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chowder

chowder
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ABT, AFL, APD, ARLP, AT, BDT, BF.B, BMO, BP, BRK.A, BRK.B, C, CBRL, CINF, CL, COP, CTL, CVX, D, DE, DRI, ENB, EPD, EXC, FSP, FTR, GD, GE, GILD, GIS, GPC, HCBK, HCN, HGIC, IBM, INTC, JNJ, KMB, KMI, KMP, KO, KRFT, LEG, LINE, LNCO, LO, MAA, MCD, MDLZ, MDT, MHR, MKC, MMP, MO, NFLX, NHI, NLY, NNN, O, OHI, PBI, PEP, PG, PM, PNY, PSX, RIG, RY, SBSI, SDRL, SDY, SNY, SO, SPY, SYY, T, TE, TGT, TIP, TOT, TUP, UHT, UNP, UNS, UTX, VIG, VVC, VZ, WAG, WEC, WM, WMT, WU, XLU, XOM
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  • AT&T And Consolidated Edison A 'Tell' Of 2 Champions: Part 3 [View article]
    @622 ... Your analysis, although correct, misses the very essence of what a lot of dividend growth investors are trying to achieve.

    Companies like ED and T are considered "core" positions, companies that they don't wish to sell, but continue to build on over time. These are not the type of companies one looks at in the shorter time frames for relative performance, but companies to provide an ongoing and growing income stream, or cash flow stream, if you will.

    Over the last 20 years ED has an annualized return of 5.9% to the S&P's 7.3%. T has done worse with an annualized return of 4.0%.

    However, and this is important, the amount of cash flow these companies throw off in the form of dividends is much more than what the S&P 500 does.

    A $10K investment over the last 20 years in the above holdings provided the following income flows:

    ED ..... $12,462.42
    T ....... $8,656.05
    S&P ... $6,123.40

    Those cash flows from ED and T can be reinvested into anything else the share owner decides to invest in. A share owner following the cash flow or income model doesn't need the best 5 year growth the S&P 500 has enjoyed in order to sell off part of the position to generate cash.

    The S&P 500 is not going to enjoy the same or better return over the next 5 years that it has enjoyed the last 5 and I'll wager on it if you are up to it.

    Yet, those income flows from ED and T will only improve going forward, the total return of the S&P 500 won't, at least over the next 5 years.

    For the person looking to generate cash flow, owning less (ED and T) was better than owning better (S&P 500). The numbers don't lie. ... The best part? Those extra cash flows can be invested elsewhere and find something producing a little more cap appreciation.

    I look for invest-able income anywhere I can find it. I own T, lots of T. Those dividends spend very well elsewhere and have been invested in companies that have outperformed the S&P 500 over time.
    Sep 14 08:21 AM | 8 Likes Like |Link to Comment
  • Look At These Juicy Yields - Are They Really Appropriate For Your Retirement Portfolios? [View article]
    Unless Buffett comes out and specifically says what he likes or doesn't like, I'd prefer not to put words in his mouth or presume I know what he's thinking.

    I do know that due to the size of BRK, there are many companies he can not even consider owning. I have read him where he said if he were starting over again, there are lots of smaller cap companies he would own.

    I have never read that's he's for or against REIT's and until I do, whether he owns them or not is a non-issue as to why he owns them or not, at least to me anyway.
    Sep 13 10:22 AM | 5 Likes Like |Link to Comment
  • Omega Healthcare Investors Continues To Impress - I Am Adding To My Pile [View article]
    No Jaques, I wouldn't. Not at this time. It doesn't have the financial strength I look for in companies.

    That doesn't mean it won't be a good investment for others, but the very first criteria I look at is a company's financial strength rating.

    If a company doesn't rate at least a 1 or 2 rating for safety by Value Line, or carry a BBB+ or better credit rating by Morningstar, I don't research it any further ... unless I'm looking to speculate. I will add a spec or two from time to time.

    VTR doesn't meet the safety requirement, so if I purchased them, I would have to consider them a speculative play and OHI is already my speculative play in this sector. So I would have to pass on VTR.

    Again, this doesn't mean it won't work out for others or fit someone else's goals or objectives.
    Sep 12 03:59 PM | 1 Like Like |Link to Comment
  • Omega Healthcare Investors Continues To Impress - I Am Adding To My Pile [View article]
    I can use a little more of a sell-off here. I'm due for a scheduled purchase early next week. A check has already been sent to the broker but it won't arrive until Monday or Tuesday.

