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cpa28761

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  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Low Sweat, you're absolutely right. I never look at "free cash flow" because, while it is an improvement over "operating cash flow", ignoring the costs of capital is unrealistic.

    KMB is not the equal of PG. I hold it for its higher yield and for diversification. They are to be praised for riding their one-trick pony for almost 100 years. I hold CL for diversification as well. Even thought PG ran them out of laundry detergent, they have done well in the oral care competition and may be a step ahead in international business.
    Jul 3 11:45 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Capital and credit markets will abide by S&P ratings. KMB at A is two notches above CLX at BBB+. I guess I'm in reasonably good company in my conclusion.
    Jul 3 11:30 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    There is nothing wrong with Goodwill and other intangibles on a balance sheet. They measure intellectual property. When we invest in a company, we are buying management and its ability to generate a stream of earnings. When a company buys another company, the previously un-monetized intellect becomes monetized.

    PG bought Gillette.
    CLX bought Burt's Bees
    Jul 3 11:26 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Do you really mean to imply that CLX has a stronger balance sheet than P&G?
    Jul 3 11:19 PM | 2 Likes Like |Link to Comment
  • 8 Dividend Stocks With Strong Cash Coverage Reaching New Highs [View article]
    When I first looked into DPS, I was in awe of the stable of brands they hold. However, I will be sixty-five years old this month. I doubt if most of those brands mean anything to people under fifty. Their size limits their ability to expand into international markets when compare to KO and PEP. Their yield is only nominally higher than those of KO and PEP. I'll stick with the big guys.
    Jul 3 09:02 AM | Likes Like |Link to Comment
  • Investors Continue to Put More Stock in Bonds [View article]
    If an investor's concern is capital preservation, bond funds are NOT the place to be. When interest rates rise, as they must at some point, the premium values ascribed to fixed income securities will evaporate. Those who hold individual bonds may choose to hold to maturity for the coupon. Bond fund investors will bail at losses. Those who remain with the funds will share those losses.
    Jul 3 09:01 AM | Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Low Sweat, much of what you say is true. Lenders do not want to foreclose on property. They want to get paid in the normal course of business. At the same time, I will tell you from personal experience, that cash flow lenders have a view to collateral in the backs of their minds, nonetheless. No one wants to choose belt or suspenders when he can have both.

    There is not much of a difference between an A rated company and one two notches lower at BBB+. However, the two notches advantage held by KMB over CLX is justified. Not only does KMB's March 31, 2011 balance sheet show more assets than liabilities (which cannot be said for CLX), KMB has more current assets than current liabilities (which cannot be said for CLX). KMB's current assets were reduced by a $244 Million LIFO reserve. CLX also uses LIFO. Had their $29 Million reserve been added back, it would have given them $1 Million of working capital.

    KMB carries two and a half times the long-term debt of CLX. That is because KMB is a far bigger company and because KMB is a natural resource and heavy manufacturing company. Their ability to service long-term debt is greater than that of CLX. Their legitimate requirement for financing is greater. The terms over which the obligations are paid are greater.

    BTW, in May CLX announced another stock buy back.

    On one thing we can agree. There are many consumer staples stock that are better, more secure buys than CLX. If KO ever embarked on this sort of buy back mania, in a few years they could take their whole company off the market.
    Jul 2 06:34 PM | 2 Likes Like |Link to Comment
  • AT&T: A Dividend Stock Pick for the Next 5 Years [View article]
    Better service is a regional issue. When I lived in New Jersey, Verizon had discernibly better service than its competitors. In Florida, where I live now, it's a toss up between Verizon and AT&T.

    Long: T
    Jul 2 09:05 AM | 3 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    For what it's worth, S&P gives credit grades as follows:
    PG "AA-"
    KMB "A"
    CLX "BBB+"

    Therefore, to imply that CLX will always have access to credit should be viewed in the context that its peer have as much or easier access.
    Jul 2 08:59 AM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    London, I hope you're right on the issue of brands. However, Tide and all the other detergents marketed by PG have had their formulations updated over the years. They have multiple formulations on the shelves. Tide, for example, has a formulation that contains all-fabric bleach, obviating the need for the consumer to purchase Clorox 2, an all-fabric bleach.

