Is the sky really falling?

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Topic Author
EDM
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Is the sky really falling?

Post by EDM »

Premise: The Dow below 8,000 is cheap; I was asleep at the switch when it ran down to the mid-6000s. Taking the long view, however, and based on my life experience, a price/earnings composite of 10:1 imputes a conservative risk level. Here's why:

I am a retired CPA/attorney/farmer looking out my window at Illinois farmland on the IL/WI state line. The springs are running, but it's 30 degrees and the ground is still plastic frozen. The bean stubble shows the injection rows where my tenant applied $220 per acre of N, P, and K last November for this year's corn, as against $150 per acre cash rent paid. Within a month the corn will be planted and the beans next. Farmers need fuel and bug spray and herbicides produced by American industry in the short run, and new machinery in the long run. American agriculture, be it suppliers or producers, will meet the need without regard to the ups and downs of the stock markets.

Likewise shoppers will keep buying groceries and clothing and, on the pecking order of importance, will surely have their conversion boxes hooked up to the few TV's that aren't already on cable or dish. And they will drive to work and WalMart and essentially maintain their lifestyle, notwithstanding the selective negativity of the mass-hysteric media. Life will go on...and is going on.

America will need the products of AA, ADM, BA, CAT, DD, DE, GE, INTC, IP, KO, MSFT, T, and even CROX. I have positions in these shares, bought at a composite 8,244 Dow and a 4.75% yield. The market can go up or down on a daily basis, but has always trended upward in the long run. It seems to me that the Bogglehead mentality is to invest--go long-- for the long haul, diversifying to some market index while keeping costs down. Whether today's Dow in the 7,900s is a bottom is problematical, but most will agree that looking to the future, a Dow at 8,000 is not a ceiling or market top.

By the way, the daily fluctuations of the Dow do not affect my buy-in yield of 4.75%, which, all things considered since my buy points (10/24-11/12-12/19-08; 1/23 & 2/12-09) has risen to 4.83%. This is called value investing, which I learned in the mid-1980s when farmland had the pox upon it, just as the stock market does today.

Back in the late-1970s the farmland market had gone hog-wild with prices going way beyond current rents on the theory that "they aren't making any more of it." Well, as it turned out in 1980-83, the realization sunk in that: (1) There was plenty of farmland, and (2) There were no more "greater fools" willing to buy in at 2% returns (or a 50:1 P/E ratio). The bubble burst, farmland tanked, and the farms I didn't buy in 1980 for $3,000 to $4,000 per acre could be bought in the mid-1980s from lenders or on the steps of the courthouse for $440 to $755 per acre with farmers willing to rent for $60 to $70 per acre. Boggleheads are some pretty smart people: Compute the P/E and Yield of $60 cash-on-the-barrel-head on a $440 capital investment.

As I was taking down productive, rentable farmland by a nod of the head at auctions in 1986-87-88, the good old boys were looking at their cowboy boots and kept their hands in their pockets for fear that a twitch might be mistaken for a bid. Farmland historically has sold at a 4% or 5% or 6% rent return/yield on price, or P/Es in the range of 18 to 24 to one. Today farms in my neck of the woods will yield less than 4% on price, having P/E's above 25:1 and are over-priced at historic norms. Sort of like when the Dow went on up to 14,280...and here's my point:

The stock market has taken a tumble, but the sky is not falling. Conventional wisdom of "Buy low, sell high..." may make the market on a daily basis, but in the long run, buying into the productive capabilities of American corporations that supply what we need and want while providing a good yield plus growth possibilities to hedge for inflation is a valid investment template. Take ATT (T) for example:

I bought T on 11/12/08 for $26.65 (down from $40.00+ in May 08) at a 1.60 dividend and 6.1% yield. T has been as low as $22.00 since, notwithstanding that it is making profits and raised the dividend to $1.64; now my yield is 6.2%. I bought more at 23.78 (6.9% yield) on 2-12-09 for a composite yield of 6.55% and a price last Friday of 26.83. Yet all I seem to read on this website is doom and gloom and speculation on whether the market has bottomed or will ever go up again. Well let me say this: Nothing is a sure thing, but there are educated guesses, and those who sit on the sidelines while American industry and commerce, that the Dow once priced at 14,280 and now goes begging at 8,000 with a 4.83 yield, can be bought with money yielding .5% to 3% in MoneyMarkets...well, the federal government bumped my Social Security this year 5.8% for the CPI, the government is printing money to beat the band, and Chicken Little and his followers are in a dither about whether 8,000 Dow is a real bottom. I see greater risks elsewhere.

The stock market is a bet on the future. I'm betting that my shares at a 4.83% yield will hold their value in the long run while beating interest rates in the short run. Daily price fluxuations are of little interest to me. That's what index and value investing are all about. One thing for sure, current interest rates are way below historic norms and short-term money will move to stocks not bonds when cooler heads prevail; bonds at such low yields are a time bomb with great market risk IMHO.

I have placed my bets. Unfortunately I was in my RoadTrek RV in a remote state park in Louisiana when the Dow went to 6,500. I had no cell phone coverage and the WiFi was knocked out by a storm. Woulda-coulda-shoulda double downed. Alas! Hope it happens again, and soon. Guess what? The severe dip didn't affect the 4.83 yield on my 13 stock portfolio. Value investors buy when things are cheap.

I recall talking to a Bogglehead friend about 20 months ago. He touted index funds and disputed my theory that an informed investor could buy his own little mutual-fund-like group of stocks that excluded the losers and do as well. Thus I acquired my 13 stocks...but not then.

We also talked about investing in general, buying on a regular schedule without regard to market levels, etc. The Dow was then about 14,000 and I thought it was over bought so I sat on the sidelines, while he kept buying in. I commented that his Index Funds were averaging about a 2% yield, and asked: If you got a million bucks invested and are getting $20,000 income (about McDonalds entry-level wages), are you really a millionaire? He yes-butted me about capital gains and said he could sell shares, etc.... Well, he's in no position to sell shares now, his Index Fund being about 50% of October 2007 value. But check the current yields! Somebody who sat on the sidelines with cash in 1980 when farmland was high and bought in at 1986-87 prices did alright. Methinks that somebody with cash today, who reflects back on how informed investors bought in at the 14,000 Dow in 2007, could buy in today and be a quasi-millionaire at today's yields. Or maybe not. But it's worth a chance. EDM
statsguy
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Post by statsguy »

I agree... If it is just a recession and we can count on things to return to the mean and talk about these low low prices and dream of being millionaires... but also wonder...

