Ben Stein & Hi Dividend ETFs

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mbs
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Ben Stein & Hi Dividend ETFs

Post by mbs » Mon Nov 17, 2008 2:35 am

In Stein's book on fixed income investing he advocates for a portfolio that includes 20% allocated to high dividend yield or dividend growth stocks -- either individual stocks or indexes.

Six ETFs based on six different indexes offer a wide range of criteria and returns. Not all of these have history reported longer than one year. On its face the SDY ETF appears best, but I wonder if anyone has experience with any of these or insights on the strategy of dividend growth indexing vs total market indexing?

Code: Select all

SYM	Underlying Index	Expense	1 Yr Ret	Dist Rate
PFM	Dividend Achievers  	0.67%	-28.86%	3.29%
PHJ	Hi Gr Div Achievers 	0.66%	-34.34%	3.11%
PEY	Hi Yld Div Achievers	0.61%	-32.18%	6.67%
VIG	Div Achievers Select	0.28%	-27.51%	2.78%
DVY	DJ Select Div Index 	0.40%	-28.93%	5.25%
SDY	SP HiYld Aristocrats	0.35%	-21.37%	5.21%
	
Thanks

/mbs

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Post by msi » Mon Nov 17, 2008 3:52 am

Lot of exposure to financials in some of those...SDY is over 38% according to Yahoo.

The highest-yielding, PEY, is over 76% financials.

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Post by DaveTH » Mon Nov 17, 2008 6:55 am

Personally, I like XLP (Consumer Staples Sector SPDR) for a little extra dividend yield:

Distribution rate: 3.12%
1YR return: -13.24
Expense: .24%

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Post by ken250 » Mon Nov 17, 2008 10:23 am

mbs,

I don't use ETFs but I do have a stock allocation that's heavily tilted toward large value and dividend payers. I based my portfolio on Stein & DeMuth's Conservative Income Portfolio, although I'm much more weighted toward stocks. I use VGs Equity Income, Wellington, Wellesley Income, International Value, and the REIT Index fund. I also have VG's Treasury Inflation-Protected Securities fund, and a global allocation fund from BlackRock. This gives me pretty good exposure to the four building blocks recommended by S & D in their books on retirement investing:

1) Bonds
2) TIPS
3) REITs
4) Dividend stocks.

Although the recent decline in prices/NAVs has increased yields I think the market still comes up short when it comes to dividends. Equity Income has long had a higher allocation to Financials than the overall market and it seems to be doing relatively well, EI is only down 33% YTD whereas the Total Stock Market Index fund is down 40% YTD. I did anticipate this though, given the difference in dividends/yield.

As far as dividend growth goes, it's a real good thing to have because it comes directly out of earnings growth. So if you invest in a fund which targets dividend growth, indexed or actively managed, you should be getting exposure to some good companies. VG's Dividend Appreciation Index fund is based on one of Dividend Achievers indexes which requires the constituent companies to have increased their dividend for 10 years in a row, if I recall correctly. Not too shabby. I used to own the Div App Idx fund when it first came out but was turned off by the expense ratio and I looked at Equity Income closely and found the overlap between Equity Income and the Div App Idex was pretty high, meaning EI already had div growth exposure. I'm sure Wellington and Wellesley have good exposure too.

A few more things about div growth:

1) Generally viewed as an indicator of good cash management
2) Div growth is generally higher than inflation

An ETF you might wish to look at is MGV from VG. While I don't own it now maybe in the future I'll get into it. It contains about 150 megacap value stocks, many of which pay high dividends and grow them. While MGV's portfolio is a bit broader than O'Shaughnessey's test portfolio of 50 megacap dividend payers you still may be able to benefit from the high risk-adjusted returns these megacap div payers demonstrated over the last 60 years...as shown by O'Shaughnessey.

