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  • 5 Safe Dividend Stocks When Using The 4% Rule [View article]
    If you are relying on rising dividends for your retirement income, and not relying on asset sales, then total return is irrelevant.

    If you are relying on total return, then you are flirting with danger. All its takes is one market meltdown like 2008-2009 to take a substantial bite out of your future income. The reliable dividend payers dropped in price during that time but maintained or increased their dividends.

    When you sell some stock to get 'income', it is not really income, it is return of capital. Each time you do this, you decrease you capital, and if you do it for a sufficiently long time you will end up with no capital. For me, that is the most dangerous possible outcome. I'll take the dividends.
    Sep 11 02:59 PM | 30 Likes Like |Link to Comment
  • Rich And Retired? Please Buy Dividend Stocks [View article]
    If you own stocks as a long term hold for the dividends, and the fundamentals of your stocks do not change for the worse, it does not matter if Mr Market makes you an offer this week that is 20% less than the offer he made last week. You are much smarter to ignore all of the market 'noise', which is exactly what Benjamin Graham did, and exactly what Warren Buffett and David Van Knapp and David Crosetti and chowder and a host of other dividend investors all do.
    Mar 13 03:48 PM | 25 Likes Like |Link to Comment
  • Kinder Morgan Merger: Where Are The Bears Now? [View article]

    Your comment has several inaccuracies.

    >Kinder had to screw over KMP and KMR shareholders with a big tax bill next year<

    Not so. KMR unit holders will not get a tax bill. The exchange is not a taxable event for KMR.

    >5%????? Why would anyone own the new KMI if it offers 5% while several other GPs offer double to triple those growth rates?<

    Not so. Slide 3 of the presentation makes these predictions about dividend growth:

    1) 16% dividend increase from 2014 guidance of $1.72
    2) 10% annual growth rate expected for at least the next 5 years thereafter (2015-2020)

    You say 'KMI is going to be a lousy investment over the next 5 years...' I suggest you revisit your opinion in the light of your misunderstandings.

    Best of investing luck. ;-)
    Aug 13 09:40 AM | 19 Likes Like |Link to Comment
  • Why Dividends Matter [View article]

    It is you who is peddling nonsense.

    Contrary to what you say in your last paragraph, studies by Ned Davis & Assoc demonstrate that since 1972, the highest total returns of the S&P 500 companies have consistently been those that pay a rising dividend. You must be aware of these studies; why do you ignore them?

    The choice between spending down assets, or retaining them and spending dividends, is a no-brainer for this investor. When I collect a dividend, I still have full ownership rights to the next dividend. If I were to instead sell a part of my assets to collect cash, I have relinquished exactly that part of my ownership rights to succeeding capital gains. Neither dividends nor capital gains are totally predictable, but dividends are much more predictable than capital gains. I am much more likely to have reliable dividend income than reliable capital gains.

    A dividend is not a disinvestment in a company's stock. It is a creator of financial discipline for company management that prevents them at least in part from wasting owners' money on ill-conceived investments, poorly timed stock buybacks, and executive perks such as stock options that provide no benefit to owners.
    Dec 31 04:45 PM | 18 Likes Like |Link to Comment
  • Safety, Stability And High Income For The Retired Dividend Growth Investor [View article]
    >Dividends are an artificial construct.<

    So is total return. Both are human constructs.

    >Wealth creation is what matters.<

    Like all generalizations, this one is worthless because it assumes that everyone is the same.

    For those to whom it does apply, the spending down of wealth recommended by the total return philosophy is the exact opposite of wealth creation. It is wealth destruction by definition. Historically, individual wealth has been accumulated and preserved by not spending the principal. Before the creation of the artificial total return philosophy, dividends were the primary reason to own common stocks. Some history:

    >The stocks will be sold at some point though, so what is happening to the stock price matters.<

    Totally untrue. Your heirs can inherit your portfolio, and so on. That is true wealth preservation across the generations. Those who spend down the principal will destroy the wealth that has been created.
    Mar 25 01:09 PM | 16 Likes Like |Link to Comment
  • There's No Way I Can 'Butter My Bread' With This Healthcare REIT [View article]


    Those who refer to 'Obamacare' apparently missed civics class when they were in (junior) high school. It is Congress that makes laws, not the executive branch. If you want to give the ACA a nickname, call it 'Congresscare'.
    Jan 21 12:54 PM | 16 Likes Like |Link to Comment
  • The Biggest Fear In Retirement, And The Golden Solution [View article]
    This article and the interviewee are for people who like being scared by horror movies, because that is all this really is, scare mongering. And on top of that, the interviewee is a proponent of MPT.

