Dividend Challengers: 17 Increases Expected By August 30 [View article]
Robert:
Merrill Lynch has an "underperform" on AZN. S&P has a "sell" on it. The research I've read shows a weak pipeline and losses of market share on existing drugs such as Onglyza.
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
chopchop, you're right to a point. I waited until I had visited my local Publix before responding. Philadelphia cream cheese is available at Publix in many more varieties than the Publix brand. At the same time, Publix charges $2.59 for Philadelphia brand and $1.69 for their brand. Wal-Mart charged $2.19 for Philadelphia brand and $1.99 for their brand. There seems to be a method to the madness. Wal-Mart did NOT have the assortment of Kraft products and could, therefore, not charge as much of a premium for the branded product.
If I were to buy straight cream cheese or the Neufchatel (low fat) variety, I would buy the Publix brand notwithstanding my holding KRFT stock. If I wanted cream cheese with smoked salmon, I would probably still buy the Publix brand and buy smoked salmon and mix it in. I doubt that the Philadelphia band has enough salmon in it to give a real taste.
Buy And Hold: The Story For Procter & Gamble [View article]
I really don't think that an investor can disconnect the earnings growth that makes increasing dividends possible from the earnings growth that drives price appreciation.
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
Sorry, Sedj. While I'll hold a position in KRFT, my position in GIS is four times as great as my position in KRFT. The GIS dividend is only half a percentage point lower than that of KRFT. On every other measure (qualitative and quantitative), GIS has KRFT beaten. Why do I hold KRFT at all? I'll pay a price for diversification. I don't claim to bat 1.000.
Fixation on generic brands? Can you give a reason to pay 10% more for Philadelphia cream cheese than the Wal-Mart brand?
I also hold four of your six other selections. I prefer CVX to XOM. I prefer GSK, LLY, and MRK to BMY.
What Is More Valuable? Dividend Yield, Or Capital Appreciation? [View article]
>>>I don't use the word "withdrawal", as (to me) that implies "sales of assets". I prefer to fund my retirement entirely from dividends. I would rather support a slightly reduced life style, that can be afforded entirely from dividends, rather than a slightly enhanced life style, that requires sales of assets. But that's me, and I respect the right of each person to make a different trade-off.<<<
Robert, "withdrawal" can mean several things. I intended it to mean taking money from my brokerage account to fund my expenses. I work at keeping my portfolio yielding over 4%, but I live my lifestyle at less than that. Additionally, I keep my luxuries in the "discretionary" column so that if I ever needed to cutback, I could do so without looking to sell a second home or a boat.
There are issues in this life with which we cannot deal until we are confronted by them. I could not see retiring on a lifestyle supported by dividends from a portfolio consisting solely of stocks yielding less than 3.0% and waiting until its dividend growth will make up the difference to what my wife and I spent 42 years working and saving for. It's an issue with which everyone must come to grips.
What Is More Valuable? Dividend Yield, Or Capital Appreciation? [View article]
Robert, in the purest sense, when we invest in any company, we buy the present value of its future earnings. In the purest sense, it should not matter whether the earnings are paid out as dividends or reinvested in the business.
I'll stick to HON and T as my archetypes. They sell for similar multiples: HON at 14.2 and T at 13.3. Using figures supplied by Fidelity, HON's projected growth is 10.33%, while T's is 6.28%. PEG ratios are about 2.0 for HON and 4.5 for T. No way will a growth investor buy T with a PEG that high. HON's earnings growth drives its price. That earnings growth will support the 8% to 10% increases in dividends that HON has been achieving. But with a payout of only 40% of earnings, reinvestment of the remaining 60% of the earnings should drive share prices higher. Those two factors will give total return.
T investors seek current income. Growth is not as much of a factor. T's 5% yield drives its price as opposed to its growth prospects. T's lower growth leaves less opportunity for dividend increases and for stock appreciation. Its high payout rules out dividend increases as well. Its total return will probably be far less than that of HON, but I have to finance my vacations somehow.
Each has a place in my portfolio. However, as fschew points out, total return has to be seen as the combination of dividends and appreciation. The beauty of stocks is that they can play both roles as opposed to bonds and preferred stocks that can only provide income.
What Is More Valuable? Dividend Yield, Or Capital Appreciation? [View article]
>>>Sheldon, should I understand this to mean that you regularly and predictably sell appreciated stocks, because the dividends you receive provide you with less income than you need?<<<
Not at all, Robert.