    I'm looking to add a new position and I'm trying to find something that is selling at a 10% or better discount to fair value, and I want that double digit discount to be confirmed by both S&P Capital IQ and Morningstar.

    My leading candidates for purchase are:

    MA, TJX, UTX and XOM.

    MA is selling at a 14.6% discount to fair value according to S&P, but M* does not confirm. They say the discount is just 8.2%.

    TJX is selling at a 6.3% discount to fair value according to S&P, but M* says it's a 10.6% discount.

    UTX is selling at a 10.6% discount to fair value according to S&P, but M* says it's just a 5.8% discount.

    XOM is selling at a 6.5% discount to fair value according to S&P, but M* says it's a 12.0% discount.

    So, all four positions are close, but none of them are confirmed by both rating agencies. I will take a final review next week and decide. If none of them have both agencies confirming a double digit discount to fair value, I will then purchase XOM.

    I will consider XOM a core position, while the other three won't be core positions. When it comes to core positions I will pay up to fair value. Since XOM is selling at a discount, it would qualify for purchase, but I'd still like to get a better valuation if I can.

    So, we'll see how it plays out.

    I looked at HCN and OHI but I need better valuations. Price hasn't dropped enough for me to consider at this time. I own both in my portfolio and continue to reinvest the dividends, but I want lower prices to add additional shares other than the reinvested shares.
    Sep 12 03:46 PM | 3 Likes Like |Link to Comment
  • Omega Healthcare Investors Continues To Impress - I Am Adding To My Pile [View article]
    The sell-off is not company specific. It is market specific, which means all we're seeing is profit taking. The buyers dried up and when buying dries up, professional traders and Institutional Investors lock in profits.

    When I see an entire sector pulling back at the same time, I ignore the noise as it means any share price drop I see in my holdings is simply market driven. This is an opportunity to add to existing positions, although I wouldn't be adding today. I would give it a day or two to let some dust settle first.
    Sep 12 03:03 PM | 4 Likes Like |Link to Comment
  • Your Guide To The Best And Worst Stocks In The Dow [View article]
    Craig, he never sells. He admits holding a couple of companies all the way to bankruptcy. The only time he has sold was when a company cashed him out.
    Sep 12 01:43 PM | 2 Likes Like |Link to Comment
  • Your Guide To The Best And Worst Stocks In The Dow [View article]
    varan, I was thinking the same thing.

    My take-away, if you will, is that the 11% number for IBM is immaterial. I look at it as being IBM will probably fare better than the others going forward, depending on what the market conditions are. If the market corrects, I assume IBM won't correct as much as the others. I expect IBM to be near the top in return, in other words a "better" investment, with regard to the other Dow members.

    I added IBM earlier this year to one of the portfolios I managed, based on the same sort of thinking that Eli is articulating here. We'll see how it plays out.
    Sep 12 01:39 PM | 1 Like Like |Link to Comment
  • New Dividend Challengers Should Carry Warning Labels: "Caution! Not Recession Tested!" [View article]
    I can't complain that SDRL is down, I sold it as mentioned above in the comment stream. Talk about great timing! ... I guess I became a capital preservation investor and wasn't even trying. ... Ha!

    It might be worth a look-see again in a couple of weeks. No hurry here!
    Sep 12 01:01 PM | 1 Like Like |Link to Comment
  • Building An Income Portfolio With Closed-End Funds. Part 1: Real Estate [View article]
    LB, I would hope we don't see another real estate crash. I thought the same thing after experiencing my first bank crash. I've been through 3 of those now. ... Ha!

    Again, I'm not saying others shouldn't invest in CEF's, but we do need to measure what we may gain by what we may lose, I would think, and the lack of liquidity and leverage will work against us during market corrections. We need to have a plan ahead of time.
    Sep 12 12:57 PM | 2 Likes Like |Link to Comment
  • Look At These Juicy Yields - Are They Really Appropriate For Your Retirement Portfolios? [View article]
    Hardog, total return is a byproduct of dividend growth investing if it is done right. The formula I use when screening for dividend growth candidates is:

    High Quality + High Yield + High Growth of Yield = High Total Return.

    I define High Quality as anything that is rated a 1 or 2 for safety by Value Line or has a credit rating of BBB+ or better by Morningstar.

    I define High Yield as anything yielding more than 50% of the yield offered by the S&P 500. If the yield for the S&P 500 is 2%, then the minimum yield I accept is 3%, often more.

    I define High Growth Of Yield as anything that meets the Chowder Rule number of 12 when you combine the current yield to the 5 year compounded annual growth rate of the dividend.