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Post by williamg » Mon Nov 17, 2008 10:55 am

Hi Ken -
Isn't the management of Equity Income pretty much the same as Wellington and Wellesley, especially Wellesley; i.e., was wondering why you hold EI separately? Also, do you hold any other bonds besides TIPS and bond portion of W and W?

thanks! bill

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Post by ken250 » Mon Nov 17, 2008 11:12 am

bill,

I'm aware that EI, W, and WI are all run by the same manager, Wellington Asset Management.

I'm also aware of the overlap amongst these funds. I originally had only W and WI but when I added TIPS to my portfolio I needed a way to offset the bonds so I added EI.

As far as owning W and WI, it does seem redundant but I suspect when I get really old I'll only want to worry about one fund. That would be WI because of the income level. I also wanted to get some years under my belt so I could qualify for Admiral shares sooner.

Besides the bonds in W and WI and the TIPS I have additional bonds in my BlackRock global fund, that fund invests in domestic and Int'l bonds.

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Post by williamg » Mon Nov 17, 2008 11:54 am

Ken,
thanks for the response. we recently got back into Wellington after being talked out of it a couple of years ago during a review with Vanguard planning. I think these funds may be similar but not exactly redundant. our current AA calls for 15% in Wellington and 30% in Wellesley. This is roughly 10% stock from each fund and a total of 25% bonds which is half of our 50/50 allocation. All in all we like the balance.
bill

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Post by btenny » Mon Nov 17, 2008 12:36 pm

What about utilities and utility ETFs??

Bill

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Post by ken250 » Mon Nov 17, 2008 12:50 pm

bill,

I noticed the Dividend Appreciation Index fund from VG has 1.80% currently allocated to utilities, while the High Dividend Yield Index fund has 9.20% allocated to them. Looks like dividend growth isn't a strong point for utilities.

Having both of these funds wouldn't be a bad idea, you could adjust the allocation to each over time to favor dividend growth or high yield.

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Post by Erwin » Mon Nov 17, 2008 12:55 pm

How come I do not see any one commenting on WisdomTree ETFs. Those folks are in the dividend business. I converted most of my equity ETFs to the equivalent WisdomTree ETFs. This way I harvested some tax credits and switched my equity portfolio to ETFs yielding 4%+ Erwin

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Post by ken250 » Mon Nov 17, 2008 1:00 pm

mpt,

I like the WT etfs, unfortunately I can't make etfs cost effective yet :cry:

I really like the fundamental approach, vs cap-weighting. And it seems WT has every angle covered...when it comes to dividends and value.

BTW, with the funds I mentioned earlier my yield is at 4.6% and that's with a ~75/25 portfolio!!! If my yield goes much higher I'm going to have get some pure growth exposure :lol: :lol: :lol:

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Post by mbs » Mon Nov 17, 2008 3:02 pm

Lot of exposure to financials in some of those...SDY is over 38% according to Yahoo.

The highest-yielding, PEY, is over 76% financials.
Good point MSI. Of these six, only VIG and PFM appear to be at all distributed.
An ETF you might wish to look at is MGV from VG.
Low expense ratio, Ken, but less than a year's worth of history. Worth watching.
How come I do not see any one commenting on WisdomTree ETFs. Those folks are in the dividend business.
Wasn't aware of Wisdom Tree, Erwin. Thanks for the heads up. I'll add them to the analysis.


It is interesting that so many funds find different ways to approach hi dividend yields and/or growth. Too many rules on an index, though, and pretty soon it's just another actively managed fund.

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Re: Ben Stein & Hi Dividend ETFs

Post by Kenster1 » Mon Nov 17, 2008 3:38 pm

mbs wrote:Six ETFs based on six different indexes offer a wide range of criteria and returns. Not all of these have history reported longer than one year. On its face the SDY ETF appears best, but I wonder if anyone has experience with any of these or insights on the strategy of dividend growth indexing vs total market indexing?