    Thirty-some years ago, when I was a young and impressionable investor, I bought into the exact same scare mongering hype that was popular at the time. I bought precious metals near their tops in the early 1980s. Since that time, the nominal returns on those investments have averaged less than 2% per year, and they generated no income. I ask you, was this a good inflation hedge? No, precious metals are not an inflation hedge, at best they are a currency hedge.

    The interviewee would have us believe that Medicare is going to somehow make it difficult to get hip and knee replacements and cataract surgery. That is just plain laughable. Imagine the outcry that will result from the largest voting bloc in our country if this were to happen, and how swiftly it would be rescinded.

    The interviewee advocates selling assets in retirement to meet living expenses. That is a strategy that, if followed for long enough, can only end in complete loss of assets. How is that a good idea?

    The idea of storing assets in foreign locations is nothing new, and anyone who followed this advice 30 years ago may have had an unpleasant visit from the IRS. I personally know someone who followed this advice, and he ended up with a very big tax bill and had to leave the country to avoid prosecution. Are you willing to expose yourself to this risk? Strange that the interviewee is myopic where this risk is concerned.

    International diversification can be a very profitable strategy, but not if done as advocated by the interviewee. For example, PM and BTI price their products in non-US currencies and both pay a healthy and growing dividend. Contrast that to the interviewee's advice to own precious metals overseas. How exactly are those precious metals going to generate income?

    My advice is to not let fear dominate your life, including your investing life. Invest prudently, but not fearfully.
    Nov 8 12:32 PM | 16 Likes Like |Link to Comment
  • Low Risk Retirement Portfolio With Dividend Yield Of 13% [View article]

    I am a big fan of mortgage REITs, but I would never build a retirement portfolio with them alone, and I would never call it low risk.

    My portfolio is about 10% agency mortgage REITs, and I think that is plenty. My portfolio yield is 7%, and I expect it to rise to your portfolio's within a decade with dividend growth.

    As for low risk, yes it has a low beta, so it is not as volatile as the 'market', but mortgage REITs face a host of other risks that are significant.
    Jul 11 03:26 PM | 16 Likes Like |Link to Comment
  • Time To Sell Enterprise Products [View article]
    It really is hard to listen when you shout.
    May 25 06:43 PM | 15 Likes Like |Link to Comment
  • Bogle's Views On Retirement Income [View article]

    $300K at 7.04% = 1760/mo (21120/yr).

    An annuity can do that easily. At my age, $300K in an annuity pays anywhere from $1660 to $1875 per month.

    A portfolio of BDCs, upstream MLPs, and mREITs can do that easily.
    Jul 18 05:09 PM | 15 Likes Like |Link to Comment
  • Fallen Dividend Champions: I Still Have No Fear Of A Market Crash: Part 2 [View article]
    The moral high ground when it comes to not investing in tobacco is really a delusion.

    When you decide to not buy MO stock, how many smokers are thereby motivated to quit? How many non-smokers are motivated to not start smoking? Obviously, none.

    When I buy more MO, how many smokers are motivated to continue smoking? How many non-smokers are motivated to start smoking? Obviously, none.

    There is no connection between ownership of MO and smoking by anyone. There is no connection between non-ownership of MO and smoking by anyone.

    No connection, no cause and no effect.

    I do not smoke. The dividends I receive from MO and PM help defray my excess health care costs that are caused by those who do smoke. They owe it to me.
    Jun 20 10:21 AM | 14 Likes Like |Link to Comment
  • A No-Brainer Dividend Growth Investment [View article]
    "I found one source that stated the company bought back 28.1 million shares in 2012, but I could not verify it, and so I did not want to include it."

