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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]
    Free Cash Flow is NOT the bottom line on Statement of Cash Flows. You have to consider Financing Activities. These cost CLX $540 Million and $706 Million in each of the last two full reported years. It also means that they burned thru $127 Million in cash in those years.
    Jun 29 05:18 PM | 2 Likes Like |Link to Comment
  • 8 High Yield Dividend Stocks Still Offer Opportunity to Boost Income [View article]
    A more correct question may be which company has the resources to service its debt in the normal course of business. The obvious answer is KMB. As I explained, KMB is twice as capital intensive as CLX. Its need for borrowing is dictated by its business model. BTW, for the last two complete years CLX burned thru $127 million in cash while KMB generated $512 million.

    Sorry, but you will never get a financial analyst or an accountant to agree that a company can be 100% leveraged under any circumstances. Then again, if we could find where Andrew Fastow (Enron) or Scott Sulivan (WorldCom) are confined, maybe.
    Jun 29 05:04 PM | 1 Like Like |Link to Comment
  • 8 High Yield Dividend Stocks Still Offer Opportunity to Boost Income [View article]
    Poortorich, first, if you "like to take the contrarian view sometimes to liven the discussion," that's fine with me. When I was even younger than you, I was a competitive debater. Second, this is about money, not my granddaughter. There is nothing personal here. I will do my best to address the issues you raise.

    I have no disdain for CLX. I even use some of their products. I believe the company was formed when PG decided to get out of the commodity chlorine bleach business.

    CLX, as of the figures from the 3/31/2011 filing on form 10Q, has less than zero equity. You are correct in that treasury stock purchases contributed to this situation, but so what. Even as recently as the quarter ending March 2011, they bought back $300 million of their own stock. What purpose did that serve other than to hope to boost the value of their shares? The fact remains that they have less than zero equity.

    The relationship between debt and market capitalization is meaningless. No company can sell stock to pay off all its debts without diluting its market value to the point where the public offering would not be enough money to pay the debts.

    Suspending a dividend is not an option for CLX or KMB. At least it is not an option that management would willingly choose to take.

    KMB's business model is such that it would have more debt than CLX because its business is more capital intensive than that of CLX. Over 42% of KMB's balance sheet is Property and Equipment. Only 25% of CLX's balance sheet is Property and Equipment. In and of itself, KMB's business model allows for more debt. For this reason, how long it would take to pay off debt from free cash flow were a dividend to be suspended, is not really a valid metric. However, if you wish to pursue a more meaningful comparison of companies, try doing this measurement with CL, which is my third holding in my non-food staples basket.

    KMB's balance sheet shows debt at 66% of assets. CLX's balance sheet shows debt at over 100% of assets. That leaves zero margin for error.

    I hope I've addressed you concerns. I thank you for this opportunity to help a retiree maintain his skills.
    Jun 29 04:17 PM | 1 Like Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    Guys, thanks for the kind words. I'm here like everyone else. We share ideas and we learn from one another. I've learned from many SA contributors, both those who write the articles and those who post comments. No one knows it all. It's a lot better for us to pool our knowledge. We, collectively, probably know more than the "professionals" who are really commissioned salespeople.
    Jun 29 02:15 PM | 4 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    >>>I don't know that CLX is in that group, but from it being your "favorite negative example" I take it you do. But it seems pretty weak tea to have nothing more substantive to back it up than "I can't empirically prove it." That sounds like a hunch to me.<<<

    CLX's last year-end balance sheet shows $US4,465,000,000 of liabilities against $83,000,000 of shareholders' equity. That's about 2,559% debt to equity. PG's balance sheet shows 35% debt to equity (percentages from the Fidelity website). Their most recent interim balance sheet shows negative equity. CLX yields 3.62% while PG yields 3.34%. Is about 1/4% better yield worth it? We can not trace each dollar coming in to whether it goes to dividends or debt service or trade credit. However, they are playing with fire to pay dividends.

    >>>..PBI looks like it is no longer one of the true Aristocrats, but it's still got some life in it yet. But what exactly do you mean by it undergoing an orderly liquidation? I've seen you use the expression before about PBI, but I have to confess I don't know how to give it any context, particularly the liquidation part.<<<

    PBI spent $500,000,000 (half a billion dollars) less on equipment purchases than their depreciation over the last three years. That is a principal means by which they finance their dividends. That is my analogy about burning the deck chairs to fuel the ship. They are shrinking rather than growing the company.