Code: Select all

SYM	Underlying Index	Expense	1 Yr Ret	Dist Rate
PFM	Dividend Achievers  	0.67%	-28.86%	3.29%
PHJ	Hi Gr Div Achievers 	0.66%	-34.34%	3.11%
PEY	Hi Yld Div Achievers	0.61%	-32.18%	6.67%
VIG	Div Achievers Select	0.28%	-27.51%	2.78%
DVY	DJ Select Div Index 	0.40%	-28.93%	5.25%
SDY	SP HiYld Aristocrats	0.35%	-21.37%	5.21%
	
Thanks

/mbs
I suspect SDY is the best performer thus far this year because it contains a concentrated collection of pretty strong companies (50) with a long history of increasing dividends every year for the past 25 years. The long-term 25 year requirement is what is differentiating this index from the others.
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Post by lazyday » Mon Nov 17, 2008 8:04 pm

Most of those ETFs have ERs too high for me.

I like the idea of what WisdomTree is doing, except that the extra trading might cost too much in hidden costs, especially in some markets, like small cap foreign or small EM. And again, their ER is too high for me.

There's three funds with great yield that I like a lot now though, and their ER is also low:

VGK - Europe Index, 6.28% according to google
VNQ - REIT Index, 10.07% according to google, though a bit of that is return of capital
VEU - Ex-US, less than one year old, over 5%? you can estimate by looking at other funds

ER is .12, .1, .25. My hope is that ER will drop soon for VEU.

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Post by ken250 » Mon Nov 17, 2008 8:08 pm

I don't know about etfs but with funds the er comes right out of the div :annoyed

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Post by msi » Mon Nov 17, 2008 8:24 pm

lazyday wrote:Most of those ETFs have ERs too high for me.

I like the idea of what WisdomTree is doing, except that the extra trading might cost too much in hidden costs, especially in some markets, like small cap foreign or small EM. And again, their ER is too high for me.

There's three funds with great yield that I like a lot now though, and their ER is also low:

VGK - Europe Index, 6.28% according to google
VNQ - REIT Index, 10.07% according to google, though a bit of that is return of capital
VEU - Ex-US, less than one year old, over 5%? you can estimate by looking at other funds

ER is .12, .1, .25. My hope is that ER will drop soon for VEU.
Bold move buying a REIT index in times like these, isn't it? I have my real estate exposure in tax-exempt...torn between staying the course and thinking I'm pissing away money.

Seems to me like recovery for real estate is a long ways out.

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Post by lazyday » Mon Nov 17, 2008 9:59 pm

msi wrote:Seems to me like recovery for real estate is a long ways out.
I remember buying small value as it did poorly, then kept falling and falling (others were buying dotcoms, I also bought more after the crash) and it felt like throwing money down the drain. For years. But finally, it turned out to have been bought cheap, just like P/B and P/E seemed to indicate, and prices rose tremendously. And it didn't even take that many years.

For REITS, from today, it might take a very long time. But with a yield this high, even if dividends get cut somewhat, I think REITS are a great long term investment. It wouldn't surprise me if NAV keeps dropping for a couple years, after the bubble and credit crisis. But by 7 to 15 years from now, the total return should be really good, I'll bet.

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Post by ken250 » Mon Nov 17, 2008 10:11 pm

You guys are hitting on why it's counterintuitive to rebalance or buy at the "bottom". It's contrary to our ideas about common sense. If it helps, hold your nose.

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Post by msi » Mon Nov 17, 2008 10:33 pm

lazyday wrote:
msi wrote:Seems to me like recovery for real estate is a long ways out.
I remember buying small value as it did poorly, then kept falling and falling (others were buying dotcoms, I also bought more after the crash) and it felt like throwing money down the drain. For years. But finally, it turned out to have been bought cheap, just like P/B and P/E seemed to indicate, and prices rose tremendously. And it didn't even take that many years.

For REITS, from today, it might take a very long time. But with a yield this high, even if dividends get cut somewhat, I think REITS are a great long term investment. It wouldn't surprise me if NAV keeps dropping for a couple years, after the bubble and credit crisis. But by 7 to 15 years from now, the total return should be really good, I'll bet.
My concern is that the advice regarding REIT allocation was based on a long-term bubble and that returns from this point forward can't be predicted based on the past. It will not be as easy to get a mortgage when we get out of this, and I'm not sure how great of a return there can be on REIT's without easy credit.

