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  • Dividends And 'The Magic Pants' [View article]
    Cf: I was comparing non dividend stocks held in a taxable account to a conventional IRA. My point was that you can hold non dividend paying stocks in a taxable account, with no limit to how much you contribute to that account, and pay no tax on your return until you choose to sell holdings--which you are never forced to do. I think I am right in saying that at time of death the unrealized capital gains in that taxable account pass to heirs without estate tax or income tax for all but the wealthiest and the basis of those holdings goes to the market price at time of death (if I am wrong tax accountants please respond). I think we all love the tax deferral aspects of a conventional IRA (which is about their only benefit) but we have the ability to do the same thing in a taxable account by holding non dividend stocks (and eliminate all the negatives of the conventional IRA). You're right of course, the Roth has all those benefits also but many of us have most of our portfolios outside the Roth.
    Mar 18 12:33 PM | 1 Like Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Katcher: You are right about Berkshire's dividend paying stocks--Berkshire does have to pay a tax on those dividends but it is less than what most of us pay (c-corps get a reduced rate below the 15% level). Berkshire also has many non dividend stocks (e.g., Direct TV, DaVita) and more importantly they buy whole companies when they can (e.g., GEICO) and there is no dividend involved. In any case, if Berkshire paid a dividend there would be an additional tax that we would have to pay, regardless of the tax Berkshire has already paid on the dividends they receive. That would mean a triple tax on the income generated by dividend paying stocks owned by Berkshire and reduce our after tax total return on the investment. What a deal!

    On your other point--I believe you will find that Berkshire has bought back shares exactly once in it's 50 year history (Buffett era). So, to me, the value of Berkshire to the small investor is (1) managers who wisely reinvest the earnings more efficiently than we can (at least for most of that 50 years); (2) Shareholder friendly managers (such as no stock options) and (3) no dividend which is tax efficient for most of us.
    Mar 18 11:22 AM | 1 Like Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    PJ: Not sure if internet stock buyers were any greedier than the rest of us. Greed is what makes the stock market tick and what I saw in the late 90s was a faith that technology had changed the investing world. Sure, there were momentum investors and bandwagon investors (as there always are) but the SA type investor of that time was buying based on a belief that the fundamentals had changed or were no longer important. I think Larry is saying your "assessing key fundamentals" is badly flawed. Or maybe that you are ignoring some of the fundamentals by focusing on dividend stocks. Unless you want to make the case that the fundamentals of dividend paying stocks are superior to those of non dividend stocks?
    Mar 18 09:32 AM | 4 Likes Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Larry: I have been reading SA for some three years and one thing I learned early on--logic doesn't work when discussing dividends with DGIs. You have logically refuted all the DGI arguments and my guess is you won't convert anyone (you will get a lot of nasty comments). Just like with those invested in the internet stocks in the late 1990s, dividend investing has taken on many of the characteristics of true religion. Faith is not based on logic.

    I will expand a little on your tax inefficiency comment. I agree that selling stock to generate income versus dividends has some small tax benefits but the real benefit of stocks not paying a dividends is to hold them as long as possible. They then become the equivalent of a conventional IRA without the negatives. Just like with an IRA the income earned is deferred until you choose to take it--if you have held Berkshire since 1980 and never sold, you have paid zero tax--just like an IRA--think of the compounding that has occurred in those 34 years of the taxes that would have been paid on dividends). But zero dividend stocks are better than an IRA since there is no mandatory withdrawals at age 70 1/2 and no maximum annual contribution (not to mention that at death, for most under current estate tax laws, all the earnings pass to heirs without taxation--a free lunch).
    Mar 18 08:49 AM | 14 Likes Like |Link to Comment
  • The Myth Of Improving Corporate Balance Sheets [View article]
    Boom: I think they might be admitting that their shares are cheap and that no acquisition makes as much sense as buying back their shares but I'm not sure how important the dividend relationship is. Look at Direct TV--since 2003 they have brought their share count down from 1.4 billion to just over 500 million and they don't have a dividend. During that time their share price has gone from $8 to $73 and the owners have not had to pay a cent in taxes on that gain (unless they choose to sell).
    Mar 15 03:49 PM | Likes Like |Link to Comment
  • What We've Sold So Far In 2014 [View article]
    KO had a PE of 51 back in 1998 so not sure how important the comparison of performance is to that time. It was grossly overvalued for quite a few years (and probably still is at a PE of 18). But the earnings are up from 71 cents a share in 1998 to about $2.25 currently--that would make for a good stock performance if it wasn't for the starting PE. Think how Buffett must feel, stuck with his zillion shares of KO that he will have a huge problem unwinding without crashing the stock. Wonder how much of Berkshire's under performance over the past five years can be attributed to KO? The DGIs call it a "Dividend Aristocrat" so who wouldn't want to own it?
    Mar 15 08:58 AM | 1 Like Like |Link to Comment
  • The Myth Of Improving Corporate Balance Sheets [View article]
    Chad: You make some good points but am not sure about your opinion that "acquisitions offer better valuations". If the PE of the market is high than acquisitions will be equally expensive. Seems like the worst time to make them, which is why Buffett is sitting on so much cash. It would also seem very strange if corporations didn't take advantage of historically low interest rates to borrow. If their earnings yield is some 6% and they are paying 3% interest on their debt (tax deductible) on the surface it seems like a good deal. It's always easy to look in that rear view mirror and say they should have guessed the bottom and bought back shares in 2009 (they started big time buybacks in 2011). I am also thinking that much of the borrowing is from MLPs and oil/gas shale companies and might make all the sense in the world. It might be valuable to take the debt numbers and break it down by sector. But your point about balance sheet quality is a good one.
    Mar 14 04:38 PM | 4 Likes Like |Link to Comment
  • Clean Energy: Heading Towards Flop Of The Year [View article]
    I have no horse in this race. I have followed natural gas as transportation fuel for the last few years and have nibbled on CMI as a trade but haven't taken the plunge on the distribution system. But it seems like it is getting very difficult to post a negative article on this site. They bring the automatic response that the author is only writing the article because he is shorting the stock. Not sure how that is different than the positive articles written by authors long a position. I guess some folks just love conspiracy theories. Just for the record, Zacks analyst ratings for CLNE are a very poor 3.55 with 5 strong sells. Value Line gives it a very poor rating of 4/4 (timeliness and safety). The stock is 58% off its all time high and 35% off its 12 month high.