I am able to get the income I require from my portfolio. That's is the principal purpose of the yield portion, with assistance from the growth portion inasmuch as yield is its secondary purpose.
I have about 50 individual holdings, but I use HON and T as cases-in-point. T has immediate yield and some small growth. HON is growth, but it pays a dividend.
If a retiree investor held only HON (or stocks like it such as BA, MMM, and UTX), a $2 million portfolio would yield scarcely over $40,000 per year. Imagine, a multi-millionaire able to afford no more than a bus trip for a vacation.
If the same investor held only T, his immediate income would be over $100,000 per year. He could afford to live well at the start, but he may not keep up with inflation given the lower growth of T. He would have to save a portion of his income as an inflation hedge.
Holding both types of investments provides a desirable balance. However, it is wrong, IMHO, to ignore appreciation driven by earnings growth.
To your original point, if an investor held only HON, MMM, UTX, or even KO and JNJ, wouldn't he or she have to sell appreciated stocks to support a life style determined by the 4% withdrawal guideline?
What Is More Valuable? Dividend Yield, Or Capital Appreciation? [View article]
Be Here Now, this article may have been more complicated than it had to be, but the thesis of total return IS what matters. I speak as a retiree and having been one for the past three years.
My portfolio is structured for two objectives: sufficient current income and sufficient inflation protection. The investments providing current income are limited with respect to inflation protection. Such investments include bonds, preferred stocks, and income-oriented stocks such as BCE, ED, FE, T, and VOD.
In between are MLP's. I really don't know if their appreciation is interest rate driven or representative of growth.
Then I have what many on SA call Dividend Growth Stocks. I call them growth stocks that pay dividends. There is no doubt in my mind that stocks such as BA, HON, MMM, and UTX will have total returns greater than those of telecoms and utilities. I hold them for their appreciation in addition to modest dividend income. Were I NOT to consider their total return aspect, they make no sense as investments for long-term or current purposes.
I have backed up my conclusions with a spreadsheet. HON yields 2.1% and its dividend has a five-year growth rate of 8.3%. T yields 5.0% with a five-year growth rate of 2.4%. It will take 17 years for the annual dividend on HON to pass that of T. However, even after 25 years, cumulative dividends on HON will still be less than those of T. On a current basis, structuring my retirement portfolio to yield over 4% enables a trip to Europe this summer and another one in 2014. Were I relying strictly on dividend growth stocks without regard to total return, my wife and I might be shopping AARP bus tours.
The concept of "dividend growth" IMHO, is treating dividends as an entity unto themselves. They are dependent variables. Earnings growth is the independent variable that drives dividend growth and appreciation. Therefore, total return is something that cannot be ignored. Earnings growth on HON should be nearly twice that of T. That's why I hold HON.
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
Willaby:
I am guided by my experiences in corporate life in a variety of industries. In general, private label enables retailers to offer products at lower prices to the consumer and achieve higher margins for themselves. Therefore, you are quite correct when you state, " ...yes the private is low (very) margin...". Why? Because the economic franchise is the space on the retailer's shelf that the retailer awards to the lowest bidder on commoditized products. This concept cuts across industry lines. It is the same for generic drug makers as it is for grocery products.
I prefer to invest in franchisors rather than franchisees. My principal holdings in foods include GIS and PEP, with smaller positions in CAG and KRFT.
The company CAG acquired was Ralcorp. The only way to make real money in private label is to have a sustainable cost advantage over competitors. That's a tall order.
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
>>>Long term, i believe we`ll see a spinoff of Folger Coffee,which will enhance our position as well.<<<
KRFT does not own, nor did it ever own, Folgers. PG owned it and sold it, with much of its food business, to SJM. KRFT owns Maxwell House Coffee. I do not see how divesting it will help KRFT or its shareholders. Will it free them to concentrate on dairy and other commoditized products that are vulnerable to private label?
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
>>>KRFT will continue to prosper and reward its shareholders. It`s one of the best stocks to own in any long term portfolio... Truthfully, you can`t own much better than KRFT!<<<
Sejd, I own a position in KRFT, but I would not go so far as calling it one of the best. Look at its products in any grocery store. The truth is that many of them cannot be differentiated from private label. Compare that to GIS, which is a company that can roll products out successfully before private label can knock them off.