If mabye this is the great depression again (it is different this time)... for example, would a recession throw so many companies off balance? Why does the government feel obligated to bailout so many industries... if this is a recession? It makes one think that things are worse than ever before and that prices at DJIA 8000 or DJIA 6000 are still overpriced.

I will close by saying I agree than prices are low now and we are considering putting our small amount of cash (we raised about 5% cash late last year with tax loss harvesting)... back in the market. We too missed the lows of a month ago but are willing to wait until summer to spend our cash. It is a calculated risk; I realize we may pay higher prices but think the odds are good we will see prices a bit lower between now and summer.

Sorry I think I was rambling.. but there was a point somewhere in there
Stats
tutaloo
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Post by tutaloo »

xx
Last edited by tutaloo on Tue Jan 18, 2011 4:44 am, edited 1 time in total.
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3CT_Paddler
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Post by 3CT_Paddler »

statsguy wrote:I agree... If it is just a recession and we can count on things to return to the mean and talk about these low low prices and dream of being millionaires... but also wonder...

If mabye this is the great depression again (it is different this time)... for example, would a recession throw so many companies off balance? Why does the government feel obligated to bailout so many industries... if this is a recession? It makes one think that things are worse than ever before and that prices at DJIA 8000 or DJIA 6000 are still overpriced.

I will close by saying I agree than prices are low now and we are considering putting our small amount of cash (we raised about 5% cash late last year with tax loss harvesting)... back in the market. We too missed the lows of a month ago but are willing to wait until summer to spend our cash. It is a calculated risk; I realize we may pay higher prices but think the odds are good we will see prices a bit lower between now and summer.

Sorry I think I was rambling.. but there was a point somewhere in there
Stats
I must say that I kind of agree with EDM, but at the same time we may be in a rough patch for longer than anticipated. Here is an article from WSJ about the similarities between the Great Depression and our current climate... http://online.wsj.com/article/SB123897612802791281.html. The authors make the case that it is the fall in real estate not the stock market that did banks in and precipitated a recession into a depression.
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Ted Valentine
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Post by Ted Valentine »

Interesting
Although our intellect always longs for clarity and certainty, our nature often finds uncertainty fascinating.
saurabhec
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Re: Is the sky really falling?

Post by saurabhec »

EDM wrote: America will need the products of AA, ADM, BA, CAT, DD, DE, GE, INTC, IP, KO, MSFT, T, and even CROX. I have positions in these shares, bought at a composite 8,244 Dow and a 4.75% yield. The market can go up or down on a daily basis, but has always trended upward in the long run. It seems to me that the Bogglehead mentality is to invest--go long-- for the long haul, diversifying to some market index while keeping costs down. Whether today's Dow in the 7,900s is a bottom is problematical, but most will agree that looking to the future, a Dow at 8,000 is not a ceiling or market top.
How safe are those dividends? GE dividend was cut, and I would say that DD, CAT and even NTC dividends could be cut if the economy takes another leg down.

I understand your need for income to fund living expenses in retirement, but I would say that stock funds that lean towards higher dividend paying companies would still be preferrable.

For example, Vanguard High Dividend Yield Index (VHDYX) has a 4.25% yield and is an index fund with a clearly defined methodology that minimizes turnover (and should hence reduce capital gains distributions)and does not have sector concentration either.

If I were in your shoes, I would compare your custom equity portfolio's characteristics to VHDYX before you decide that self-managed stock portfolios are the way to go for you to get income from stocks. Using VHDYX would also free up more time for you to enjoy your retirement on other pursuits than monitoring your stock investments.
tim1999
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Post by tim1999 »

OP: I just wanted to say, before all the hardcore Bogleheads start bashing your individual-stock strategies, that I share your views. Sure, the dividends can be cut, but they'll eventually go back up. Beaten down "blue chips" look to be a great deal now compared to some of the alternatives. Especially now vs. DOW 14,000. Someone will probably say "well what about GM, that was a blue chip, look what happened there..." I'm no professional, but it's been obvious for years that GM has been on a death sprial. 3M, DE, MSFT, CL, JNJ aren't going anywhere. Neither is GE despite their recent troubles. GE Capital is a huge, failing chunk of their company, yet they are pulling through fine due to their other strong businesses.

I own both individual dividend stocks and dividend stock funds (including Vanguard's). In the "crash" of the past year my individual dividend stocks were down 20%. I'm heavily weighted in consumer staples and telecom. The funds were down 35-40%. Those funds likely own all the toxic financial stocks as part of their holdings.
tutaloo
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Post by tutaloo »

xx
Last edited by tutaloo on Tue Jan 18, 2011 4:45 am, edited 1 time in total.
Avo
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Post by Avo »

What is the Boglehead view on tilting towards dividend yield? Is it known that this doesn't work over time (eg, is not a relevant "factor" in the Fama-French sense)?
saurabhec
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Re: Is the sky really falling?

Post by saurabhec »

tutaloo wrote:
Without too much thinking on part, I also thought in this direction, at some point in the past 4 months. This is why I decided it was not the way to go for me - 3 of it's top 10 holdings represent dividends from past performance, and by it's very diversification, may not be representative of future performance (as in the next 10 years) at all.

GE - cut it's dividend, we all know half of GE is GE Capital who has who knows what - issues.
JP Morgan - cut it's dividend to a nickel
Wells Fargo - I'm not sure whether it has or has not cut its dividend yet, but it is on the government dole, so ...

That makes 30% of the top 10.
Those 3 companies account for slightly less than 10% of the funds holdings. I am curious to see what your own dividend portfolio holdings are and in what weights? I suspect there are other risks you are taking on. Just like we could not expect some of these stalwarts to cut dividends, I suspect some of your holdings either leave you exposed to excessive single-stock or sector risk. It is fine if you think you have a gift for analyzing stocks and want to spend hours a week staying on top of your portfolio but otherwise something like this is a better way for most to g.
Derek Tinnin
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Post by Derek Tinnin »

To the OP, what is the expected return of diversifiable risk? Answer: somewhere between zero and complete randomness.

Investors using a handful of individual stocks are exposed to (sometimes tremendous) unnecessary and uncompensated risk. They should not expect to be paid for taking risk that can be easily eliminated.

As for a focus on yield, it matters not where return comes from (dividend, cap gain, interest). Money is money and a portfolio tilted to higher yields is an inefficient portfolio by default, which inevitably exposes you to the law of unintended consequences.

How many stocks are enough? All of them.
Topic Author
EDM
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Re: Is the sky really falling?

