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Barrons - "Speaking of Dividends"
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December 15, 2008
I am of the opinion that stock buy backs are an abdication of management's responsibility.
Most buy backs do so at a price that an educated investor would consider over priced. Retained earnings should either be invested for future growth or paid out to the stock holder. After all, the company belongs to the share owner and he/she is entitled to the benefits of the profits. Many buy backs simply are compensating the number of shares for management's excessive stock options whether the operation of the company are super or poor.
Ralph
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Subject: [StockCentral.com] Barrons - "Speaking of Dividends" (efb1c192-fce7-4d4b-954d-89d576c917ba)
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robert Posted:01/15/2008 3:03 AM
Subject: [StockCentral.com] Barrons - "Speaking of Dividends"
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I enjoyed the article Danny. The thing it omits to point out . . . and an argument for stock buybacks versus dividends . . . is that a dividend triggers a tax event whether or not the shareholder wants it. A stock buyback allows the shareholder to choose when to trigger a tax event (by choosing to hold or sell). Therefore, I think I would prefer a buyback . . . does this argument make sense?
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Rank: Advanced Member
Posts: 262
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So true a point so overlooked by company boards. Instead of increasing overall profits they want the EPS to "look" like it is increasing...until all the options are exercised.
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Rank: Advanced Member
Posts: 42
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Isn't the market tracking PE's and Dividend Yields. EPS seems to be the critical element for the market. If management can get the market to focus on EPS, then Cash Flow, Price to Book, EBITDA, Price to Sales, ROE, ROIC and other metrics can slide thru unnoticed.
Bob
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December 15, 2008
There are two things that are important in moving
the price of a stock, both up and down,'
These are growth of EPS and a change in P/E
ratio. Of two, the most important for a price rise is a P/E ratio
expansion. Try to buy at a P/E ratio close to your judgment as to a reasonable
average so it can rise to close to the average high P/E ratio. In
calculating the P/E ratio be sure to use analyst's estimate of E/S 12 months in
the future. In using Yahoo Finance as a source of estimated EPS be aware
these are estimated EPS for a fiscal year. This requires some calculation
to add together the fraction of the this year and the fraction for next
year.
Ralph
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----- Original Message -----
Fro,
2008 11:13 AM
Subject: [The Classroom]: RE: Barrons -
"Speaking of Dividends" (efb1c192-fce7-4d4b-954d-89d576c917ba)
From the The Classroom forum at StockCentral.com, Bob
Blanchette writes:
Isn't the market tracking PE's and Dividend Yields. EPS seems to be
the critical element for the market. If management can get the market to
focus on EPS, then Cash Flow, Price to Book, EBITDA, Price to Sales,
ROE, ROIC and other metrics can slide thru unnoticed.
Bob
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Posted by: Bob Blanchette
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To view the complete topic, reply, or unsubscribe to
this topic please visit: http://www.stockcentral.com/community/tabid/143/view/topic/postid/4278/ptarget/4843/language/en-US/Default.aspx
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January 17, 2008
Re REITs
Please be aware that REITs are valued on a price/funds from operations basis not a P/E basis. Funds from operations include net income plus depreciation, but not profits from sale of real estate.\
To be free from income taxes a REIT must pay out about 90% of it pre tax income in dividends. REITs which stick close to this rule are able to use the remainder of funds from operations for improvements and acquisitions. Obviously REITs which pay out only the minimum required by Federal Income Tax Law are in a position to grow organically. When searching for a REIT keep the above in mind
Ralph Seger
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Rank: Advanced Member
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S&P reports a 9.3% increase in dividends paid by the companies in the index. To read the full report...
http://biz.yahoo.com/ap/071227/s_p_500_dividends.html?.v=1
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Rank: Advanced Member
Posts: 42
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Danny,
Interesting report. What are your thoughts on how dividends effect stock price. Specifically, announced dividends; x-dividend date; and paid dividends. I would think price would increase when announced and increase to a delta equal to the dividend until x-dividend date then fall.
I think Graham wanted stocks that had at least 10 years of increasing dividends. Are there growth stocks that meet this criteria?
Bob
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Rank: Advanced Member
Posts: 262
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Bob, here is the last paragraph from the article I will look further and see if I can come up with the list.
