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  • The Essence Of Valuation Is Soundness, Not Rate Of Return [View article]
    Thank you for good article. Let me comment/ask:

    “This fact is supported by the reality that a 15 PE ratio represents an earnings yield (E/P) of 6.67%, or approximately 6% to 7%.” …. “When the current earnings yield is between 6% and 7%, the investment is currently attractive whether or not the business grows, and almost regardless of the company's rate of growth (up to a point -- 15%).”
    Hmmmm…. sounds to as the magic number – what do you think about ?

    “Additionally, it should also be recognized that there is always risk in achieving a given level of growth.”
    Yep, in DGI terms I always say that YoC is in your hand and DGR is in your fantasies…..

    “To me, the proofs of any hypothesis, especially those regarding investing in stocks are, so to speak, in the pudding. In other words, if the hypothesis has any validity at all, you should be able to demonstrate it through real world, real life examples.”
    Yes in natural science a SINGLE fact that contradicts a hypothesis kills the hypothesis. So it is sometimes hard for me to deal with investing theories.

    In context of this article I’d rather to say that average P/E is 15, P/E sigma /standard deviation/ is (I guess) about 10 and distribution is rather (I guess) lognormal than gaussian, so your note “It is vitally important that the reader does not try to become too precise with these notions” should be obvious for anybody who knows stats 101.

    …“it should be clear that total return will be the combination of the capital appreciation based on earnings growth, plus the additional contribution from dividends.”
    As you know earnings is a tricky accounting number. As a dividend investor I think that more correct definition of total return should be done only in tangible terms of dividend yield (initial and market-traded=change in valuation) and DGR – see

    From 8 examples you presented here blue/orange lines can be approximated as Y=aX+b or as Y=aX^n+b (for ABC, ROST and LKQ), so 15% boundary rule (I cannot guarantee that in next 15 years ROST will have CAGR>15% and UTX will have CAGR <15%), over/under-priced or any other judgment for 2 groups cannot be the same. BTW, due to huge set (>5K stocks traded only in US) some firms can have “blue and orange lines” coincided and some firms can have “blue and orange lines” far away but it cannot be stated that last firms are constantly over/under-priced (returning to our discussion to your previous article).
    I don’t want to discuss this point again within this or previous article but my SA email is open for any opinion 8-).

    “I would argue that valuation is more relevant to the soundness of the investment than it is to the total return the investment is capable of achieving”
    “The purpose of this article was to illustrate … that valuation is a valid concept that helps determine whether the investment is sound or not.
    Sounds good but I didn’t grasp it, probably. What is the soundness of the investment – can you define, please? What is difference between soundness and total return/income?

    Feb 24, 2013. 03:04 PM | Likes Like |Link to Comment
  • Avoiding Tunnel Vision In Your Dividend Growth Investing [View article]
    I probably should make disclaimer for novice investors to my today's early comment: DO NOT CHASE YIELD! In nowadays market it is very hard to find good HY stock with YoC>10%.
    Feb 24, 2013. 01:28 PM | 1 Like Like |Link to Comment
  • Avoiding Tunnel Vision In Your Dividend Growth Investing [View article]
    Dear David Crosetti,

    Thank you for detailed respond you gave 23 Feb, 09:19 PM on my comment.

    I am eclectic dividend investor who combines DGI and high yield (HY) investing. More than half of my holdings are belong to CCC list and I hope that I do understand DGI. I always challenge my and others prior believes, knowledge, understanding and new ideas (sorry it is not my habit – it’s my nature). Therefore, I am short to point a weakness in SA articles, blogs and comments. Also having huge vested interest in DGI, I’m not sure that DGI (which indeed simple and seems logical) approach is 100% bulletproof and cannot be improved.

    “I want to know that every year I am going to get an increase in my dividend payment from my DG company.”
    I have slightly different goal “I want to get an increase in my dividend payments from my PORTFOLIO.” I think it is to naïve to assume that investor can know future, although DG companies are much more predictable than others (e.g. David Fish can even predict a month when DG firm increase dividends). Also I think your annual goal can be achieved with portfolio of 2 “tick-tack” stocks with bi-annual dividend anti-phases increases (Attention: my dictionaries are controversial – one states than bi-annual means once in 2 years /and I consider that this is correct/ but another states than bi-annual means once in half-year. BTW, what is correct?)

