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SDS (Seductive Dividend Stocks)
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Sorry I hide my true identity but I'm a physicist/engineer, native contrarian and idea generator. I am an eclectic dividend investor with motto "In God We Trust, All Others Pay Cash" applied to companies I invest in. I like to read /and read a lot - did you look on my SA photo 8-)? /... More
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  • My Thoughts On Dividends

    15 March 2014

    I'm a dividend investor because of several reasons (see Endless discussions in SA on dividends (I commented to several) are usually quite hot but repetitive. So I decided to put some my arguments in favor of dividends in this blog. I'll use some graphs and update blog than new ideas come.

    OK, let me start. Larry Swedroe kindly send me DFA white paper "Global Dividend-Paying Stocks: A Recent History" written by Stanley Black in 2013. He analyzed 23 developed stock markets in Jan 1991-Dec 2012 and found that annualized compound return for payers and non-payers was practically the same (7.80% and 7.58%).

    There are some question marks to this study (probably because its reported as white paper) but the numbers above are probably correct.

    When we buy a stock we exchange money protected by the wealth of the country issued these money for piece of paper or electronic file which represent a partial ownership of the company issued the stock. I should point that country protection of its money is not perfect and even US Treasury did (had?) default ( see or or Of course a stock (in contrast with bond) is not protected and stock owner faces the absolute risk /probability to loose money (invested capital)/.

    Common method to transfer a risk is to use insurance ( A party which accept a risk sells insurance, a counter party purchases insurance. Insurance is NOT free!

    I consider dividends as insurance that CFO/CEO do not "cook the books". Based on Stanley Black results this insurance is free!

    16 March 2014

    I read that the following maxim was popular in XIX century : "Gentleman invests in bonds" I guess it was assumed that this gentleman had enough money to live on interest. Any stock at that time was consider as object of speculation. All ladies, gentlemen and not-so gentlemen did not face inflation policy in XIX century

    Situation change and US government officially supported inflation in the second half of XX century and still supports it in XIX century. So a gentleman must be super-rich to continue XIX century style of investment. Fortunately some companies recognized this modern feature and try to increase dividends at least at the pace of inflation. Stocks of such DG companies should be a core of a XXI century gentleman portfolio IMO.

    Mar 15 9:55 PM | Link | Comment!
  • Your Cash Emergency Fund

    There is some discussion on cash emergency fund in different SA comments. I suggest the following simple schedule for my fellows based on probability to find new job if you fired (well we have age discrimination in USA) and probability to get sick for long-time exceeded disability benefits (also age-dependent):
    Age 25 - have 0.5 year of spending (calculate average of last 3)
    Age 40 - have 1 year of spending (calculate average of last 5)
    Age 50 - have 2 years of spending (calculate average of last 5)
    Age 60 - have 3 years of spending (calculate average of last 5)
    Keep 3 years until age when you get Social Security/Pension. Reduce to 3 years of spending minus your annual Social Security/Pension (assuming they will not default) as soon as you get.
    Of course increase gradually your cash emergency fund between ages indicated above.
    Of course make adjustments for kids.
    Of course increase gradually your cash emergency fund based on inflation and your real annual spending.

    Please remember that I'm not a financial adviser, so do your DD.

    5 Feb 2014

    Feb 05 11:41 PM | Link | 3 Comments
  • On Mean-Reverting In Stocks

    Being a physicist/engineer and amateur long-term dividend investor (contrarian by my nature) I try to understand mean-reverting in stocks because of importance of this concept . So far I did not figure out fundamental forces for mean-reverting in stock market except only one.

    In my opinion P=FV+MP, where P is stock price, FV is the fundamental value and MP is the mispricing. It should be noted that P is always positive and the precise number, while FV and MP can be positive and negative and BOTH are ill-defined numbers, so noise/signal approach known in hardware engineering might not work in finance. Assuming that FV is time independent, at least 2 forces or a non-smooth embedding of a parameter in the driving force are/is needed in order to change time dependence of MP.

    A positive feedback is needed for MP to increase its absolute value with time (the same is for a price bubble). But a negative feedback is needed for MP to reduce its absolute value with time and hence for the mean-reverting. Change of FV (or assumption about FV number) opposite to MP time derivative can be a natural source for mean-reverting. In contrast with mean-reverting of natural and artificial systems probably many forces (co)-exist.

    What are other possible fundamental forces for mean-reverting in stock market?

    Jan 23 12:00 PM | Link | Comment!
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