Disclaimer: Always remember that these are the results of ourresearch based on the methodology that I have outlined above and inother articles previously published. This research is provided as aneducational tool and should not be considered investment advice, butjust the results of our research. There are many ways to analyze astock and you should never blindly follow anyone’s work without doingyour own due diligence or by seeking the help of an investment advisor,if you so need one. As Registered Investment Advisors, we see it as ourresponsibility to advise the following: We take our research seriously, wedo our best to get it right, and we “eat our own cooking,” but we couldbe wrong. Please note, investments involve risk and unless otherwisestated, are not guaranteed. Past performance cannot be used as anindicator to determine future results. Strategies mentioned may not besuitable for everyone. We do not know your personal financial situation,so the information contained in this communiqué represents the opinionsof Peter “Mycroft” Psaras, and should not be construed as personalizedinvestment advice. Information expressed does not take into accountyour specific situation or objectives, and is not intended asrecommendations appropriate for you. Before acting on any informationmentioned, it is recommended to seek advice from a qualified tax orinvestment adviser to determine whether it is suitable for your specificsituation.
Disclosure: I am long NOK, CTL.
Ive looked at your backtest of djia. It confirms what has been known....if you buy companies that are undervalued, you will get higher return. If you change the criteria to buying the stocks with the lowest pe or the highest dividend yield or lowest sales to price (one of Ken Fishes favorite in his book Superstocks), you will get similiar results. James o shaunessy demonstrated this in his book also
Everything you say is true, but investors continue to pile into stocks with extreme valuations. My whole goal in writing these articles is to teach the individual investor to do the same thing in the stock market that they do when they go shopping at the super market and that is to know the prices that they are willing to pay before they invest and to avoid overpaying. In just a minute they can find out if they are paying a fair price or not, using Warren Buffett's ratio. Warren Buffett knows what he is willing to pay at all times, so why shouldn't the individual investor.
Thank's for posting,
Mycroft
Of course having the capacity to grow dividends does not mean a company will grow its dividend(see LLY), but the capacity to pay dividends does build a margin of safety around the dividend which is critical to dividend growth investors like myself. I also look at debt/EBITDA as a factor in evaluating dividend capacity. Certain companies have a very high (90%+) dividend payout as % of levered FCF, but also have a stated policy of doing so (MO, CTL).
Long CVX, KMB, PG, ADP, PM, ABT, JNJ, WMT, LLY, VZ, MO and INTC.
Thank you for your comments,
Mycroft
In this instance, Qwest repaid $2B in debt payments through the period ending 9/30/10. My point is that free cash flow has to be adjusted from time-to-time, and my argument is that in this instance, the debt level and leverage of Qwest plus network spend and network integration costs will put considerble pressure on the divdiend.
Management sold the sharedholders on the flawed concept that leverage would be improved (debt to EBITDA) and said the divdiend coverage ratio woudl improve (which it will not when you consider debt and network spending requirements). So, if you want to think the dividend is solid, please due.
My argument here is that this stock is about to take a dive. If you have been noting it reached a high of 46+ and is now down to $42.17 and falling. We will see $40 soon enough. I am short the stock through puts. Now, you can hold on to June to see if you get your dividend, which I think you will, but our capital loss will more than eat up $.725 per quarter. It already has.
Because I was in the telecommunications business, focused on voice and least cost routing, and I was a finance director, I have full appreciation for power of land lines, but what people forget that the payback period for net work investments is considerbly more than the nickels you spend on your DSL service, which is not near as good as fibre service via your cable provider.
Now, you like Zoros do you. Well, I can't compete with him and I don't have a massive portfolio. It does show that it matters to you; it does not to me. He might now even now he has the investment. Who I do appreciate is Warren Buffet. What he suggests is that you avoid, albeit he changes his mind when he becomes a lender, heavy fixed cost models. This is one of those models, and the only shareholder benefiting here will be Qwest. Given the fact that the four telecommuniactions I worked went under and Qwest is the relic from the dot.com bust, then you would appreciate it when I say that the fixed costs and heavy debt load is going to create a sell off which is well underway.
Mycroft
that plague this acquisition and will create considerable headwinds for CTL which is still adjusting for the Embarq acquisition.
For example: they show JNJ as having 19 years of consecutive dividend increases when its been well over 40.
They show the P/E as 12 and don't go out to any decimals.Sometimes it may not matter but sometimes there is a difference between 12.01 and their current 12.76
Their EPS is shown as $1.24 which I presume is a quarter but when is it updated? Its been nearly a month since last quarter they announced an EPS of $1.03
I follow JNJ close so I knew the numbers where off but what if I was looking at a company for the first time?