Post by EDM »

saurabhec wrote: I understand your need for income to fund living expenses in retirement, but I would say that stock funds that lean towards higher dividend paying companies would still be preferrable.

For example, Vanguard High Dividend Yield Index (VHDYX) has a 4.25% yield and is an index fund with a clearly defined methodology that minimizes turnover (and should hence reduce capital gains distributions)and does not have sector concentration either.

If I were in your shoes, I would compare your custom equity portfolio's characteristics to VHDYX before you decide that self-managed stock portfolios are the way to go for you to get income from stocks. Using VHDYX would also free up more time for you to enjoy your retirement on other pursuits than monitoring your stock investments.
(1) I don't need my portfolio income to fund my expenses in retirement. I got into the stock market for two reasons: (a) My Bogglehead friend thought that blindly investing in an Index Fund was better than putting one's mind in gear and separating the wheat from the chaff. I thought it would be interesting to prove him wrong. Investigation continues. (B) I have a cash hoard at virtually nothing percent interest in anticipation of using cash as a club to buy another farm, but farms got too high and I examined my options. Blue chips at a good yield seemed obvious.

(2) My wife has a Vanguard Index Fund so I don't need to be sold on this sort of investment. My point, however, was (and still is) that, looking forward, I think that high-yield good-quality investments, be they Index Funds or a well-chosen diversified individual stocks, are a good buy at the trade-off between today's interest rates and dividend yields. Some dividends may be cut, but some have risen on strong profits since last November: ADM, KO, and T. The ag sector is going great guns, people aren't going to give up drinking Coke, nor are they going to stop communicating.

(3) GE is a disappointment, down 75% from $40.00 a short year ago, but at $10.00 and a projected 40 cent annual dividend (down from $1.24; quarterly 31 cents just paid) the yield is 4%; not bad given present-day interest rates. And remember, getting much more than nothing percent interest involves taking a position in bonds far longer than any projected stagnation of the stock markets. Forty cents on a ten-dollar share of GE will beat almost every interest bearing security, and at today's low interest rates there isn't much leeway downward to boost bond prices. Fact is that all the vibes are for inflation with higher interest and lower bond prices...

(4) When I bought farms on the cheap in the mid-1980s, I equated it to investing in high-yield MMCD's that had some prospects for appreciation. In reality all my farms brought in over 10% the first year, and then I raised rents. Had I sat on the sidelines and held MM's, my long-term financial position would have been impaired. Low-priced high-yield farms made sense, not because I had some sort of crystal ball or made a wild-ass guess on something like a lottery ticket. It was a well-considered decision based on past experience.

I know that Mr. Bogle discounts the past as being prologue, but it is instructive to remember how things used to be and judge accordingly. GE was (and I suspect still is) a viable profit-making giant of a company. One must believe in something or just muddle around worrying about a falling sky. I wish GE was still at $16.00 where I bought my first shares, but the projected 40 cents dividend is still a 2.5% yield on my cost, which is a better yield than almost any Index Fund 18 months ago, and most interest bearing securities today.

(5) The upshot of this is that I saw all the negativity on this website, the pundits debating the exact date when all things will be wonderful versus the proposition that there was nowhere to go but into the pit of darkness. Then I reflected upon Cabela's (CAB), a stock I looked at on January 5, 2009 at $6.20 with a 4.98 P/E and $1.24 EPS (down from $16.29 a year earlier). The results of the Xmas quarter were yet to be disclosed; meanwhile, the hysteric-media hammered the retailers, predicting the end of the world. I did not buy CAB, mainly because it paid no dividends, and I deem myself a value investor. However, it turned out that my instincts were good and CAB did pretty well that last quarter and was recently above $10.50--about a 70% gain as the Dow sank from 9,000 to 6,500. Somebody made some money these past three months and they didn't do it by waiting for the consensus of Internet bloggers to bless the "buy" word.

Oops! Am I starting to sound like Jim Cramer? No. I'm in it for the long run, don't buy and sell, but keep my ear to the ground, be it here or the WSJ. And when I'm in Cabela's I question the check-out girl about her workload, I shoot the breeze with the GUN Library guy about the sale of high-priced guns. As Cramer says, "Buy and Homework." A friend of mine is at ATT; I question "What's up?"

When I'm driving I notice all the relatively new cars, no rust, no blue smoke, no beaters--GM and Chrysler sold all their 2009 models for no money down, $5,000 cash back, no payments for a while, and Zero% interest in 2005. No wonder they are not selling anything now. And the banks kiting worthless paper hoping that 30% interest and stiff penalties for being a day late were going to make up for principal obligations absolved in bankruptcy courts. Notice that my 13-stock portfolio omits banks and automakers and, of course, airlines and oil companies. Had I invested in an Index Fund (S&P, Dow, W-5000, etc) it would take all comers and it's hard to avoid heavy weighting toward Exxon.

So we shall see who's right, my wife with her S&P 500 Index or my little personal mutual fund: AA, ADM, BA, CAT, DD, DE, GE, INTC, IP, KO, MSFT, T, and CROX. I'd like the Dow to dip into the 6,000s again so I can Double Down...or maybe recover to 14,000 in the time it took to lose it. And I think of the time when I was in the tax department of a Big 8 accounting firm, sworn to secrecy and signed off six ways to Sunday, completing the tax return for a NYSE-listed company. I was the ultimate insider with everything at my fingertips...and try as I could, I could find no hint of which way the company's stock might go when the disclosures were made public by the SEC filings. Years later when the CEO of Enron pleaded "no knowledge" (and/or stupidity) of how his company got in such a mess I could understand. All the big companies are beyond comprehension on a day-to-day basis. All the media flap is pap. Sometimes you just gotta step back and logic it out and have faith in the system...I think I'll buy more GE at under $10.00. EDM
Avo
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Post by Avo »

Derek Tinnin wrote:As for a focus on yield, it matters not where return comes from (dividend, cap gain, interest).
Again I ask if there is relevant academic research on this question.
Derek Tinnin
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Post by Derek Tinnin »

Avo wrote:
Derek Tinnin wrote:As for a focus on yield, it matters not where return comes from (dividend, cap gain, interest).
Again I ask if there is relevant academic research on this question.
I think Ken French has info on portfolios formed on dividend yield here:

http://mba.tuck.dartmouth.edu/pages/fac ... brary.html

It's not that a dividend/price ratio can't separate high expected return stocks from low expected return stocks. It does a reasonably good job. The issue is that the universe of dividend paying stocks is relatively small in the grand scheme of things. This means more potential turnover (higher cost) and potentially greater dispersion of returns compared to another sort method such as book to market.