    For example, CVX has a current yield of 3.5% and a 5 year CAGR of 9.53%. Combine those numbers and you have a Chowder Rule number of 13.03. It qualifies as a dividend growth investment.

    When you combine those 3 ingredients, you are going to have High Total Return. I don't think there is an ETF out there that can beat a dividend growth company that meets the above criteria over the long-term when you factor in the compounding process over 15 to 20 years. The higher yields and dividend growth rates force price higher and it's a force that most ETF's can't compete with.

    I challenge anyone to show me a company who met the formula above and did not outperform the market over the time frame mentioned above because I haven't been able to find it myself. Perhaps someone else knows something?
    Sep 12 12:36 PM | 5 Likes Like |Link to Comment
  • Building An Income Portfolio With Closed-End Funds. Part 1: Real Estate [View article]
    I used to own a number of CEF's and currently own just one ... ETO.

    A friendly reminder to those of you who have been adding CEF's recently. Due to their lack of liquidity, some CEF's trade as little as 100K shares per day, some even less, the draw-downs during meaningful market corrections can be quite disturbing. Additionally, that leverage being used to provide the nice NAV returns and very handsome income numbers is a killer to the downside. And I mean a killer!

    Some of these CEF's draw back even more than the S&P 500 does and the S&P 500 dropped 57.7% from peak to valley during the Great Recession. Of the CEF's that were in play prior to the Great Recession, here are their draw-downs from peak to valley.

    AWP ... down 86.1%
    IGR ... down 89.3%
    JRS ... down 92.0%
    NRO ... down 92.6%
    RFI ... down 70.3%
    RQI ... down 91.0%

    I understand that these investment vehicles are being purchased for their income generating abilities, but make sure you can withstand the serious drawbacks that accompany these funds from time to time.

    If you can sit there and ignore watching this much of your value disappear, you're a better man than me, even if you're a woman.

    I would think that at some point people need to know in advance where the trade-off for income vs capital preservation meets because these CEF's are known to be heart-breakers. ... Just sayin'. ... It's why I don't count on them for reliable income. I only looked at them as opportunities to goose the income short-term and garner a little cap appreciation.

    I found that purchasing them following a serious draw-down was the best way to purchase these funds and then I sold most of them as they rose close to par with NAV. I'll follow that same strategy again if we get a 15 to 20 percent market correction.
    Sep 12 12:17 PM | 2 Likes Like |Link to Comment
  • Look At These Juicy Yields - Are They Really Appropriate For Your Retirement Portfolios? [View article]
    @sharppencil ... >>> Why to DG investors invariably equate higher yield with higher risk? <<<

    Because the focus for DG (Dividend Growth) investors is on the dividend growing at an acceptable rate of growth year after year after year.

    High yielding companies, in the 6% range and above, have a miserable overall record of growing dividends.

    There is a difference between a high yield investor like WmHilger and a dividend growth investor like BuyandHold. Both can achieve their overall goals but the goals are clearly different. Dividend growth means just that ... dividend growth!
    Sep 11 07:11 PM | 7 Likes Like |Link to Comment
  • Look At These Juicy Yields - Are They Really Appropriate For Your Retirement Portfolios? [View article]
    @Justin ... There are those who say only risk what you can afford to lose. I think that makes a lot of sense, but people seem to interpret "at risk money" differently.

    Some seem to think that the more time you have to make up for mistakes, the more risk you can afford to take by going after growth. I interpret growth to mean capital appreciation, or at least the emphasis would be on capital appreciation.

    There are those who define "at risk money" as protecting against price volatility. It's why they preach about "asset class" investing or looking for protection via ETF's or Mutual Funds. They talk about diversification and capital preservation.

    I have read over and over again how so many people advise a young person to start with an ETF or fund, and I assume it's to salve one's nerves psychologically against price volatility, and against owning an Enron for example.

    I look at it a little differently. I see so many people later in life needing to switch the way they invest. (Guilty, your Honor!). Hubris allows us to think we can master one way of investing, one that we know to be more riskier, and then switch over to a more conservative way at a later time, perhaps when we approach retirement. It usually doesn't work that way, or it doesn't work as well as we'd like.

    First off, why would you switch from a plan that has been working well, even a plan that involved a great deal of risk? We tell ourselves we have it figured out and it's worked so far, so why abandon it? Problem is, at some point the plan doesn't work anymore. We get hit the hardest at the time we least can afford it, especially if we lost years of compounding opportunity.

    I say why not do it right from start?