    “Your list of stocks have one thing in common. At one time or another, they have all stopped increasing their dividends”
    So what? I’m a long-term investor (10+ years) and to me short periods of DGR=DCR=0 are OK if DGR10 > Inflation. Actually I think that DGi /I use small I for investors/ should NOT expect that their portfolio will have DGR above magic 6.5% ( Hopefully average inflation in US in next 50 years (my life time horizon) will be smaller.
    Moreover, I think that CEO and BOD who froze dividends in 2008-2012 are quite smart even if their company had positive (but not terrific) CAGRs during this period just because it was veru difficult to get credit for firm expansion.
    Some HY stocks remind “FIXED INCOME VEHICLES”, some NOT. Why should I care if my average YoC >12% (chowder rule) and if I do not expect to hold them forever (see ?

    “In order to become a DG stock again, they have to increase their dividends on an annual basis (at least yearly) for 5 consecutive years.”
    Is 5 year the law any DGi must follows? 8-). Many Chinese DGis like 7 consecutive years mark more… The same again “annual div. increase” is NOT the law IMO because “An investor cannot afford to be inflexible” /SDS (unpublished 8-)/ especially with hand-made definitions. I’d suggest to read George Soros books if you disagree.

    “Callling it a DG stock without dividend growth is just incorrect on your part.”
    I did not do it. For example I never call NLY /I hold it/ as DG stock or even as “fixed income vehicles” /look on its div. history/. I just cannot accept an arbitrary period (“within 12 months of the previous increase”) in a definition of DG stock. IMO there is a life beyond CCC list (once again, David Fish's list is the most valuable free information for DGis and we own David a zillion great kowtows) for real DGi.

    “But there are dividend paying stocks that raise the dividend more frequently.”
    Yes and I hold some. I have nothing against a company which will pay me dividends each day and increase dividends each week /if you know such please let us know 8-)/.

    “Where you are mistaken is the "assumption" that CCC stocks are the ONLY stocks a DG investor buys and that somehow they are better than non CCC stocks.”
    If you define that pure DG stocks are only CCC stocks then whole universe for pure 100% DGi is in CCC list. It is the same as 100% pure French stocks ETF cannot hold non-French companies by definition. Of course most DGis “violate” this definition and probably (I didn’t investigate) real French stocks ETF has non-French companies.

    “If you have looked at my porfolios and stock selections, then you would realize that I invest in non-dividend growth companies as well as DG companies.”
    I think it is good and right way to do but in this case you cannot claim yourself as pure 100% DGi.

    “No tunnel vision here. Maybe the tunnel vision is on your version of what has been written.”
    I’m not a polite person but again I didn’t want to abuse you and I apologize if I did. I just wanted to illustrate the tunnel vision with the very restrictive definition of DG stock. I believe that a wider definition of DG stock should NOT specify “within 12 months of the previous increase” as the necessary condition ( I also apologize to be too official and formal to use your first and last name but there are several DGIs with the same first name (David) who call themself as Dave. I think it might be a topic of astrology investigation 8-).

    “SA wouldn't be nearly as much fun if everyone walked in lock step.”
    Oh yes, at least I’d not even read it…..

    Good luck!
    Feb 24, 2013. 12:58 PM | 2 Likes Like |Link to Comment
  • Avoiding Tunnel Vision In Your Dividend Growth Investing [View article]
    As far as I remember from the book Steve Jobs violated non-disclosure agreement and implemented PARC ideas into Mac.
    In my personal scale (based on the book) Steve Jobs had negative integrity + zero respect to his co-workers, and IMO this culture is reflected in Apple attitude to shareholders (they refused dividends for long time). So no AAPL in my portfolio for at least next 7 years.
    Feb 24, 2013. 11:52 AM | 2 Likes Like |Link to Comment
  • Avoiding Tunnel Vision In Your Dividend Growth Investing [View article]
    My 2 cents to comments:

    David Crosetti's comment 23 Feb, 11:17 AM outlined 5 principles of DGI. In principles 2,3,4 the word "annual" is used. I don't want to abuse David Crosetti and other DGi-s /I have great respect for all SA contributors/ but it seems to me as example of the tunnel vision. Why company's dividend cycle cannot be bi-annual or even longer ? IMO ( such companies can be as good as other DG firms from CCC list.

    It seems that Apple management resists to pay dividends until public force them to pay. Their stock is not for me....

    richjoy403: "I participate in the technology sector, but I am very selective in my holdings .. I choose to avoid the small caps, the start-ups and IPOs..."
    Agree on start-ups and IPOs. Some tech small & medium caps are quite successful in niche markets and their markets and dividends are growing.