Dividend Stocks: Lose-Lose-Lose Proposition In Intermediate Term [View article]
>>>I would disagree about astute investors not seeking commodity producers.<<<
Commodity producers generally have no competitive advantages or, in other words, no economic moat. The only possibility to make money as a commodity producer is to be lower cost than competitors. That's a tough game. I would rather invest in companies with proprietary products, processes, or technologies.
>>>I think stocks like FCX will outperform the market over the next 5 years.<<<
M* has a three-star hold on FCX. FCX may be a good investment as it is a best-of-breed commodity producer. However, it is levered to metal and other commodity price levels, which makes it a volatile investment.
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
Every stock must be judged on two merits. First, on its worth. Second, on its place in a portfolio. There are food stocks with better total return prospects than KRFT. However, as a reliable income source, KFRT has its purpose.
4 Oversold Stocks For Patient Investors [View article]
PG's strength has been their ability to develop products at least as quickly as private label can knock them off. As long as they can differentiate themselves (which they have been able to do), they will remain on top,
How many companies can divest themselves of what they consider brands that have outlived their usefulness at profits? For example, Pringles to K, and Folgers, Jiff, and Crisco to SJM.
Dividend Challengers: 17 Increases Expected By August 30 [View article]
Merrill Lynch has an "underperform" on AZN. S&P has a "sell" on it. The research I've read shows a weak pipeline and losses of market share on existing drugs such as Onglyza.
Sheldon
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
If I were to buy straight cream cheese or the Neufchatel (low fat) variety, I would buy the Publix brand notwithstanding my holding KRFT stock. If I wanted cream cheese with smoked salmon, I would probably still buy the Publix brand and buy smoked salmon and mix it in. I doubt that the Philadelphia band has enough salmon in it to give a real taste.
Buy And Hold: The Story For Procter & Gamble [View article]
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
Fixation on generic brands? Can you give a reason to pay 10% more for Philadelphia cream cheese than the Wal-Mart brand?
I also hold four of your six other selections. I prefer CVX to XOM. I prefer GSK, LLY, and MRK to BMY.
What Is More Valuable? Dividend Yield, Or Capital Appreciation? [View article]
Robert, "withdrawal" can mean several things. I intended it to mean taking money from my brokerage account to fund my expenses. I work at keeping my portfolio yielding over 4%, but I live my lifestyle at less than that. Additionally, I keep my luxuries in the "discretionary" column so that if I ever needed to cutback, I could do so without looking to sell a second home or a boat.
There are issues in this life with which we cannot deal until we are confronted by them. I could not see retiring on a lifestyle supported by dividends from a portfolio consisting solely of stocks yielding less than 3.0% and waiting until its dividend growth will make up the difference to what my wife and I spent 42 years working and saving for. It's an issue with which everyone must come to grips.
Sheldon
What Is More Valuable? Dividend Yield, Or Capital Appreciation? [View article]
I'll stick to HON and T as my archetypes. They sell for similar multiples: HON at 14.2 and T at 13.3. Using figures supplied by Fidelity, HON's projected growth is 10.33%, while T's is 6.28%. PEG ratios are about 2.0 for HON and 4.5 for T. No way will a growth investor buy T with a PEG that high. HON's earnings growth drives its price. That earnings growth will support the 8% to 10% increases in dividends that HON has been achieving. But with a payout of only 40% of earnings, reinvestment of the remaining 60% of the earnings should drive share prices higher. Those two factors will give total return.
T investors seek current income. Growth is not as much of a factor. T's 5% yield drives its price as opposed to its growth prospects. T's lower growth leaves less opportunity for dividend increases and for stock appreciation. Its high payout rules out dividend increases as well. Its total return will probably be far less than that of HON, but I have to finance my vacations somehow.
Each has a place in my portfolio. However, as fschew points out, total return has to be seen as the combination of dividends and appreciation. The beauty of stocks is that they can play both roles as opposed to bonds and preferred stocks that can only provide income.
Sheldon
What Is More Valuable? Dividend Yield, Or Capital Appreciation? [View article]
Not at all, Robert.
I am able to get the income I require from my portfolio. That's is the principal purpose of the yield portion, with assistance from the growth portion inasmuch as yield is its secondary purpose.
I have about 50 individual holdings, but I use HON and T as cases-in-point. T has immediate yield and some small growth. HON is growth, but it pays a dividend.
If a retiree investor held only HON (or stocks like it such as BA, MMM, and UTX), a $2 million portfolio would yield scarcely over $40,000 per year. Imagine, a multi-millionaire able to afford no more than a bus trip for a vacation.