    When I stated that Clorox was a "commodity", I mean that its formulation of sodium hypochlorite and water has never changed and never will change. I also noticed that my local grocery store brand actually has a slightly higher level of the active ingredient. Therefore, the brand cannot offer even a perceived advantage.

    I don't know what your leading detergent brand is, but here in the States, PG ran Unilver and Colgate out of the laundry detergent business. Both were multi-billion dollar consumer products companies with brands that had been around for decades.

    PG is neither perfect not invincible, but I'll put 70% of my nonfood consumer staples market basket on them any day. If you're curious, the balance is divided between CL and KMB.
    Jul 2 08:49 AM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    You picked the following cases in point:

    ABT-2.0
    CL-2.1
    PM-3.4
    LEG-4.7
    WMT-5.5
    MCD-6.7
    KO-7.1
    PG-8.1
    VZ-8.1
    CLX-10.5
    WM-15.3
    KMB-15.7
    T-16.7

    Which have balance sheets that show more liabilities than assets?
    Jul 1 10:49 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    >>>Here are some back of the envelope numbers(quick bloomberg math) for popular DG stocks....Debt/Full Burdened Free Cash Flow... (the lower the better). Could also be expressed as the number of years required to repay debt based on current fully burdened FCF.

    ABT-2.0
    CL-2.1
    PM-3.4
    LEG-4.7
    WMT-5.5
    MCD-6.7
    KO-7.1
    PG-8.1
    VZ-8.1 (could be materially higher if dividend is paid to vodaphone)
    CLX-10.5
    WM-15.3
    KMB-15.7
    T-16.7<<<

    Does the concept of Debt/Full Burdened Free Cash Flow consider the scheduled maturities of the debt? If not, why not? Shouldn't it? Is there a difference between the debt on a 5-year term loan and a 30-year bond insofar as cash flow is concerned?
    Jul 1 10:45 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    >>>If the stocks are not dividend stocks, then their entire value is whatever thier market price is right now. But if they are d-g stocks, their value is their market price plus the present value of their future dividend streams. I am still searching for a way to quantify this adequately, but clearly the dividend rights attached to the shares have a value.<<<

    David, I do not believe you can quantify this because you are counting the same money twice. Lets assume two profitable companies with all things equal except one.

    "Grow" does NOT pay dividends at all. Its market value should be the present value of all its projected income. Over the years, Grow's value will grow based on its earnings that it can plow back into its business. The acquired assets will earn money as existing assets. The value of the company will increase with the reinvested retained earnings.

    "Inkum" operates the same business model as Grow with the same efficiency. It pays out, say, 50% of its earnings as dividends. It cannot reinvest half of its earnings. It will lose market share as it will not have the capacity to keep up with demand. Therefore, it cannot grow as fast as its competition. Its value will not increase as fast as its competitor's.

    To avoid losing market share to its competitor, Grow, it must raise equity capital thru an offering, thereby diluting the equity of the shareholders who originally financed Inkum.

    In the situation you describe, you are counting the present value of the earnings of Grow and the present value of the dividends of Inkum. Inkum's investors cannot receive both because the dividends are distributions of income that will be unavailable to reinvest in Inkum's business.

    My example is an over simplification. It would never happen in real life as there are too many variables for a controlled experiment. But I think my logic is sound.
    Jul 1 10:16 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Gunny:

    Clorox is a commodity. It's sodium hypochlorite and water. That makes it highly vulnerable to competition from store brands.

    We use their "all fabric" bleach. However, it will face stiff competition from the "Tide Stain Release" product that P&G recently introduced. From my career in corporate American I learned that a company competes with P&G at its peril. P&G will probably win.
    Jul 1 09:49 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Robert and PTR,

    I will respond to Below's latest comment, just not tonite. However, I am so furious that I almost walked past the Clorox products (even though they were on sale) at my local Publix Supermarket.
    Jul 1 05:03 PM | 1 Like Like |Link to Comment
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