I still have the exposure, just...I wonder how prudent that is. This must concern you, as it does me?

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Post by ken250 » Mon Nov 17, 2008 10:48 pm

REITs have a nice yield now and as part of a portfolio which targets retirement income they still serve their purpose.

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Post by stratton » Mon Nov 17, 2008 10:55 pm

REITs are commercial propety and have no relation to free standing detached homes used in the Case-Shiller index. Residential REITs are apartments and again have no relation to the Case-Shiller index.

Paul

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Post by msi » Mon Nov 17, 2008 11:33 pm

stratton wrote:REITs are commercial propety and have no relation to free standing detached homes used in the Case-Shiller index. Residential REITs are apartments and again have no relation to the Case-Shiller index.

Paul
My bad, here is the MSCI US REIT index which is what the Vanguard fund tracks http://snipurl.com/5qk6h

Doesn't look so hot, either.

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Post by bobsh » Tue Nov 18, 2008 1:44 am

I think the point of allocating some portion of portfolio to REITs was to access growth in real property values as well as to receive high dividend yields. If values fall, you still have the dividends. They also had a lower correlation with the S&P 500 than other stocks.

I have/had 5% in VGSIX, hoping the diversification would offset the risk. Of course my portfolio seems to be highly correlated rather than highly diversified these days.

Regards,
Bob

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Post by lazyday » Tue Nov 18, 2008 1:53 am

stratton wrote:REITs are commercial propety
Yes, not just apartments, but commercial/retail and industrial space, hotels, nursing homes, personal storage rental, etc.

Even though I expect tough times, the price is so low now, and the yield so high, I'm buying anyway. I hope that even after dividend cuts, the yield will still be pretty good, partly because I think many REITs have long term leases locked in. Though lessees could go bankrupt. Even if dividends get cut in half, it would still yield more than the U.S. market, TIPS, or a CD. (Though a CD wouldn't lose NAV of course.)

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Post by bobsh » Tue Nov 18, 2008 2:00 am

Ken,
I have seen you use the phrase "with a Value tilt" before - I've used it myself. Is there some way of measuring how tilted a portfolio is with respect to Value and/or size? Do you use any special benchmarks to measure results?

Thanks in advance for any info.

Regards,
Bob

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Post by PiperWarrior » Tue Nov 18, 2008 8:08 am

bobsh wrote:I have seen you use the phrase "with a Value tilt" before - I've used it myself. Is there some way of measuring how tilted a portfolio is with respect to Value and/or size? Do you use any special benchmarks to measure results?
Would a factor loading do the job for you? You might be interested in reading Rolling Your Own: Three-Factor Analysis as well as several articles and papers mentioned in Fama and French Three-Factor Model.

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Post by Valuethinker » Tue Nov 18, 2008 8:33 am

msi wrote:
stratton wrote:REITs are commercial propety and have no relation to free standing detached homes used in the Case-Shiller index. Residential REITs are apartments and again have no relation to the Case-Shiller index.

Paul
My bad, here is the MSCI US REIT index which is what the Vanguard fund tracks http://snipurl.com/5qk6h

Doesn't look so hot, either.
What is striking about that graph is that REITs are not yet, quite back to their 2002 levels.

16 months into the worst financial crisis of the postwar years, arguably, REITs haven't yet retested their lows. OK dividends are higher, but how much of that increase in commercial rents is sustainable? As an example, commercial office rentals in London are still below their 1989 peaks (adjusted for inflation).

I would be interested in a graph of REIT dividend yield going back-- not sure how to generate one.

Best forecast of current yield is probably last 4 dividends divided by share price (you'd need to X-out capital distributions for a true adjustment-- there won't be many of those in the next 2-3 years).

In what is likely to be a brutal recession in Commercial RE, you probably want something like an 8-9% yield to compensate you for the likely years of negligible capital growth.