If the same investor held only T, his immediate income would be over $100,000 per year. He could afford to live well at the start, but he may not keep up with inflation given the lower growth of T. He would have to save a portion of his income as an inflation hedge.
Holding both types of investments provides a desirable balance. However, it is wrong, IMHO, to ignore appreciation driven by earnings growth.
To your original point, if an investor held only HON, MMM, UTX, or even KO and JNJ, wouldn't he or she have to sell appreciated stocks to support a life style determined by the 4% withdrawal guideline?
Sheldon
What Is More Valuable? Dividend Yield, Or Capital Appreciation? [View article]
My portfolio is structured for two objectives: sufficient current income and sufficient inflation protection. The investments providing current income are limited with respect to inflation protection. Such investments include bonds, preferred stocks, and income-oriented stocks such as BCE, ED, FE, T, and VOD.
In between are MLP's. I really don't know if their appreciation is interest rate driven or representative of growth.
Then I have what many on SA call Dividend Growth Stocks. I call them growth stocks that pay dividends. There is no doubt in my mind that stocks such as BA, HON, MMM, and UTX will have total returns greater than those of telecoms and utilities. I hold them for their appreciation in addition to modest dividend income. Were I NOT to consider their total return aspect, they make no sense as investments for long-term or current purposes.
I have backed up my conclusions with a spreadsheet. HON yields 2.1% and its dividend has a five-year growth rate of 8.3%. T yields 5.0% with a five-year growth rate of 2.4%. It will take 17 years for the annual dividend on HON to pass that of T. However, even after 25 years, cumulative dividends on HON will still be less than those of T. On a current basis, structuring my retirement portfolio to yield over 4% enables a trip to Europe this summer and another one in 2014. Were I relying strictly on dividend growth stocks without regard to total return, my wife and I might be shopping AARP bus tours.
The concept of "dividend growth" IMHO, is treating dividends as an entity unto themselves. They are dependent variables. Earnings growth is the independent variable that drives dividend growth and appreciation. Therefore, total return is something that cannot be ignored. Earnings growth on HON should be nearly twice that of T. That's why I hold HON.
Is Diamond Foods On The Road To Recovery? [View article]
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
I am guided by my experiences in corporate life in a variety of industries. In general, private label enables retailers to offer products at lower prices to the consumer and achieve higher margins for themselves. Therefore, you are quite correct when you state, " ...yes the private is low (very) margin...". Why? Because the economic franchise is the space on the retailer's shelf that the retailer awards to the lowest bidder on commoditized products. This concept cuts across industry lines. It is the same for generic drug makers as it is for grocery products.
I prefer to invest in franchisors rather than franchisees. My principal holdings in foods include GIS and PEP, with smaller positions in CAG and KRFT.
The company CAG acquired was Ralcorp. The only way to make real money in private label is to have a sustainable cost advantage over competitors. That's a tall order.
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
KRFT does not own, nor did it ever own, Folgers. PG owned it and sold it, with much of its food business, to SJM. KRFT owns Maxwell House Coffee. I do not see how divesting it will help KRFT or its shareholders. Will it free them to concentrate on dairy and other commoditized products that are vulnerable to private label?
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
Truthfully, you can`t own much better than KRFT!<<<
Sejd, I own a position in KRFT, but I would not go so far as calling it one of the best. Look at its products in any grocery store. The truth is that many of them cannot be differentiated from private label. Compare that to GIS, which is a company that can roll products out successfully before private label can knock them off.
Dividend Stocks: Lose-Lose-Lose Proposition In Intermediate Term [View article]
Commodity producers generally have no competitive advantages or, in other words, no economic moat. The only possibility to make money as a commodity producer is to be lower cost than competitors. That's a tough game. I would rather invest in companies with proprietary products, processes, or technologies.
>>>I think stocks like FCX will outperform the market over the next 5 years.<<<
M* has a three-star hold on FCX. FCX may be a good investment as it is a best-of-breed commodity producer. However, it is levered to metal and other commodity price levels, which makes it a volatile investment.
Kraft: Attractive Dividend Yield With Low Growth Prospects [View article]
Long: CAG, GIS, KRFT, PEP
4 Oversold Stocks For Patient Investors [View article]
How many companies can divest themselves of what they consider brands that have outlived their usefulness at profits? For example, Pringles to K, and Folgers, Jiff, and Crisco to SJM.
Long: PG