    I appreciate negative articles--would like at least 1/3rd of the articles on this site being negative--even if the author is shorting.
    Mar 9 09:38 AM | 2 Likes Like |Link to Comment
  • Exxon Mobil Needs A Big Dividend Hike This Year [View article]
    Michael: Not clear to me how shareholders selling and paying a 15% capital gains tax on Exxon (much of the gain being nothing more than the result of the deferral of taxes allowed by share buybacks of previous years) is any different than increasing the dividend and paying the same 15% tax on those dividends. They can control the amount of tax they pay on capital gains by how much they sell. And also not clear to me what CD and bond returns have to do with the issue--if they sell the XOM they can buy high dividend paying stocks, REITs, MLPs or whatever meets their risk tolerance. If they (or you) wanted a big dividend payer why did you buy XOM in the first place? Their dividend was 2% in 2000 and 2% in 2005. It's 2.7% current dividend is the highest it has been since the 2.8% of 1997. To me complaining about XOM's dividend makes about as much sense as complaining about Berkshire's.
    Mar 7 02:17 PM | 5 Likes Like |Link to Comment
  • Exxon Mobil Needs A Big Dividend Hike This Year [View article]
    Michael: I know this dead horse won't come to life with a little beating but (1) not all shareholders want dividends (2) the money used for an increased dividend will reduce share buybacks at a time that Exxon is cheap--the exact time that buybacks should be increased (3) reducing share buybacks will cause the share price to drop (4) the total return of Exxon stock won't go up because the dividend goes up (5) share buybacks are tax efficient for most shareholders (6) the board designed the option plan--if share buybacks are beneficial to manager compensation do you really think they won't redesign it so that dividends are equally beneficial to the option plan?(7) if you want more dividends why not just sell your Exxon and increase your holdings in one of the higher dividend payers you mention in the article?
    Mar 7 11:46 AM | 15 Likes Like |Link to Comment
  • Industrial REITs: Time In The Sun Has Finally Come [View article]
    I see you own Terreno (TRNO). What can you tell us about your reasons for buying that recent IPO? The analysts and corporate governance folks seem to like the REIT.
    Mar 4 07:24 PM | Likes Like |Link to Comment
  • Equity CEFs: Sell This, Buy That From These Fund Families [View article]
    GRX is a difficult fund to benchmark. The "Healthcare & Wellness RX" title makes it sound like a health care fund and comparing it to Vanguards health fund (VGHCX) finds a 5 year return that is almost exact between the two funds. But look at the GRX holdings and you will find Nestle, Whole Foods and Pepsi. Pepsi in a health and wellness fund? Looks almost like a no brainer if the discount evaporates over the next year but if it doesn't there are plenty of health funds with better total returns.
    Mar 3 03:17 PM | Likes Like |Link to Comment
  • Spice Up Your Retirement Portfolio With Convertibles CEFs [View article]
    John: You talk about screening for "non destructive" ROC. Not sure what you are basing that on. All of these funds have NAV below their IPO. AGC is way below with a IPO of $20 and a current NAV of $8.66. In the good years like 2013 they might have had so called "non destructive ROC" but over time they are all distributing more than they are earning (looks like CHY and AVK are close to in balance). To me that is destructive and can't last forever. If you are buying CEFs based on the distribution instead of the portfolio return you might be kidding yourself.
    Mar 2 08:24 AM | 1 Like Like |Link to Comment
  • Dumb Investment Of The Week: Floating Rate Note Funds [View article]
    This is what Morningstar has to say about EVBLX "this fund may not lead the pack in risk led markets but it is still a strong choice". Expenses--"below average". Average annual return for last 5 years, 11.03%--Barclays US agg, 4.88%. Morningstar (and they don't have any conflict of interest) rates it "Gold" and 3 stars. If I was the customer you mentioned, I would be getting a very queasy feeling about now. Dumb article of the week.
    Feb 24 07:25 PM | 9 Likes Like |Link to Comment
  • Barron's Is Wrong On Kinder Morgan Energy Partners [View article]
    I read a lot of complaints about IDRs but I am guessing two things--without receiving the IDR, KMI would never have set up KMP to begin with. And those MLPs that don't have IDRs had to buy back those rights from the GP--it wasn't a gift from the GP. Whether it is worth it to buy back the IDRs is something that would take some analysis. Do the MLPs without IDRs have higher dividends? Do they have higher total returns? Are functions that the GP used to perform now being performed by the MLP and what is the cost? Maybe a little more analysis might occur by the writers of these articles (or maybe even us readers!).
    Feb 24 11:03 AM | 7 Likes Like |Link to Comment