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Post by ken250 » Tue Nov 18, 2008 9:51 am

bob,

If you can live with their definition, Morningstar supplies a free tool called the X-Ray which allows you to enter a portfolio and get a detailed breakdown by capitalization and style. It supplies sector and regional breakdowns as well.

Go to the Morningstar homepage and look across the tabs near the top of the page and off to the right you'll see the tools tab. Click on it and the next page will have the link to the X-Ray.

A caution: M* takes in and processes a lot of data every day so you may see some unexpected things from day to day.

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Post by ken250 » Tue Nov 18, 2008 9:53 am

bob,

I invest in REITs for the same reasons as you, income and diversification. I'm still 20 years away from retirement, God willing, but my portfolio is based on generating a high but safe yield.

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Post by ziggy29 » Tue Nov 18, 2008 9:58 am

If someone likes the high-dividend index but is wary of the financials -- all they need to do is go long the dividend index and "short" the exposure to the financials out of it.

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Post by ken250 » Tue Nov 18, 2008 10:02 am

ziggy,

Such optimism :lol:

Even a diversified ain't cutting it heh?

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Post by Phil DeMuth » Tue Nov 18, 2008 11:24 am

Just a thought:

If you are going to put this much work into selecting a high-dividend ETF, you might as well go the extra mile and select individual high-dividend stocks. This is not anti-Bogle heresy, as you are not trying to "beat the market" on a total returns basis-- you are simply trying to get more yield than the market. As Stein/DeMuth write in Yes, You Can Supercharge Your Portfolio:

"A number of high-dividend exchange-traded funds have launched recently (DVY, PEY, SDY etc.), making things easy for the dividend-hungry investor. Maybe a little too easy. All of these funds have a common issue. In the name of including every possible dividend stock, they achieve a market-like level of diversification that masks a sub-optimal yield.

The performance of many high-dividend stocks is highly correlated with each other, so simply mixing in more and more of them becomes fairly meaningless after a point, in terms of the total diversification benefits it affords. Since there is a finite pool of really high dividend stocks to begin with, the more we add (...fifty stocks...one hundred stocks...), the more diluted our dividend yield becomes – the yield that was the only reason we wanted to buy them in the first place. This leaves us with two bad outcomes: a lower-than-desired yield that we don’t want, which is purchased at the expense of obtaining a low standard deviation, which we don’t need.

Why don’t we need the low standard deviation? Because we can always use bonds to lower the standard deviation of the portfolio...." (pp.121-122)

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Post by ddb » Tue Nov 18, 2008 11:28 am

ken250 wrote:You guys are hitting on why it's counterintuitive to rebalance or buy at the "bottom". It's contrary to our ideas about common sense. If it helps, hold your nose.
Buying after a big fall is emotionally counterintuitive, but logically intuitive. If you bought the S&P 500 at 1300, how can you not want to buy it at 850?

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Post by ken250 » Tue Nov 18, 2008 12:26 pm

ddb,

That's the way I'm looking at things.

Stay-the-course is good advice but we're being given a possible once in a lifetime chance to buy at a big discount, so not buying doesn't make much sense...assuming one has some cash available.

I've been lowering my avg cost while increasing the rate at which I accumulate dividend-producing shares, talking about having one's cake and eating it too.

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Post by ken250 » Tue Nov 18, 2008 12:47 pm

Hi Phil.

Always good to have you drop in...

re: The performance of many high-dividend stocks is highly correlated with each other,...

What do you mean by that?

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Post by lazyday » Tue Nov 18, 2008 12:52 pm

Valuethinker wrote:What is striking about that graph is that REITs are not yet, quite back to their 2002 levels.

16 months into the worst financial crisis of the postwar years, arguably, REITs haven't yet retested their lows.
I have worried about this, before plowing a huge chunk of my portfolio into VNQ, which was at 0%.

My rationale is that

(1) Perhaps REITS were unappreciated and undervalued for years, like TIPS when first issued.
(2) Yield. That peak yield is so high, that when it gets back to peak again, I should do quite well.