My main point is that total return is what matters most, , not the source of return.
statsguy
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Post by statsguy »

Derek Tinnin wrote: My main point is that total return is what matters most, , not the source of return.
I too used to believe who cares where the return comes from. But as you get closer to retirement you begin to ask the question.... Where will our retirement income come from? It seems to me that you have two choices... sell investments or take your income from dividends. We have been re-investing our dividends for years but soon (the plan is 26 months) we will soon be living off them.

In most years the market goes up and selling a few shares is no big deal to raise retirement income. Last year though brings out the benefits of a dividend strategy... our dividend income was up even as the stock market swooned and this year it looks like our dividend income will be up again though level is more likely describes it...

Anyway, had we retired we would have not sold anything last year and would have sold nothing again this year to fund our retirement. We would have lived off our dividend yield. Not having to sell anything when prices are at multi-year lows makes me thing that I do care where my return comes from.

Stats
Harold
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Post by Harold »

statsguy wrote:Not having to sell anything when prices are at multi-year lows makes me thing that I do care where my return comes from.
Though I can see the psychological advantage to receiving dividends instead of "selling low", mathematically it doesn't seem to really matter.

Assets transferred to the shareholder in the form of dividends reduce the assets of a corporation, leaving you with a lower share value (everything else equal).
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market timer
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Post by market timer »

I just realized something: the difference between receiving dividends and selling shares is theoretically equivalent to the difference between a CD ladder and a bond fund. In the former cases, a cash flow is received from an asset with duration zero: cash from the corporate treasury or a maturing CD. In the latter cases, there is unnecessary risk from the standpoint of duration. Selling shares involves selling a long duration asset, while selling a bond fund involves selling fractions of the entire basket of bonds. If the goal is to match duration of assets with future liabilities, there is a theoretical justification for preferring dividend stocks and CD ladders.
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Post by Derek Tinnin »

statsguy wrote:
Derek Tinnin wrote: My main point is that total return is what matters most, , not the source of return.
I too used to believe who cares where the return comes from. But as you get closer to retirement you begin to ask the question.... Where will our retirement income come from? It seems to me that you have two choices... sell investments or take your income from dividends. We have been re-investing our dividends for years but soon (the plan is 26 months) we will soon be living off them.

In most years the market goes up and selling a few shares is no big deal to raise retirement income. Last year though brings out the benefits of a dividend strategy... our dividend income was up even as the stock market swooned and this year it looks like our dividend income will be up again though level is more likely describes it...

Anyway, had we retired we would have not sold anything last year and would have sold nothing again this year to fund our retirement. We would have lived off our dividend yield. Not having to sell anything when prices are at multi-year lows makes me thing that I do care where my return comes from.

Stats
Are you saying you have no cash/bonds for near-term cash needs (several years worth) and are relying on dividend income alone?
bigH
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Post by bigH »

The sky is not falling. However, my perspective (from 28 year old eyes) is that this is the perfect economic storm. I know this not by reading press releases but seeing the conditions some of my friends are in as young earners: struggling to save and having little net worth. Also as an active graduate at my university (an ivy league school) I can tell you that even the best talent is not finding work right now. This is worse than the dot.com bubble and will not turn around after a year and a half. This is one of those generational events that will change the course of history (not to be too overdramatic)
MP173
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Post by MP173 »

EDM:

I enjoyed reading your comments. I also missed on the lows in March, but wouldnt be surprized if we get back down there again.

BTW...are you east or west of Rockford? I travel out to Dubuque and really enjoy the drive once past Rockford. That is really good farmland out there, far better than mine in the southern part of the state.

My holdings are similar to yours (ADM, KO, MSFT are common) with other holdings in CNI, EMR, XOM, MCD, PAYX, PFE, PG, and WAG. There are several others picked up the past couple of years, but those are the main ones. All are paying hefty dividends now.

This leads me to something heard last week. A man interviewed commented when asked about where to invest, to look at the blue of blue chips. He defined those as being the S&P 50 stocks which have increased dividends in the past 6 months. He indicated there are about 13 of them and gave MSFT as an example. (I may be incorrect on the number 13)

At this time, with a portion of my assets, I want to look at the great companies, not the shaky ones. Financials do not give me a great risk reward premium at this time. There is far too much drama.

Thanks for your list, I will take a look at 3M.

Has the farmland prices started falling out there yet?

ed
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market timer
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Post by market timer »

BigH, what might be unusual about this crisis is that it hits "top talent" (who knows what that means now?) particularly hard. Not enough high end jobs to go around. Time for plumbing school?
bigH
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Post by bigH »

market timer wrote:BigH, what might be unusual about this crisis is that it hits "top talent" (who knows what that means now?) particularly hard. Not enough high end jobs to go around. Time for plumbing school?
Hi,
the point I was trying to make is that white collar jobs are being hit harder than even in the dot.com. I graduated after the dot.com bust when umployment hit 6.6% peak. It was not pretty. At 8.5% and falling fast, is trouble.

Some of these kids maybe should be plumbers.
mike.bayer
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The Boom in Gloom

Post by mike.bayer »

In the words of the old popular song of the 1930s, it is picnic time for the bears in the financial publishing industry right now. But these particular creatures are more of the grizzly than the cuddly variety.

Crowding out the non-fiction bestseller lists on online retailing websites is a virtual biblical flood of books about the financial crisis that, were you to read them end-to-end, you wouldn’t be in the mood to do much of anything at all.

Among the titles grouped together on Amazon currently are such light reading as ‘Financial Armageddon’, ‘The Great Depression Ahead’, ‘Game Over: How You Can Prosper in a Shattered Economy’, ‘Meltdown’, ‘Depression Economics’ and ‘When Giants Fall’.

There is not much to conclude from this spate of literary doom and gloom other than the fact that the market is doing its job, meeting an upsurge in consumer demand for titles that shed light on the global financial crisis.

People justifiably are anxious. They are concerned that what used to work doesn’t work any more. And, feeling fatalistic, they buy these books hoping that the catastrophic musings within will give substance to their fears.

Now while there is nothing wrong in being intellectually curious about the financial crisis, there is a danger in seeking practical investment advice from books that merely reflect fears that are already in the market.

The lead-time in publishing books, even with writers that are unusually quick in bashing out a narrative, is usually at least 3-6 months, which means the market has often moved on by the time the book comes out.