    Robert Allan Schwartz: "Xerox did the same thing - their Palo Alto Research Center (PARC) invented the "window, icon, mouse, pointer" (WIMP) user interface, but they never productized it; that fell to Microsoft and Apple."
    I read Job Steve bio and it seems that he stole PARC inventions....

    Feb 23, 2013. 08:47 PM | 1 Like Like |Link to Comment
  • Avoiding Tunnel Vision In Your Dividend Growth Investing [View article]
    Thank you for good article. I work a lot with tunneling of electrons in nanodevices but this is different from tunnel vision because allows electron to overcome barriers they should not be able to pass without tunneling. The same is correct to some extend to investor - they often need to overcome psychological barriers they would not be able to pass if concentrate only on a few aspects.
    One way, as you demonstrated, to overcome tunnel vision to finance data only is to analyze future of a company. Because DGI is a long-time effort ( for an estimation see it is indeed important to how the company will compete in future.
    The only critical note (well I almost always have at least one) is - do not rely solely to the company reports and check that independent analysts say. Of course it is easy to propose than to do and it takes more than 2 hours.
    Feb 23, 2013. 08:04 PM | 1 Like Like |Link to Comment
  • How To Build A Utility Portfolio [View article]
    Thank you for good article. I'm a simple minded person on utilities - because they are mostly regulated and regulations are limited by {country} boundaries a good portfolio should include solid utilities from different continents.
    Feb 23, 2013. 01:22 AM | Likes Like |Link to Comment
  • How To Remain Solvent Longer Than The Market Is Irrational [View article]
    I overcome myself and read whole article. I agree with "The question that stimulated this article was essentially how long can, or should, an investor wait for an undervalued, and therefore, underperforming stock to regain its luster. My simple answer would be that as long as the company's earnings are justifying a higher price, then I would be willing to wait as long as it takes" just because more than one company is traded at stock exchanges. But I think arbitrary movements of a blue line above or below an orange line cannot prove anything esp, for mega-caps there EMH works quite well during "low crazy" market periods. Just compare your graphs in this article with HCP and VTR fast-graphs in and try to explain all.
    Anyway I really appreciate your articles - they are well written and give a food for brain.
    Good luck!

    PS I'm not going to open and discuss this article anymore - you have newest one, I'll read 8-).
    Feb 23, 2013. 12:58 AM | Likes Like |Link to Comment
  • Retirement Tips Series: 1 - Start Early [View article]
    Thank you for good article.
    I think your AFL lesson should be "It is almost impossible to buy at the bottom".
    Disclosure: I'm long on AFL and have no clue about current stock price.
    Feb 22, 2013. 12:13 AM | Likes Like |Link to Comment
  • The Hard Truth Of Dividend-Growth Investing [View article]
    I answered on "DoREITs compatible with DGI?" in one of previous comments
    Feb 21, 2013. 04:41 PM | Likes Like |Link to Comment
  • The Hard Truth Of Dividend-Growth Investing [View article]
    I guess you're joking...
    I have more ideas than time, so I often delegate to develop my ideas to others.
    Feb 21, 2013. 04:33 PM | Likes Like |Link to Comment
  • The Hard Truth Of Dividend-Growth Investing [View article]
    Hmmm... Portfolio123 seems too expensive if you trust that "past performance does not guarantee future results". Anyway, thank you for the guide. It would be nice to see at SA articles like "Review of best SSRN papers in last year/quarter" - can you lead?
    Feb 21, 2013. 11:48 AM | Likes Like |Link to Comment
  • The Hard Truth Of Dividend-Growth Investing [View article]
    Well WM biz depends on economy so why to expect 10% DGR in recession?
    I'm long on WM
    Feb 21, 2013. 11:08 AM | 1 Like Like |Link to Comment
  • The Hard Truth Of Dividend-Growth Investing [View article]
    If you bought WMT in 2005 their DGR +your YoC in 2012 should be more than 12%, so why did you sell? Did you violate you chowder rule 8-) ?
    Feb 21, 2013. 11:02 AM | Likes Like |Link to Comment
  • The Hard Truth Of Dividend-Growth Investing [View article]
    There are REITs in DG universe such as
    HCP REIT - Healthcare Facilities
    OHI REIT - Healthcare Facilities
    ESS REIT - Residential
    O REIT - Retail
    More can be found in David Fish CCC list
    Feb 21, 2013. 10:57 AM | 2 Likes Like |Link to Comment