilities will soon be providing higher dividends, no? Also, DUK’s EPS was negative over the past 3 years, and minimal over the past 5 years, so I wonder if it will be able to sustain and grow dividends going forward.

    Since I am new to assessing individual stocks, I expect that my analysis is faulty, since it disagrees with yours, and I’d appreciate your showing me the error of my ways.
    Jan 17, 2012. 08:33 PM | Likes Like |Link to Comment
  • Misguided Popularity Of Dividends: Not Always What They Are Cracked Up To Be [View article]
    I am happy to see an author support or refute a different article on the same topic. Presumably both authors are well-informed on the topic, and so I get a balanced view, and I can make a better decision to buy or stay away.

    Assessing which viewpoint to favour becomes easier if each refutation is more pointed, if each author refers to specific points made by the other author.
    Jan 16, 2012. 07:10 PM | 2 Likes Like |Link to Comment
  • Is The Yield Curve Still A Reliable Signal Of Recession Risk? [View article]
    Once the bond yield curve becomes inverted, can the investor count on a time frame (weeks, months?) in which the economy (and more importantly the stock market) will decline?

    Stocks themselves are taken to be leading indicators, so which indicator comes first – yield curve or stocks? If stock react more quickly than the yield curve, i.e. f stocks have already declined by the time the bond curve inverts, then the curve has less interest for me. But if the yield curve usually becomes inverted (say) 3 months before stocks start to decline, that is useful information.

    Conversely, once the yield curve becomes normal again, i.e. short rates again become lower than long-term rates, how much time do investors have before stocks rise again?

    I understand your being conservative and advising us to rely on several indicators, rather than just yields, but if each market decline is predicted by a different cocktail of indicators, each time different, then we’re back to guesswork, or reading tea leaves.
    Jan 16, 2012. 06:56 PM | Likes Like |Link to Comment
  • My Long-Term, Enhanced Investing-For-Income Strategy [View article]
    I should probably read more before asking this question, but I am too curious to wait!

    The price of the covered call you have sold normally decays (price declines) the closer you get to the expiry date. However, if the stock price is rising, and gets close to the strike price of the call you have sold, isn't the call likely to actually increase in price?

    So, if you want to buy back the call, to avoid having to sell the underlying stock, you would buying back at a higher price = loss, no?
    Jan 14, 2012. 10:40 PM | Likes Like |Link to Comment
  • Regarded Solutions' 'Buy On Dips' Dividend Strategy - SA Author Spotlight [View article]
    I expect that RS will rue the day he got such a favourable review. I went back and read all his articles, and then inundated him with about 7 questions.

    RS makes a lot of sense.
    Jan 14, 2012. 09:04 PM | 1 Like Like |Link to Comment
  • Dividend Giant Exelon Is A Cheap Buy Now [View article]
    I am late to the party of reading your articles. I just returned from reading every one, starting last November. Thanks for a job well done. But if I may play catch up with a few unconnected questions, here they are.

    1) How exactly do you re-balance your portfolio? You started off with equal dollars in each stock of the portfolio. Do you sell off a few shares in the high-flying stock and buy more in the low-flying stock, to bring them back to equal dollar weightings? How often?

    2) When you say to buy during a dip, how do you know it’s only a dip and not the start of a major leg down? I don't try to guess the bottom of a dip; instead I buy when the dividend yield (of a solid stock) rises to my threshold. But I'd love to hear your strategy.

    3) Buying when a dip occurs is possible only when you have cash available to invest. So, do you keep a prescribed amount of cash always on hand (say, 10-15% of portfolio value)?

    I suspect that this is not the case, though, because I think you once replied to a reader that you liked his stock picks, but you did not have spare cash to buy any. So, it seems that at times you are fully invested. Is the cash to buy stocks during the next dip only from dividends and selling calls? Or, once fully invested, do you look for a good time to sell the weakest stock in the portfolio?