    The 10-Qs and 10-K for 2012 show the follow shares repurchased:

    2012-03-31: 8,081,145
    2012-06-30: 9,393,365
    2012-09-30: 6,652,762
    2012-12-31: 3,959,079

    Total: 28,086,351
    Jan 21 01:08 AM | 13 Likes Like |Link to Comment
  • Annaly Shareholders: Don't Worry Be Happy [View article]

    Mortgage REITs make their money on the spread between short and long rates. The slope of the yield curve determines their fate. As long as long rates rise at least as quickly as short rates, mREITs will continue to generate healthy dividends. You appear to be lumping short and long rates together. They are not the same, and the Fed has said repeatedly that short rates are here to stay for a long time. That being true, a gradual rise in long rates will result in higher mREIT dividends. This is how things have worked in the past, and there is no reason to expect anything different in the future.
    Sep 26 03:19 PM | 13 Likes Like |Link to Comment
  • Are Dividend Growth Stocks In A Bubble? [View article]
    Just because a holding is currently overvalued is not a reason for me to reduce or eliminate a holding. I would want to re-invest the proceeds in another dividend grower, and I would want the following requirements to be met for me to make the switch.

    - There must be another stock or stocks that are currently available at a price that would improve my portfolio's total yield.

    - I would want to own the new stock independently of what else I own, including the sell candidate, as long as the new stock does not violate any sector allocation limits I might have.

    - The stock would have to meet all of my valuation criteria.

    - There is not sufficient cash to make the purchase without also making the sale.

    - Other reasons that I haven't thought of that might arise depending on circumstances.

    My yield on cost for MO is 6.5%, and my portfolio's current yield is 7.3%. MO is a dividend raising stalwart in a recession-proof industry. It would take a lot more than the current over-valuation to make me sell it. For example, I wouldn't sell it to buy more AGNC because I have already reached my allocation limit for mREITs.

    Finally, thanks for asking the question. You made me think the process through and write it down, which I hadn't previously done. I have a written investment plan - goal, strategy, and tactics - as recommended by David Van Knapp, but I had not made a written statement of my sell criteria until now, so I am going to add this comment to my plan.
    Jul 20 10:53 PM | 13 Likes Like |Link to Comment
  • Annaly: A Funny Thing Happened While The Boo Birds Sang [View article]
    The price of mREITs closely tracks book value. When rates rise, by which I think you mean short rates, then several things can happen.

    If long rates also rise at the same or greater rate, then the yield spread will not decrease and earnings will increase. But at the same time, when long rates rise, bond prices fall, and so the book value of existing bond positions will also fall, thus causing book value and market price of the REITs to fall. Also affected by rising long rates is mortgage prepayment rates. There will be less incentive to prepay mortgages when replacements will be more expensive, so this particular drag will diminish or cease to exist. I think the net of this is that book values and share price will drop, but dividend amounts will not drop. To summarize, kf you are in it for the dividends, and why else own these, then you are in good shape if you simply hold, and event better shape if you buy more.

    If, however, long rates do not rise at the same or greater rate than short rates, then the yield curve flattens and the spread on which these REITs make their money will decrease, thus causing dividends to decrease. As before, book value will depend on the direction of long rates, independently of short rates. If long rates actually fall, bond prices will thus increasing book values, and prepayment rates will also rise, causing the REITs to reinvest at lower long rates, thus reducing income. So you could have rising book values and falling dividends. Another factor is hedging strategies and how these ameliorate risks such as rising rates and the shape of the yield curve. The last time the 2-10 yield curve went negative was 2006, so theoretically NLY should have had no income and therefore paid no dividend, but they paid a dividend nevertheless, which I credit to their hedging. So again, if you are in it for the dividend, you will need to evaluate whether or not you would continue to hold, and collect a diminished dividend, in this environment. Personally I have decided to hold.

    An important point to emphasis is that even if the market price of these should drop significantly, you would still be collecting the dividend, and if you do not sell, you cannot be 'annihilated'. That only happens if you join the crowd and panic. I think it would be a lot smarter, and unfortunately a lot scarier, to hold tight and simply wait for conditions to change, as they always do. During 2005, NLY went from 20 to 11, and its dividend dropped, hitting its low in 2006, but by 2007 it went from 14 to 18 and its dividend had started a multi year climb. My plan is to hold and then increase my investment when everyone else is panicing.
    Apr 22 11:45 AM | 13 Likes Like |Link to Comment