I could easily be wrong, or just very early.
Valuethinker wrote:I would be interested in a graph of REIT dividend yield going back-- not sure how to generate one.
If you succeed, please post. Here's a couple things I have:
Hate to use Yahoo as a data source, but it does offer dividend data back to '96, not very long term.
http://finance.yahoo.com/q/hp?s=VGSIX&a ... f=2008&g=v

Here's an indication that recent high yields may have been in the early 90's, at 7%: http://www.nareit.com/portfoliomag/06mayjun/feat3.shtml
In the early 1990s, the average REIT yield was around 7 percent.
Valuethinker wrote:In what is likely to be a brutal recession in Commercial RE, you probably want something like an 8-9% yield to compensate you for the likely years of negligible capital growth.
It's above that now, for sure. You can calculate it easily from the Vanguard website, distributions tab.

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Post by btenny » Tue Nov 18, 2008 2:29 pm

Regarding selecting individual reit stocks for yield. I have been doing this for a while. The following is my experience with one reit. Now I know how fast high yields can go away.

I sold out of all of my reit allocation except for one stock back in 2006 because I felt the whole world wide real estate market was way over priced and going crazy. Housing prices were crazy but so were apartment houses and shopping centers and office buildings and timber. But I was stupid and held one stock that had lots of good characteristics, good management, good cash flow, not too much debt, etc.. The company is called First Industrial, or FR, they own industrial real estate. Maybe you have heard of it, Warren Buffett offered this as a stock tip during a charity thing. I bought it around 2002 not knowing about the Buffett recommend based on my own research.

Well it has been a great stock until this year. They paid about 8-10% dividends all the time and are partnered with CALPERs for joint ventures, etc.. I bought at $27ish and it had run up to $44ish by last August. Starting early this year FR got attacked by the shorting people. The stock was shorted over 40% of available shares at one time. Well they drove the stock to the around $23 at the low by the end of the summer. Many thought this was a great bargain at this price. Other reits were much higher in price and P/E ratios, etc..

Well everyone was totally wrong. The credit squeeze hit all reits almost as hard as the banks including FR starting in October. FR fired their CEO and changed operating procedures to conserve cash. They reduced their dividend to $1 minimum from $2.80. They layed off 25% of their staff. The $1 dividend is low risk and FR will likely pay this plus $1 additional distributions during the 2009. But these changes drove the stock to $6 or so. I doubled down the number of shares I hold at $6. So my net cost is now around $15. Today I am still down 50% net. The company balance sheet is still sound and and has no need for loans revisions or other cash before 2010. Plus the Chairman of the Board is on board at this stock price having bought 1M additional shares at $10.

Another reit in this sector (Prologis) was the growth darling for the last 5 years or so. They are likely to go bankrupt by early next year unless they can renew big revolving short term loans at reasonable rates. Their stock is down from over $70 to $4 at the present time. Their CEO just quit and they are reducing their divi by over 50%, etc..

Other reits in other sectors are in just as much trouble. Just because these companies have long term leases does not mean they cannot be over leveraged or have funny loan terms and so forth.

So beware of high dividend stocks or funds at this time. Many of these big dividends are going to be cut in half or more before all this mess is stabalized.

Bill

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Post by AnotherCFP » Tue Nov 18, 2008 2:42 pm

btenny wrote:Regarding selecting individual reit stocks for yield. I have been doing this for a while. The following is my experience with one reit. Now I know how fast high yields can go away.

I sold out of all of my reit allocation except for one stock back in 2006 because I felt the whole world wide real estate market was way over priced and going crazy. Housing prices were crazy but so were apartment houses and shopping centers and office buildings and timber. But I was stupid and held one stock that had lots of good characteristics, good management, good cash flow, not too much debt, etc.. The company is called First Industrial, or FR, they own industrial real estate. Maybe you have heard of it, Warren Buffett offered this as a stock tip during a charity thing. I bought it around 2002 not knowing about the Buffett recommend based on my own research.