    4) Speaking of selling calls, I could not find the article where you explained your approach in detail. True, you mention bits and pieces of the strategy, but a cohesive detailed explanation would be fascinating.

    5) What is the “ESS” rating?

    6) I have been advised to consider Return on Equity as one factor in deciding whether a company is well run, and can therefore maintain its dividends. At times, though, I can find (in Schwab) data on Return on Assets, but not Return on Equity. What is the difference (I am not an accountant)?

    7) You like EXC as a utility stock, and it does offer a nice dividend yield. But its total return underperforms its comparable ETF (XLU), and other stocks (like UNS, CNP, and NGG) score a bit higher on my point scale (which probably needs improvement, I’ll admit). Any comments on these other utilities?

    Sorry to inundate you with questions from articles in the distant past, but I promise to stay current from now on.

    Jan 14, 2012. 09:01 PM | Likes Like |Link to Comment
  • Verizon: The Best Dividend Growth Plan In Telecom [View article]
    Neither T nor VZ are financial giants; each has its strengths and weaknesses. For example, T has a higher EPS over 3 and 5 years, but stumbled badly this year, while VZ had poor EPS over 3 and 5 years, but raised it considerably this year.

    Do you give more weight to recent performance, or more weight to longer-term performance?

    I guess you'd weight longer-term performance (hence T) if you want to buy and hold for almost ever. But you'd give more weight to shorter-term performance if you were going to reevaluate, and perhaps replace the stock each year. Then you'd give more weight to current div yield and let the currently-strong EPS assure you that the dividend will continue for at least a year or two longer. Hence VZ.

    I wish there were a simple but thorough scoring system to sort all this out for us. Each scoring system I have examined (including my own) seems to let in certain stocks that I subsequently wonder why I ever considered seriously. Or, conversely, if I set the filters too tight, I end up with old stalwarts that yield maybe 2-3%, and that's too low.

    Sigh ....
    Jan 13, 2012. 10:41 PM | Likes Like |Link to Comment
  • General Dynamics: Dividend Stock Analysis [View article]
    GD's financials (EPS etc) seem very solid, yet it's total return for the past decade is less than 5% !? Does this make sense, or is the market inefficient?
    Jan 13, 2012. 09:57 PM | Likes Like |Link to Comment
  • Wal-Mart Dividend Growth Stock Analysis [View article]
    Would you consider adjusting your marking system to award a few points to solid companies that don't yet have a long record issuing and increasing dividends, and (of course) awarding more points for longer records?

    This would allow companies with a shorter dividend paying records, but higher current yields and higher dividend-growth rates to be considered too.
    Jan 13, 2012. 09:47 PM | 1 Like Like |Link to Comment
  • What Is The Bond Market Telling Us? [View article]
    Let's see if I have this right. We have an inverted yield curve in the bond market, which means that yields are higher now (prices low) than later, into the future (when yields are lower, prices higher).

    Does this suggest that fewer investors are buying bonds now (and so prices have slipped) because investors expect good times for stocks? But investors are buying later bond maturities because trouble for stocks is expected later?

    If so, and the bond market is usually right, this scenario suggests good times for stocks short term, but poor times later on. The question is, "when will the poor times occur?"

    In 2000 and other times when an inverted yield curve predicted stock market declines, how soon after inversion did the stock market decline occur? Weeks, months, a few years?

    And did the crossover point have any bearing? That is, when the yield curves crossed, and short-term yields were again lower than longer-term yields (the normal situation), did this predict a return of good times to the stock market? Again, what was the time lag between yield curves crossing and stock market action?

    Jan 13, 2012. 08:52 PM | Likes Like |Link to Comment
  • Choosing The Best Utility Stocks For Growth In Your Portfolio [View article]
    I admire the author for being able to reassess the weightings placed on different factors, and change his mind publicly. It is the analysis and not just the conclusion that is useful. I learned a few things about evaluating a stock from this article.
    Jan 13, 2012. 07:55 PM | Likes Like |Link to Comment