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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]
    >>>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
  • 3 Model Dividend Stock Portfolios to Consider [View article]
    chowder, I think we're on the same track. I just added to my position in T to replace matured bonds. I couldn't buy bonds because I would have had to go out more than 10 years and into states where I would not want to be financially to get any kind of yield.

    I hold NVS, RDSB, and T in my taxable account. The withholding on NVS doesn't bother me as it's only 15% and I get it back dollar-for-dollar on April 15. I think Royal Dutch wants investors to hold "A" shares so that they don't have to pay out cash. When I elected not to convert to A's, they warned me that my equity would be diluted by the scrip shares being issued on A's. I don't think I'm that big a fish to worry about voting control.
    Jul 1 04:36 PM | 3 Likes Like |Link to Comment
  • 3 Model Dividend Stock Portfolios to Consider [View article]
    I prefer CVX (listed above) and RDSB to XOM.

    If you have an issue with the taxes on NVS, RDSB has no withholding at all.
    Jul 1 01:23 PM | Likes Like |Link to Comment
  • 3 Model Dividend Stock Portfolios to Consider [View article]
    Eight is my number too.
    Jul 1 01:20 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Robert, you'll have to make your own assessment as to whether a company can grow if it pays all of its profits out on dividends and stock buy backs and depends on borrowed funds to fund its growth. There are companies with higher margins and superior returns on assets that do not function that way.
    Jul 1 12:02 AM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    >>>Book equity is an accounting creation...you cant pay dividends with book equity and you cant pay down debt with book equity. Both of those actions require cash...something that CLX generates tons of.<<<

    Book equity is an accounting creation. Accountants create it when they subtract liabilities from assets. According to CLX's filing on form 10Q, the company showed more liabilities than assets. That is no different from an individual living on credit cards.

    Let's compare CLX to a few consumer staples companies that I hold in my portfolio: KMB, PG, PG, KO, and PEP.

    YIELD:
    CLX 3.56%
    KMB 4.23%
    PG 3.36%
    KO 2.82%
    PEP 2.95%

    5 Year Div Growth:
    CLX 15.65%
    KMB 7.39%
    PG 11.11%
    KO 8.68%
    PEP 11.41%

    TTM Pretax Margin:
    CLX 11%
    KMB 13%
    PG 18%
    KO 38%
    PEP 14%

    Return on Assets:
    CLX 6.58%
    KMB 9.27%
    PG 8.44%
    KO 19.24%
    PEP 8.84%

    Debt/Assets:
    CLX 61%
    KMB 31%
    PG 23%
    KO 34%
    PEP 37%

    CLX carries twice as much debt, according to the Fidelity web site, as the others. Based on the above margins and returns on assets, what would lead an investor to believe that CLX management can operate so close to the brink while these other companies that have been around a lot longer feel that they should maintain a capital base.
    Jun 30 08:15 PM | 2 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    It's funny that you mention Burt's Bees.

    PG's balance sheet is about 50/50 debt to equity. I guess their financial management is not as talented as CLX's to know that they finance their company in its entirety with borrowed money.

    Why am I defending my position against CLX? Let me ask it this way, what does CLX offer an investor that PG does not?
    Jun 30 04:52 PM | 2 Likes Like |Link to Comment
  • AT&T: A Dividend Stock Pick for the Next 5 Years [View article]
    I am not comfortable with the financial sector as a whole, which includes banks, investment banks, insurance companies, etc. Not only did I get burned by investments in several banks, I also took losses with AXA and HIG. All were highly rated by analysts when I invested. I even had some paper profits at a point.
    Jun 30 03:56 PM | 2 Likes Like |Link to Comment
  • 8 High Yield Dividend Stocks Still Offer Opportunity to Boost Income [View article]
    Poortorich, of course we're buddies. My dearest friend tells me that the entire stock market is a ponzi scheme and has all of his money in CD's. Imagine how much closer you and I are than that.

    This forum is about money and not morality. I have probably broken more of the ten commandments than I have kept. Nonetheless, I will have nothing to do with tobacco stocks having lost a person dear to me to lung cancer.

    Different stocks achieve different investment objectives. All other things being the same, were I in my 40's instead of my 60's, I would not be as heavily into power companies, teleco's, and MLP's as I am today. However, I have been buying those to replace bonds as they mature and get called.

    Dividend growth stocks are my hedge against inflation. They will provide a superior total return, but it can take a decade for cumulative dividends to pass those of higher yielding stocks. Therefore my portfolio has a mix of things that provide the level of income I need with what I hope is inflation protection. Then again, I further hedge my position by not spending all my immediate income.

    I hope I have explained why our differences are not personal or even ideological. They are driven by the different stages of life we are at.
    Jun 30 02:58 PM | 1 Like Like |Link to Comment
  • AT&T: A Dividend Stock Pick for the Next 5 Years [View article]
    Robert, I am avoiding the entire banking sector in the US and Europe. I got burned too badly on several financials a few years ago. A lack of true transparency and nobody knowing where the true bottom of the housing market is troubles me.

    I hold a small position in TD and would consider adding to it or, perhaps, another Canadian bank.

    Sheldon
    Jun 30 02:42 PM | 5 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Only time will tell if a company can be financed 100% by borrowed money.
    Jun 30 02:35 PM | 1 Like Like |Link to Comment
  • AT&T: A Dividend Stock Pick for the Next 5 Years [View article]
    There is no reason not to own T and ABT. ABT is a dividend growth stock that, in time, should generate a superior total return. But that is over the long haul and that is why I own it.

    T generates a higher yield today and some dividend growth. I recently added to my position to replace maturing and called bonds. Each has a place in a diversified portfolio.
    Jun 30 02:34 PM | 4 Likes Like |Link to Comment
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