Well it has been a great stock until this year. They paid about 8-10% dividends all the time and are partnered with CALPERs for joint ventures, etc.. I bought at $27ish and it had run up to $44ish by last August. Starting early this year FR got attacked by the shorting people. The stock was shorted over 40% of available shares at one time. Well they drove the stock to the around $23 at the low by the end of the summer. Many thought this was a great bargain at this price. Other reits were much higher in price and P/E ratios, etc..

Well everyone was totally wrong. The credit squeeze hit all reits almost as hard as the banks including FR starting in October. FR fired their CEO and changed operating procedures to conserve cash. They reduced their dividend to $1 minimum from $2.80. They layed off 25% of their staff. The $1 dividend is low risk and FR will likely pay this plus $1 additional distributions during the 2009. But these changes drove the stock to $6 or so. I doubled down the number of shares I hold at $6. So my net cost is now around $15. Today I am still down 50% net. The company balance sheet is still sound and and has no need for loans revisions or other cash before 2010. Plus the Chairman of the Board is on board at this stock price having bought 1M additional shares at $10.

Another reit in this sector (Prologis) was the growth darling for the last 5 years or so. They are likely to go bankrupt by early next year unless they can renew big revolving short term loans at reasonable rates. Their stock is down from over $70 to $4 at the present time. Their CEO just quit and they are reducing their divi by over 50%, etc..

Other reits in other sectors are in just as much trouble. Just because these companies have long term leases does not mean they cannot be over leveraged or have funny loan terms and so forth.

So beware of high dividend stocks or funds at this time. Many of these big dividends are going to be cut in half or more before all this mess is stabalized.

Bill
Could agree more. There will be dividend cuts and I'd be supprised if the financials weren't going to lead the pack down. They will start feeling the pressure to as the gov't gives them more money.

Therefore I would implore you to consider looking for Preffered Stock in some of the same companies. They can't stop paying on those without setting of a panic. One in which I believe the fed would step in and prop them up to avoid. I have recently allocated about 2.5% percent of my portfolio. I'm 29 I have 40 year plus time horizon and I have no fixed-income investments at this time.

The ETF is bought into was PFF. This is a bit risky. About 88% Financials last I looked. But you will also notice almost all the banks in the fund are "too big to fail" types with the Fed as their partner. Its not without risk but I like the idea owning companies that the fed will step in to save.
Its paying nearly 10% yield last time I looked. To me thats a nice alternative if you want something with a high-yield and you can afford to take some risk and handle the volitility.

I'd be interested to hear anyone elses take on this.

Sorry to jack the thread.
"Only when the tide goes out do you discover who’s been swimming naked." | W.B.

Phil DeMuth
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Post by Phil DeMuth » Tue Nov 18, 2008 7:38 pm

re: The performance of many high-dividend stocks is highly correlated with each other,...

If you look at the returns of dividend stocks generally, you will find that stock A's performance covaries with stock B's performance and stock C's performance. All of them as a group are sensitive to interest rate risk: when interest rates rise, their share prices will fall. Additionally, they tend to cluster in certain sectors that can rise and fall as groups: financials being the conspicuous example this year.

Happy hunting!

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ken250
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Post by ken250 » Tue Nov 18, 2008 7:50 pm

Phil, after posting my question I realized sectors would be the culprit. Good Luck.

lazyday
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Post by lazyday » Tue Nov 18, 2008 9:41 pm

ken250 wrote:I don't know about etfs but with funds the er comes right out of the div :annoyed
Same with ETFs too. (Remembered I forgot to answer this earlier.)

lazyday
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Post by lazyday » Thu Nov 20, 2008 7:58 pm

Valuethinker, here's a REIT dividend yield chart back to '90, but it's annual, monthly or quarterly would probably be much better. Not sure how one comes up with annual, might be misleading if it depends on what the December price happens to be.

http://www.nareit.com/portfoliomag/05mayjun/feat1.shtml

Today's yield was last seen in 1990, according to the chart.

Monthly (I think) yield is mentioned, and highest in last 10 years til the article (1995-2005):
The highest REIT dividend yield, 9.28 percent, in the past 10 years was recorded in November 1999.

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