And even when the writer’s thesis is still relevant, it often merely reflects what is in the price. Almost inevitably, as soon as investors respond to the book by piling into or out of the particular asset class, everything changes.

As an example, think back about 10 years, where there was a mini-publishing boom in books that declared the internet and its associated innovations had rendered the business cycle dead. This was a productivity revolution, we were told. Well, we know how that one ended.

Now, there is a boom in gloom. Every time you walk into an airport bookshop, you find yourself confronted with titles that declare the end of capitalism, the inevitability of another great depression and tips on surviving the economic apocalypse. And that’s even before you get to the new Robert Ludlum.

By the way, this critique of ‘Financial Armageddon Chic’ is not aimed at downplaying the very real issues at the heart of the financial crisis or the many economic questions it raises. But it’s worth reflecting on the fact that the reason stock markets have fallen so far is precisely because of these uncertainties. A lot of the bad stuff that keeps you awake at night is already in the price. In other words, the markets have done the worrying for you.

By the time you register what has occurred and seek to act on it, the markets (and the publishing industry) usually have moved onto new stories.

(article from DFA)
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cato
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Post by cato »

One thing that gives me pause with the dividend yielding stocks is just how many people seem to be praising them these days.

"Just buy the companies that have managed to increase their dividends in the last 12 months....." I feel like I hear that everywhere from Jim Cramer to Kiplinger's, to Money Magazine, to this forum.

It makes me think, if and when the market does turn around, these will be serious underperformers.....
Citigroup delenda est.
mike.bayer
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investment porn

Post by mike.bayer »

cato wrote:One thing that gives me pause with the dividend yielding stocks is just how many people seem to be praising them these days.

"Just buy the companies that have managed to increase their dividends in the last 12 months....." I feel like I hear that everywhere from Jim Cramer to Kiplinger's, to Money Magazine, to this forum.

It makes me think, if and when the market does turn around, these will be serious underperformers.....
Do yourself a favor and stop consuming so much investment porn!

http://www.investorhome.com/porn.htm
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spam
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Post by spam »

Isn't FVD a dividend index? I don't own any and know little about it.
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Re: investment porn

Post by nisiprius »

mike.bayer wrote:
cato wrote:One thing that gives me pause with the dividend yielding stocks is just how many people seem to be praising them these days.

"Just buy the companies that have managed to increase their dividends in the last 12 months....." I feel like I hear that everywhere from Jim Cramer to Kiplinger's, to Money Magazine, to this forum.

It makes me think, if and when the market does turn around, these will be serious underperformers.....
Do yourself a favor and stop consuming so much investment porn!

http://www.investorhome.com/porn.htm
One thing I've learned, fortunately not with important money... by the time "everybody" is praising some investment I've never really thought about, it's too late for me to join the party. Whether or not shrewd investors could have spotted the trend earlier is the great mystery, of course, but it doesn't really matter. I'm not one of those shrewd investors.

By the time I hear about stuff, it may really be good quality beer, but it's very likely to have a head of foam on it.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
cjking
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Post by cjking »

Harold wrote:Though I can see the psychological advantage to receiving dividends instead of "selling low", mathematically it doesn't seem to really matter.

Assets transferred to the shareholder in the form of dividends reduce the assets of a corporation, leaving you with a lower share value (everything else equal).
Here is an example to show why the difference is not merely arithmetic.

Consider a REIT I own. (The argument applies to all companies, but the truth of it is easier to see with REITs, because they have a very visible and transparent measure of "true value", the NAV per share.) This REIT has low leverage and zero chance of going bust, yet recently the share price was at a 33% discount to NAV per share. Had they reinvested their rents, you would have had to surrender $1.50 of property for each $1 of income you raised by selling shares. Because they pay dividends, you actually only surrendered $1 of property (they would have bought) for each $1 of dividend income.

In the share-selling scenario, if you wanted to preserve your capital by only selling a quantity of shares that represented reinvested rent, your income would have been a third lower than if the company paid you dividends.
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Post by DaleMaley »

The original poster's analogy between farmland prices and stock investing reminds me of a story I read years about a hog farmer.

Raising feeder pigs involves buying young hogs and then feeding them until they reach market weight...and you sell them. This business has historically been very cyclic. The cycle goes like this...hog prices rise......more farmers enter the market based upon the higher prices....more hogs are raised and sold...the price of young hogs rises......supply then exceeds demand and hog prices crash.....and farmers get out of the market.

This hog farmer stayed in cash until the price of young hogs was low, then he backed up the truck and bought lots of young hogs. He went back to cash when prices got high.

This same farmer applied his hog farming strategy to stock investing. He backed up his truck and loaded up when prices were low. He sold and went back to cash when prices were high.

The only trick to applying this strategy to either hogs or stocks is knowing when prices are low and when they are high :D
Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. – Warren Buffett
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Post by tutaloo »

xx
Last edited by tutaloo on Tue Jan 18, 2011 4:45 am, edited 1 time in total.
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Post by Harold »

cjking wrote:This REIT has low leverage and zero chance of going bust, yet recently the share price was at a 33% discount to NAV per share.
Why is that? If the shares are clearly worth more, why isn't everyone just buying up as many shares as they can? Maybe the NAV calculation involved some subjectivity that not everyone agrees on? What would be the difference if the REIT bought new market value property with the dividends (or merely retained them as cash)?
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Post by Harold »

market timer wrote:I just realized something: the difference between receiving dividends and selling shares is theoretically equivalent to the difference between a CD ladder and a bond fund. In the former cases, a cash flow is received from an asset with duration zero: cash from the corporate treasury or a maturing CD. In the latter cases, there is unnecessary risk from the standpoint of duration. Selling shares involves selling a long duration asset, while selling a bond fund involves selling fractions of the entire basket of bonds. If the goal is to match duration of assets with future liabilities, there is a theoretical justification for preferring dividend stocks and CD ladders.
I'm going to think about this some. My first reactions were along the lines of the interchangeability of the two (i.e. it's easy to buy/sell stocks for cash) and the uncertainty of the dividend stream (unlike income from a CD ladder, dividends can, and probably should, fluctuate as the "corporate treasury" has more or less cash). First reactions can easily be wrong though ...
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Post by ken250 »

There have been many high profile dividend freezes and cuts, but I think if you own a broadly diversified stock income fund you're probably doing ok because I believe the number of dividend increases is still greater than the number of cuts.
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Post by cjking »

Harold wrote:
cjking wrote:This REIT has low leverage and zero chance of going bust, yet recently the share price was at a 33% discount to NAV per share.
Why is that? If the shares are clearly worth more, why isn't everyone just buying up as many shares as they can? Maybe the NAV calculation involved some subjectivity that not everyone agrees on? What would be the difference if the REIT bought new market value property with the dividends (or merely retained them as cash)?
Well, simply the fact that investors are pulling money out of shares is enough to make any investment trust (closed-end fund) go to a discount, or a bigger discount if one already existed in better times. It's a well known fact that anyone who's ever looked at closed-end funds is aware of.