    Both CLX and PBI pay dividends about equal to 100% of their earnings. Both are paying dividends to simply support their stock prices rather than thru prudent financial policy. Please let me know what I am missing?
    Jun 28 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]
    Robert:

    My best guess is that they may honestly believe that they are working to achieve profitability at a reduced volume. In a way, they are. However, once the dividend has reached the level, as a percentage of earnings, it will be the first casualty.

    Unfortunately, I have experience with "been there, done that" and it's no fun. But management keeps the ball rolling for as long as they can. No one wants to give up a pay check.
    Jun 28 10:58 PM | 1 Like Like |Link to Comment
  • 36 Companies Likely to Raise Dividends in the Next 10 Weeks [View article]
    Just take a look at this:

    www.redlobster.com/men...

    Then again, I won't vouch for its authenticity. You can fool middle America with some things :)
    Jun 28 08:21 PM | 3 Likes Like |Link to Comment
  • 8 Dividend Stocks Laying Golden Eggs for Shareholders [View article]
    I agree with you on the K-1's.

    However, according to W.E.B. Griffin's writing, the Marines of 1941 did not want to embrace the M1 Garand rifle.
    Jun 28 07:46 PM | 1 Like Like |Link to Comment
  • 36 Companies Likely to Raise Dividends in the Next 10 Weeks [View article]
    Careful. I may live in Florida, but I was born and raised in New York :)
    Jun 28 07:42 PM | 4 Likes Like |Link to Comment
  • Dividend Stocks May Be a Good Retirement Strategy, But Protecting Your Principal Is Better [View article]
    >>>I choose to buy dividend paying companies because I believe the research has demonstrated over and over, and over many different periods, that companies that pay a dividend outperform those that do not, and further, that companies that consistently raise their dividends over a long period of time outperform those that do not.<<<

    Sorry, London, but I agree with those who say that only great companies can pay dividends. You are looking at stocks, not companies. If a company chooses to pay a dividend for the wrong reason, they are supporting their stock price, but are damaging their business. In the long run (which may or may not be too long), the dividend will not be sustained.

    CLX is my favorite negative example. Look at their leverage. Money is fungible. Therefore I cannot prove it empirically, but they are borrowing to pay their dividends.

    PBI is paying dividends out of funds received from an orderly liquidation of their business. Sooner or later, you run out of deck furniture to burn to fuel the ship.

    Companies like JNJ, KO, PEP, and PG pay dividends because they are great companies and their stocks follow.
    Jun 28 07:38 PM | 1 Like Like |Link to Comment
  • 36 Companies Likely to Raise Dividends in the Next 10 Weeks [View article]
    Good guess!

    www.bizjournals.com/tw...
    Jun 28 07:27 PM | 4 Likes Like |Link to Comment
  • 36 Companies Likely to Raise Dividends in the Next 10 Weeks [View article]
    David, two things:

    First, you called this one:

    www.bizjournals.com/tw...

    Second, my familiarity with DRI goes back to the late 70's to mid 80's when I worked for GIS and DRI was the General Mills Restaurant Group. If memory serves me, there were over 300 Red Lobster stores at the time and only one failure. It was in Boston.
    Jun 28 07:26 PM | 5 Likes Like |Link to Comment
  • 36 Companies Likely to Raise Dividends in the Next 10 Weeks [View article]
    I cannot believe that anyone from New England would eat at a Red Lobster.
    Jun 28 04:25 PM | 4 Likes Like |Link to Comment
  • Examining the Value of Active Management for Preferred Securities Investments [View article]
    Oh, don't sweat it. We are all here to exchange ideas. It's not a competition and there is nothing personal.
    Jun 28 01:26 PM | Likes Like |Link to Comment
  • Examining the Value of Active Management for Preferred Securities Investments [View article]
    >>>Love the hybrid nature or preferred stocks, sensitive to interest rates but not as much as bonds, and has a better upside potential based on the underlying securities.<<<


    Preferred stocks, given their longer to perpetual maturities, have a greater sensitivity to interest rates than bonds. That they rank next to last in liquidation preference makes them more sensitive to other risks than bonds.

    What upside potential do you mean unless you mean to trade on interest rate volatility since the ultimate values will never be more than par?
    Jun 28 12:34 PM | Likes Like |Link to Comment
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