S&P keeps a list of S&P 500 members that have increased their actual dividend payments in each of the past 25 years. For 2008, it added five companies -- Aflac Inc., Avery Dennison Corp., Exxon Mobil Corp., Integrys Energy Group Inc. and Pitney Bowes Inc. -- to the list of 58 and subtracted three: Altria Group Inc., First Horizon National Corp. and SLM Corp.
I don't know what you mean by increasing to a delta equal to the dividend.
As far as the dividend affecting the price, sometimes you see a bump in a price after a significant dividend increase announcement, but I think eventually it will come down to earnings growth. It is just my personal preference that I like to see dividend growth equal to earnings growth. Most often dividends are stable so they shouldn't affect the price significantly. I don't know of any timing strategy to get in by the ex dividend date, but I'm sure there are some who do this.
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Rank: Advanced Member
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> I would think price would increase when announced and increase to a delta equal to the dividend until x-dividend date then fall.
I think for normal dividends any such price changes would get lost in the noise of day to day fluctuation. However for unusually large dividends it might be detectable. For example, a $3/sh MSFT special dividend was announced on 20 Jul 2004 and the ex-dividend date was 15 Nov 2004 (see http://www.microsoft.com/msft/FAQ/dividend.mspx). If you look at the MSFT price history from Jul to Nov 2004 you can see evidence of price moves of about $3/sh on the announcement date (very short lived increase) and again for a few weeks leading up to the ex-dividend date.
-Jim Thomas
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Rank: Advanced Member
Posts: 262
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Here's the S&P dividend list in excel, click on the link when you get to the S&P page
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_dai/2,3,1,0,0,0,0,0,0,0,3,0,0,0,0,0.html
you can also read about the list and how it is comprised from this site
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Rank: Advanced Member
Posts: 42
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Jim,
I saw a similar thing of Microsoft's special dividend with Total Systems (TSS). I can see where MSFT's dividend of $.11 isn't significant. On the other hand, Pfizer's 5+% dividend yield seems to be supporting the stock price. Maybe the expiration of the dividend tax laws in 2010, might hurt dividend stocks.
Bob
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Rank: Advanced Member
Posts: 42
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Danny,
I would guess you could create a nice conservative portfolio from the list of 63. If bought at the right price, I could sleep very well at night owning most of them.
Bob
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Rank: Advanced Member
Posts: 262
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Mergents has a list also, you might cross reference the two lists and see who makes the cut on both sites.
http://www.dividendachievers.com/Site/others/constituents.php?id=53&preview=
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Rank: Advanced Member
Posts: 42
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Danny,
I crossed the Mergents top 50 with Aristocrats. I found 7 and I own 3 of them. I also ran take stock against Aristocrats and found 5 (different from the 7) with acceptable quality ratings.
The charts for Mergents top 50 led me to believe that they were heavy into small caps and financials. For a long term - 10 year- that strategy has done relatively well. Recently, small caps and financials have taken it on the chin.
I'm a fan of diversification but not sure the best way to diversify a stock portfolio. Do you diversify by stock size (market cap, sales)? Do you diversify by sector and if so, how many? Do you diversify by the number of stocks disregarding size and sector and if so how many stocks? I've heard 5 to 20 stocks with no stock being greater than 20% nor less than 3%.
Thoughts and opinions please.
Bob
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January, 23, 2008
Diversification is used to reduce risk. This
means diversification among industry sectors so that unexpected adverse economic
events will not blow your portfolio out of the water. Mark Robertson has
an easy to remember "rule" for diversifation. That is sweet 16 plus minus
4. A small portfolio is 12 issues, all in different economic
sectors. A very large portfolio is 20 different issues with no
concentration in any one or 2 or 3 sectors. Diversification is one of the
ways to reduce risk. Risk is measured by the prospects of losing real
value. The concept of volatility of market value to measure risk if
flawed. Risk of individual stocks can be determined in several ways.
Look at the coverage of interest to be paid from borrowing by the coverage of
interest to be paid by pretax income plus interest. Make sure accounts
payable are not growing faster that sales. There should be a comfortable
safety margin of growth of receivables compared to growth of sales.
An additional method is to carefully examine the
quality and risk of each issue. Remember that risk and potential reward
are opposite ends of a teeter totter. There is no such thing as a free
lunch. If you keep all your assets in cash the income return will be low;
probably less that inflation. If you concentrate your investments in assets
which do not grow such as bonds, preferred stocks, money market funds most
annuities and other "safe" situations inflation will eat you alive.