What may be more controversial is my idea that ordinary trading companies have a (possibly unknown and unknowable) "true value" that differs from their share price. The sum total of expected future returns from a stock that might have decades of life ahead of it can't change rapidly, even if an unexpected deep recession appears, but share prices do change rapidly. Hence the saying "in the short run the stock market is a voting machine... (but) in the long run it is a weighing machine.”

In the particular case of the REIT, people may rationally not be buying because they expect NAV to fall to match the price, rather than the price to rise to match the NAV. Us buy-and-hold investors ignore such considerations, of course.

I assumed in the original example that the company earned the same return on capital on profits retained as on its pre-existing capital, i.e. that the money was re-invested in property, in this case. The justification for retaining money is because a company thinks it can make a return of that order, if not more. If the company retained money when it didn't believe it could earn that much, it would be letting down its investors. In my example, if the company did temporarily keep the money as cash, it would make little difference because, if for example that meant 5% of their assets were now cash, then when you sold a share you would be giving up a claim on $1.425 of property and $0.075 of cash for each $1 of cash you received.

To give another example, a couple of months ago I read of a Telecoms company with a reasonably stable stream of profits, no borrowing, and its share price was less than each shareholders share of cash it had in the bank. Obviously that's an extreme example, but it shows what can happen.
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Post by ETFnerd »

http://www.latimes.com/business/la-fi-d ... 0602.story
ken250 wrote:There have been many high profile dividend freezes and cuts, but I think if you own a broadly diversified stock income fund you're probably doing ok because I believe the number of dividend increases is still greater than the number of cuts.
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Post by Harold »

Thanks cj, I'll think about what you wrote. (I'm not immediately convinced by some of it.)

It does point out that in my original observation, I should have included the phrase "properly priced stock" or something similar. Clearly, if shares are mispriced, receiving dividends aren't going to be the same as selling shares.
robsrdd
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Post by robsrdd »

The Stock Research Portal is mystified with the continuing economic optimism of the experts. Here’s how he sees the near future: “More Job Losses → Less Consumer Spending → No Change or Lower House Prices → Further Declining Consumer Confidence → Less Government Taxes Collected → Larger Government Deficits → Ongoing Recession (or worse).”

Via Stock Research Portal (http://www.stockresearchportal.com)

With the amount of things going wrong, its going to be tough for anyone to lead a recovery.
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Post by ken250 »

ETFNerd,

Thanks for that update, the last data I saw was for last year. I wonder what's going to happen to VDAIX?
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EDM
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Post by EDM »

bigH wrote:The sky is not falling. However, my perspective (from 28 year old eyes) is that this is the perfect economic storm. I know this not by reading press releases but seeing the conditions some of my friends are in as young earners: struggling to save and having little net worth. Also as an active graduate at my university (an ivy league school) I can tell you that even the best talent is not finding work right now. This is worse than the dot.com bubble and will not turn around after a year and a half. This is one of those generational events that will change the course of history (not to be too overdramatic)
bigH: The American economy does not rise or fall on the perspective of 28-year-old wage earners "struggling to save and having little net worth." At twenty-eight you should mark yourself lucky to have an Ivy League education, which is a form of "money in the bank" (so long as your degree represents something the workplace values like accounting, engineering, law, medicine, and the like, and not Central American Hocus-Pokus.

Given that you identify with those who are not finding work and, thus, struggling to save and having little net worth, you are in a poor position to evaluate the economy. This reminds me of a recent "Zitts" cartoon, the punch-line being that the 16-year-old kid knew it all and his parents knew nothing. Please be advised that the object of this website is to hash over the investment opportunities and strategies of those who are exactly not in your position. You are not an investor unless you have established wealth or current disposable income to invest. Then you are in a position, of necessity, to separate the wheat from the chaff.

My example was of an Index Investor with $1,000,000 sunk in some Vanguard Fund getting, say, 2.0% or $20,000 yield; he or she is still getting $20,000 on the residual at a 4% yield, given market losses of late. People with investment capital have decisions to make: Farmland? Stocks? Bonds? or maintain a cash position?

A person struggling to save with little net worth is not an investor. However, "savings" at the present time can be deposited to a ready cash account at close to nothing percent interest and, thus, are guaranteed to be eroded by inflation while you are waiting to make your move. I was willing to take the "hit" with my cash hoard in anticipation of buying another farm, but there came a time when I realized that this is not a realistic option, now or in the near future. So I examined my options:

(A) Where can I beat low interest? High yield stocks.

(B) What is the risk?

(C) The 14,280 Dow having sunk to, say, 8,000 has taken the high yield stocks with it, many of which are making profits and raising dividends (KO, ADM, T).

(D) Is American commerce and industry going out of business? I doubt it.

(E) Is American commerce and industry shedding itself of dead wood? Yes.

(F) Will 300,000,000 Americans need the stuff produced by American commerce and industry this year and next? you fill in the blank:______ .

(G) Bond yields are historically low with little "wiggle room" downward to translate into higher prices (capital gain). In fact, our 28-year-old commentator was born ca. 1981 when I got 15.7% interest on gov. insured MMCD's when I retired in 1981, and set sail from Chicago to Europe and the Caribbean in my Westsail 42 sailboat.

At that time (1981-82) unemployment in Rockford IL was 22%...

bigH says, that he "...graduated after the dot.com bust when unemployment hit 6.6% peak...it was not pretty." Please be advised that economists have long considered 6% unemployment to be base-line standard that is necessary to economic growth; if everyone was fully employed, nothing new could get started.

What I am seeing here may be the key to the whole economic debacle. The next generation thinks they are owed a living, or at least a bailout. When in the history of the world has a chief executive of a government guaranteed the warranties on motor vehicles made by privately held corporations? Things ain't what they used to was.

The media has so pandered to the wants and needs of a generation of over-educated perpetual students who can't find work in their special niche-jive-job-occupations that their reach too often exceeds their grasp. Believe it or not, I do not personally know one person who is unemployed. My view of this may not reflect the statistical reality, but neither does the view (s) of recent graduates who have not achieved their expected instant gratification. Looking beyond individual views, going under the surface, doing a little homework, maybe the world as we know it is not coming to an end. It just could be that the drive-by media has been a false prophet of doom, the proverbial Chicken Little with advertising to sell.