    My son is 29 and invests $500 per month into his taxable and Roth accounts. If something were to happen where he couldn't invest that amount any longer, his investment plan falls apart, at least temporarily until better times come along.

    So in my mind, if his assets aren't creating at least $500 per month in income, he's investing money he can't afford to lose. Since he can't afford to lose, he can't afford higher risks in his investments.

    We avoid ETF's and Mutual Funds by owning only the best of the best when it comes to a company's financial strength. PG and JNJ are not Enron, Kodak, Bank of America or World Com.

    PG and JNJ are companies that sell a product that people must or will use regardless of economic or market conditions. These are companies that pay and raise a dividend regardless of economic or market conditions. These are companies that are considered so safe, some people refuse to invest in them, if you can believe that. ... Ha!

    But when you can't afford to lose what you have, this is where you start! These companies, and others like them, will show more income growth over the years than any ETF or Mutual Fund that I've come across. And when you have more yield plus income growth, and allow the many years of compounding that you have available to work, why not start out doing it right.

    Diversification? ... The safer your investments, the less you need to worry about it. You start with owning one "high quality" company at a time and you add a new one in a different sector, one sector at a time, until you have adequate diversification.

    As a young person, price volatility should be the least of your concerns, in my opinion. Volatility comes with the territory and is something a young person should embrace. This is where time is your greatest ally and you take this time to reinvest your "high quality" dividends.

    Once my son is generating $500 per month in dividends, (he hit $400 last month), he can then afford to spread out and take on a little risk. He will more than likely lower his credit rating criteria from BBB+ to BBB for example, to include a couple of companies that he doesn't own now. VGR would be a company like that.

    Once his "at risk Investing" money is covered by dividends, he can stretch out and purchase a NLY or PSEC for example. He will certainly add a BRK.b or a company like GILD at that time, but the goal was to start out the same way, using the same strategy that a lot of people are switching over to later in life. Cover your income needs or at risk investing money first. Once that is done, he can spread his wings babee.
    Sep 11 03:40 PM | 17 Likes Like |Link to Comment
  • DGI For Dummies: Managing Your Dividend Growth Portfolio [View article]
    >>> the income dividend investing strategy has worked for a while now <<<

    I'll say! ... Some of these companies have been paying dividends for over 100 years. ... Yup, seems to still be working.
    Sep 10 01:54 PM | 3 Likes Like |Link to Comment
  • Omega Healthcare Investors Continues To Impress - I Am Adding To My Pile [View article]
    There is a huge distinction between being a "high yield" investor and a "dividend growth" investor.

    Those who invest for high yield are usually taking on more risk, and when I talk about risk I'm talking about the financial strength of the company, or lack thereof. I'm talking about any loss of principal being lost permanently, or taking so long to recover it might as well be considered permanent.

    NLY does not qualify as a high quality company. It may be a good company as far as mREITS go, but when I go to look for a company's financial strength rating, NLY doesn't fare too well.

    That doesn't mean that NLY isn't worthy of an investment, it usually means that it isn't a very safe company to depend on for income in retirement, especially if one doesn't have a large margin of safety around their dividend income.

    Most people in retirement may not necessarily have cap appreciation as a goal or a concern, but they don't want to lose very much principal either.

    A dividend growth investor expects the dividend to grow every year and they expect it to grow at a certain rate. When you combine high quality with high yield and high growth of yield, you can expect high total return.

    mREIT's don't meet that equation. A high yield investor may accept those risks, a dividend growth investor would normally avoid them.

    I don't own any mREIT's and have no intention of owning any. I do own OHI, have done very well with OHI, nearly a double, but I did classify OHI as a speculative position in my portfolio when I purchased them. I do take on a spec play or two from time to time.

    OHI doesn't have the financial strength to qualify as high quality either. I consider high quality as a company who is rated 1 or 2 for safety by Value Line, or a BBB+ or better rating by Morningstar, and absent that, a BBB+ or better credit rating by S&P Capital IQ.

    OHI has a BB+ credit rating. NLY doesn't qualify for a rating at all. I can find a "quality" rating for NLY by S&P, but not a credit rating. If looking at a quality rating, I look for B+ or better. NLY only rates a B.

    If I were to own NLY it would be a speculative position and I don't speculate for income, I speculate for share price appreciation and NLY hasn't done very well there either the last couple of years.

    I think Kevin made the prudent move by selling based on his comments regarding being a dividend growth investor. NLY doesn't meet the standard.
    Sep 10 12:50 PM | 2 Likes Like |Link to Comment
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