Currently we are in a situation where the Fed is on the horns of a
dilemma. If it reduces the discount rate to increase money in the economy
it will lead to inflation. If it tightens to avoid inflation we will have
low or no growth. In fact what we face is so called stagflation.
This is a combination of inflation and low growth as we had when Jimmy Carter
was president.
Ralph
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----- Original Message -----
Sent: Sunday, January 20, 2008 9:42
AM
Subject: [The Classroom]: RE: Barrons -
"Speaking of Dividends" (efb1c192-fce7-4d4b-954d-89d576c917ba)
From the The Classroom forum at StockCentral.com, Bob
Blanchette writes:
Danny,
I crossed the Mergents top 50 with Aristocrats. I found 7 and I own 3
of them. I also ran take stock against Aristocrats and found 5
(different from the 7) with acceptable quality ratings.
The charts for Mergents top 50 led me to believe that they were heavy into
small caps and financials. For a long term - 10 year- that strategy has
done relatively well. Recently, small caps and financials have taken it
on the chin.
I'm a fan of diversification but not sure the best way to diversify a stock
portfolio. Do you diversify by stock size (market cap, sales)? Do
you diversify by sector and if so, how many? Do you diversify by the
number of stocks disregarding size and sector and if so how many stocks?
I've heard 5 to 20 stocks with no stock being greater than 20% nor less than
3%.
Thoughts and opinions please.
Bob
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Posted by: Bob Blanchette
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To view the complete topic, reply, or unsubscribe to
this topic please visit: http://www.stockcentral.com/community/tabid/143/view/topic/postid/4278/ptarget/4879/language/en-US/Default.aspx
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Was thanked: 1 time(s) in 1 post(s)
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And then, there come times in the market where even
the most thoughtful diversification doesn't help much, like right now
;-) All my personal and club stocks have headed south, the only ones
still in the green are those I've held for a pretty long time, anything bought
in the last year or so is toast. But, revisiting the SSG's, none alarm me
as losing in fundamentals, so I'm staying put, at least until all the 12/30
quarterly reports come in for a fresh review.
Gene
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Rank: Advanced Member
Posts: 262
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I crossed the Mergents top 50 with Aristocrats. I found 7 and I own 3 of them. I also ran take stock against Aristocrats and found 5 (different from the 7) with acceptable quality ratings.
I'm a fan of diversification but not sure the best way to diversify a stock portfolio. Do you diversify by stock size (market cap, sales)? Do you diversify by sector and if so, how many? Do you diversify by the number of stocks disregarding size and sector and if so how many stocks? I've heard 5 to 20 stocks with no stock being greater than 20% nor less than 3%. Thoughts and opinions please.
Bob
What are the 12 stocks you came up with?
I do not pay attention to the 25/50/25 sales cap size we have been taught over the years. I try and look at overall best candidate. As far as sector diversification I would not overlap more than two in the same sector. Mostly because of the theory that a rising market floats all boats, and visa versa. It would have to be a slam dunk to own two in the same sector. As far as stocks to own I usually stay in the 10-12 range, sometimes I will go over the twelve but never less than ten. If I reduce a position because it grows to over 15% of the portfolio I will try to add to an existing position. I wouldn't be concerned that a stock that is less than 3% of the portfolio as I am thinking that it will either grow by appreciation or by my adding to it as time goes on. As you can tell by the title to this thread, dividends do have a considerable weight on my decisions when researching a stock.
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Rank: Advanced Member
Posts: 42
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Danny,
5 stocks meeting TS quality are APD, BDX, TGT, WAG, and WMT. The 7 with Mergents cross are BAC, BBT, CMA, EMR, FITB, PFE, and USB.
Full disclosure: I own TGT, WAG, BBT, EMR and PFE.
Bob
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Rank: Advanced Member
Posts: 42
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Gene,
I too am waiting for annual reports. Seems this week will be full of new reports 10k's.
Are you increasing cash position or bonds or both?
Bob
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Rank: Advanced Member
Posts: 62
Was thanked: 1 time(s) in 1 post(s)
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Bob, until I see the 12/30 reports, I'm not doing
anything. If I decide to sell anything then that looks like it will be a
long time recovering, I will probably reinvest in adding to other positions
whose sales are staying steady and that appear more poised for a strong
recovery. Gene
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