In this context, having done some homework, but never being sure, I believe the blue chips are under-priced and yields will provide support in these days of doom and gloom. At some point the low interest rates will rise to reflect the inflation that is built into the economy by recent events. Thus today's bonds will lose value, a rising stock market will attract capital from the interest-bearing securities, the go-with-the-flow investors will be attracted by rising prices, the net buying will bid prices ever higher until sometime in the future the market will again get over-bought with higher than sustainable R/E ratios...and here we'll go again. EDM
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Post by tutaloo »

xx
Last edited by tutaloo on Tue Jan 18, 2011 4:45 am, edited 1 time in total.
statsguy
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Post by statsguy »

Derek Tinnin wrote: Are you saying you have no cash/bonds for near-term cash needs (several years worth) and are relying on dividend income alone?
Derek... Our portfolio is 60% equity and 40% TIAA -CREF Traditional Annuity (basically a sstable value fund). We have virtually no cash in our portfolio remaining fully invested long-term. Right now we have about 7-8% cash that is from tax loss harvesting late last year.

The dividends from our stocks produce about what we need as income in retirement. Hopefully, we can put a few more dollars into our dividend stocks in the next couple of years to get the income above our needs. In a pinch we could get money from the 40% stable value fund. But for the last three years... dividends and capital gains have more than covered all our future income needs.

Stats
Last edited by statsguy on Wed Apr 08, 2009 3:23 pm, edited 1 time in total.
saurabhec
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Post by saurabhec »

tutaloo wrote:I also do not know anyone personally unemployed, or underemployed. All family members including our offspring (and our siblings offspring) whom we invested in (their educations) are both employed and totally unconcerned - and this spans 3 countries, and 2 continents, and 3 different industries.

What's even more amazing is there is brand new home construction going on next door to me today, right now. A custom solar home, being incrementally built by the owner, who is a contractor. He says he is just doing the next step to keep the permit alive. Never-the-less, the Caterpillars are humming, the workmen are tromping around.
tutaloo
Seriously, I would not extrapolate from your anecdotal evidence. I think the US consumer as an engine of growth for the US and Global economy is a phenomenon that is over for a long time. Even when the economy bottoms out, I think the consumption habits of the US consumer will never get back to where they were in the 00s. There is a world of hurt out there, and it is pretty ugly if you are looking for a job in the US. It is much worse than the 2001-2002 recesssion (which I experienced as well), which now almost looks like it wasn't so bad. I would say if anything, the mainstream media is more optimistic than the reality. Real estate in particular is not a stabilized asset class. It will be a volatile sector till the structural problems of the major players in residential and commercial real estate get sorted out, which I think will take till the end of next year at least (doesn't mean values could not bottom ahead of that).
saurabhec
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Post by saurabhec »

tutaloo wrote: I don't think I have a gift for analyzing stocks. I have no special financial or economic expertise.
:
:
:

... And that full grown adults are capable of deciding for their selves whether investing in ExxonMobile or GM is a good opportunity at this time (for a companies prospects are always changing, you are evaluating in the current light of day).
I would suggest to you that the above two statements are a stark contradiction.

It sounds to me that your investment portfolio is fairly complex and requires a lot of monitoring. As you said, you consider tending it the equivalent of a low paying job. Clearly you are deriving some non-financial (psychological) returns in addition to your financial returns from your portfolio by investing your time in it.

My own personal view (bias?) is that the great majority of individual investors (even those with a relatively high financial IQ) will take on unecessary risks (usually undiversified stock and/or sector risk on the equities side) to earn the return their portfolios will deliver.

I am not averse to an investor taking on excess exposure to a sector of the market they truly have knowledge/talent in analyzing, but I think most individual investors over-estimate the extent of their knowledge and under-estimate the knowledge of institutional investors pricing the stocks/sectors they invest in.
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Constructing a Diversified Portfolio of Dividend Stocks

Post by BillRogers »

Hello EDM,

If you want to create a diversified portfolio of dividend stocks that have a long history of increasing their dividends you can take the following steps to reduce your research time.

Get a list of companies that have increased their dividends. S&P has a constituent list of their S&P Aristocrats with a minimum of 25 years of dividend growth. A better list is the Mergent Dividend Achievers, which includes companies with a minimum of 10 years of dividend growth as of 12/31/2008. They also have a list of ADRs and Canadian companies.

Using the S&P Aristocrats or the PowerShares Dividend Achievers ETF (PFM), you will get the S&P GICS sectors so that you can diversify among the 10 economic sectors.

Use Morningstar to determine their cap size and style (i.e., small cap core, etc.) to diversify among cap size and style.

Check each company on the list to confirm that they have not reduced their dividends. Also note the date of the last increase so that you will have a heads-up when to expect the next increase or not. Companies with long histories of dividend growth usually raise their dividend the same time each year.

Once you have all the relevant information, you can construct a diversified portfolio of companies with increasing dividends including international and diversifying across sectors, size and style dimensions. One caveat, with respect to ADRs, the dividend increase is expressed in USD, thus the dividend increase can come from two places: an actual increase in the company's dividends and/or from currency translation adjustments.

The best part is that S&P and Mergent have provided you with the universe from which to work from.

Best wishes,
Bill
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graveday
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Post by graveday »

EDM. Kudos on your cruise. What are your comments on the nickname for the Westsail being westsnail?
statsguy
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Re: Constructing a Diversified Portfolio of Dividend Stocks

Post by statsguy »

BillRogers wrote:Hello EDM,

If you want to create a diversified portfolio of dividend stocks that have a long history of increasing their dividends you can take the following steps to reduce your research time.

Get a list of companies that have increased their dividends. S&P has a constituent list of their S&P Aristocrats with a minimum of 25 years of dividend growth. A better list is the Mergent Dividend Achievers, which includes companies with a minimum of 10 years of dividend growth as of 12/31/2008. They also have a list of ADRs and Canadian companies.

Using the S&P Aristocrats or the PowerShares Dividend Achievers ETF (PFM), you will get the S&P GICS sectors so that you can diversify among the 10 economic sectors.

Use Morningstar to determine their cap size and style (i.e., small cap core, etc.) to diversify among cap size and style.

Check each company on the list to confirm that they have not reduced their dividends. Also note the date of the last increase so that you will have a heads-up when to expect the next increase or not. Companies with long histories of dividend growth usually raise their dividend the same time each year.

Once you have all the relevant information, you can construct a diversified portfolio of companies with increasing dividends including international and diversifying across sectors, size and style dimensions. One caveat, with respect to ADRs, the dividend increase is expressed in USD, thus the dividend increase can come from two places: an actual increase in the company's dividends and/or from currency translation adjustments.

The best part is that S&P and Mergent have provided you with the universe from which to work from.

Best wishes,
Bill
This is a good start. Next you want to determine if the companies can continue increasing their dividend. There are some very sophisticated ways to do this but genearlly making sure that the payout ratio is less than 70% (REITs and MLPs should be excluded from this as they derive much of their "income" from depreciation and hence can have payout ratios over 100%). When we bought most of our dividend companies they had payout ratios on the order of 40-50%... though the payout ratios have risen... especially for Verizon and AT&T.

For what its worth, I think companies with a Moat (as defined by M*) make better investments too.

Stats
bigH
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Post by bigH »

EDM wrote:
bigH wrote:The sky is not falling. However, my perspective (from 28 year old eyes) is that this is the perfect economic storm. I know this not by reading press releases but seeing the conditions some of my friends are in as young earners: struggling to save and having little net worth. Also as an active graduate at my university (an ivy league school) I can tell you that even the best talent is not finding work right now. This is worse than the dot.com bubble and will not turn around after a year and a half. This is one of those generational events that will change the course of history (not to be too overdramatic)
bigH: The American economy does not rise or fall on the perspective of 28-year-old wage earners "struggling to save and having little net worth." At twenty-eight you should mark yourself lucky to have an Ivy League education, which is a form of "money in the bank" (so long as your degree represents something the workplace values like accounting, engineering, law, medicine, and the like, and not Central American Hocus-Pokus.

Given that you identify with those who are not finding work and, thus, struggling to save and having little net worth, you are in a poor position to evaluate the economy. This reminds me of a recent "Zitts" cartoon, the punch-line being that the 16-year-old kid knew it all and his parents knew nothing. Please be advised that the object of this website is to hash over the investment opportunities and strategies of those who are exactly not in your position. You are not an investor unless you have established wealth or current disposable income to invest. Then you are in a position, of necessity, to separate the wheat from the chaff.

My example was of an Index Investor with $1,000,000 sunk in some Vanguard Fund getting, say, 2.0% or $20,000 yield; he or she is still getting $20,000 on the residual at a 4% yield, given market losses of late. People with investment capital have decisions to make: Farmland? Stocks? Bonds? or maintain a cash position?

A person struggling to save with little net worth is not an investor. However, "savings" at the present time can be deposited to a ready cash account at close to nothing percent interest and, thus, are guaranteed to be eroded by inflation while you are waiting to make your move. I was willing to take the "hit" with my cash hoard in anticipation of buying another farm, but there came a time when I realized that this is not a realistic option, now or in the near future. So I examined my options:

(A) Where can I beat low interest? High yield stocks.

(B) What is the risk?

(C) The 14,280 Dow having sunk to, say, 8,000 has taken the high yield stocks with it, many of which are making profits and raising dividends (KO, ADM, T).

(D) Is American commerce and industry going out of business? I doubt it.

(E) Is American commerce and industry shedding itself of dead wood? Yes.

(F) Will 300,000,000 Americans need the stuff produced by American commerce and industry this year and next? you fill in the blank:______ .

(G) Bond yields are historically low with little "wiggle room" downward to translate into higher prices (capital gain). In fact, our 28-year-old commentator was born ca. 1981 when I got 15.7% interest on gov. insured MMCD's when I retired in 1981, and set sail from Chicago to Europe and the Caribbean in my Westsail 42 sailboat.

At that time (1981-82) unemployment in Rockford IL was 22%...

bigH says, that he "...graduated after the dot.com bust when unemployment hit 6.6% peak...it was not pretty." Please be advised that economists have long considered 6% unemployment to be base-line standard that is necessary to economic growth; if everyone was fully employed, nothing new could get started.

What I am seeing here may be the key to the whole economic debacle. The next generation thinks they are owed a living, or at least a bailout. When in the history of the world has a chief executive of a government guaranteed the warranties on motor vehicles made by privately held corporations? Things ain't what they used to was.

The media has so pandered to the wants and needs of a generation of over-educated perpetual students who can't find work in their special niche-jive-job-occupations that their reach too often exceeds their grasp. Believe it or not, I do not personally know one person who is unemployed. My view of this may not reflect the statistical reality, but neither does the view (s) of recent graduates who have not achieved their expected instant gratification. Looking beyond individual views, going under the surface, doing a little homework, maybe the world as we know it is not coming to an end. It just could be that the drive-by media has been a false prophet of doom, the proverbial Chicken Little with advertising to sell.

In this context, having done some homework, but never being sure, I believe the blue chips are under-priced and yields will provide support in these days of doom and gloom. At some point the low interest rates will rise to reflect the inflation that is built into the economy by recent events. Thus today's bonds will lose value, a rising stock market will attract capital from the interest-bearing securities, the go-with-the-flow investors will be attracted by rising prices, the net buying will bid prices ever higher until sometime in the future the market will again get over-bought with higher than sustainable R/E ratios...and here we'll go again. EDM
EDM,
I said some of my friends are struggling. I am thankfully doing just fine with my eletrical engineering degree working for a patent law firm. I also thankfully have plenty of disposable income to invest right now. I just want to make sure I am investing it and not DISPOSING it :)....

You make excellent points about american corporations not going anywhere but you miss one point: It's all about profit GROWTH. No one is going to pay a premium for a pieace of a company that has stagnant profit. What a stock then becomes is a very volatile bond paying a 3-6% (maybe more) dividends. At that point, I'd rather buy corporate or even junk bonds.
tutaloo
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Post by tutaloo »

xx
Last edited by tutaloo on Tue Jan 18, 2011 4:46 am, edited 2 times in total.
Ron
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Post by Ron »

tutaloo wrote:Maybe full grown adults with decades of experience are currently underestimated / undervalued in today's world?

tutaloo
How true :lol: ...

On the other hand, I really don't care how I (personally) am viewed.

Like the old saying says, "What you think of me is none of my business" 8) ...

- Ron
tutaloo
Posts: 384
Joined: Sun Feb 22, 2009 2:45 pm

Post by tutaloo »

xx
Last edited by tutaloo on Tue Jan 18, 2011 4:47 am, edited 1 time in total.
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