PG is an excellent and well run company. I've owned modest positions for decades under my old-fashioned buy-and-hold approach which I've been learning to modify recently (recently for me is since 1998). During last year's correction, I added several large chunks in the $47-$49 range intending to keep them as a pillar of my retirement for the long haul. However, when it reached $62-$64 I could not resist unloading most of my positions for long-term gains of around $15/share on the large chunks acquired in Spring 2009, to effectively cash in the next seven years' worth of dividends @ 15% federal tax rate.
My logic is that (a) the effective tax rate on dividends appears set to climb to over 40%, possibly over 45% with all the various stealth tax additions that don't make it to the headline rate, especially with new goodies to "fund healthcare reform", so with state taxes it would likely exceed 50%. This means that I cashed-in the next twelve years' worth of after-tax dividends last week, i.e. the dividends between now and 2022, and who knows who will still be around by then. (b) With the dead rats under the rug and the skeletons in the closet, I still see a better than 50-50 chance of another significant dip creating better buying opportunities within the next couple of years, so a bird in hand .....
I fully agree with, and share your philosophy of dividend investing. However, in all honesty, which of you would have predicted, two years ago, that DOW or GE or AA or PFE or BAC would slash their dividends? These are all companies that many (myself included) have invested in specifically for their once-stable dividend growth.
To get a handle on the scale of the decimation, here are a few examples of what's been happening:
(a) DOW increased their dividend in Spring 2007, and now it's been slashed back to its 1988 level.
(b) GE last increased their dividend in Fall 2007. Now it is back to its 1999 level.
(c) AA last increased their dividend in early 2007. Now it is back to its 1978 level (nominal! remember what a buck bought in '78?).
(d) AEP's dividend, slashed in 2002, then steadily increased since, until now it has regained its 1970 level (nominal !!!)
(e) NWL's dividend was slashed twice in the past six months, and is now at its 1989 level.
(f) IP's dividend was just slashed to return to its 1970 level.
(g) WY's dividend was just slashed, back to its 1988 level.
These are but a few examples. Adjust for inflation, and the picture gets uglier. While some stellar names mentioned in this article have increased their dividend, they are the exception, not the rule for 2008/2009, and the dividend slashing party may be just beginning. Additionally, there is no guarantee that some of these very companies will also cut when they find that their yields are much higher than their peers.
Yes, dividend investing is the way to go, but dividend cutting has gained momentum to an unprecedented extent in 2008/2009, and the title of this article would lead you to believe otherwise.
On May 18 09:50 AM David Van Knapp wrote:
> I second the comment by George Edwards. An attentive dividend investor > is not invested in the whole S&P 500, nor even in just the dividend-paying > stocks of the S&P 500. Instead, he or she is invested in the > best dividend-paying stocks, whether or not they are in the S&P > 500, including foreign stocks. > > Dividend-growth investing is a strategy that must be executed carefully > over many years. Across-the-board one-year snapshot statistics on > S&P 500 dividends are interesting, but not very relevant to the > attentive dividend investor. The best dividend stocks must be ferretted > out through stock-by-stock research. One quality of the "best" is > that they raise their dividends annually. Companies only do that > if they can afford to. So companies that are in financial difficulty > cannot qualify as "best," because their dividends are in peril, even > if they have raised them for many years consecutively.
To complete the picture, one should note that when dividends are cut, it is usually by 60%-100% of their previous level, but when they are increased, it is usually by 3%-8%. These annual increases, when they follow a drastic cut, imply that it may well take decades for slashed dividends to return to their former nominal level, let alone their former inflation-adjusted level.
It would have been informative had you tallied the total cuts in $ and the total increases in $ for the S&P500 this year. You would have found that total cuts greatly exceed total increases, and would have titled your article "Dividends Decimated by Recession", in the interest of truth and clarity.
The wholesale decimation of dividends is another reason that equities are unlikely to recover to their former bubblesphere valuations for a very long time.
You are quite right, and I have posted often on this subject as I believe it does not get the attention it deserves. Buybacks are corrupt. Since the zombie (or ignorant) boards are complicit in this corruption, the way to eliminate it is for the SEC to require public companies to increase the strike price of all outstanding options when a buy back is implemented, by the ratio:
(number of shares outstanding before buyback) / (number of shares outstanding after buyback)
Without this necessary adjustment, buybacks disproportionately benefit management's options at shareholders expense. This leads them to buy back their stock, no matter how high the price, just to make sure their most recent and expensive options can be liquidated at a profit.
On Apr 10 12:44 PM stonebluff wrote:
> Has anyone tackled a study of the damage done by buybacks to American > financial corporations? I cannot understand the rationale for buybacks > except when the assets underlying the shares plainly exceed in value > the price of the shares. Then, and only then, do the shrareholders > as a group benefit. Buybacks otherwise benefit only EX shareholders, > who sell into the buyback storm. With buybacks, management is making > an investment decision with regard to my money; I would prefer to > invest it myself. Give me cash dividends. I'll invest them where > I choose. Buybacks carry even a mild odor of corruption, since managers > with options are commonly large and regular vendors of their companies' > shares, and buybacks tend to mask the dilution caused by prodigal > use of options.,
S&P 500 Watch: March 'Winners' Are Actually the Biggest Losers [View article]
Thanks for an informative analysis. When the market was near its lows I had argued that sound stocks were by no means "cheap"; and that the low SP500 was more due to some of its constituents being demolished, rather than due to its good companies becoming "cheap". This was just an observation, now bolstered by your excellent analysis, which says that the demolished ones have stirred back to life in the ER, boosting the SP500.
I still maintain that at current levels stocks are not "cheap" except relative to the bubble era. Dividends are being slashed at astonsihing rates, and historically, companies which drastically cut dividends have restored them slowly, if at all. Thus, I expect SP500 dividends will not climb back to 2007 levels for many years, and this suggests to me that stocks will be worth less than they were in 2007 for many years as well.
Preview from Europe: Stocks Log Worst January Ever [View article]
Mole, thanks for your succinct summary, and particularly for the great Monty Python sketch!
There was another Ponty Python (the "Village Idiot" perhaps?) in which the idiots discuss stock investments intelligently, as the pundits blather stupidly about them. If you can locate it, please consider posting it as appropriate.
S&P 500 Dividend Aristocrats: Past, Present and Future [View article]
I had a position in KO for some years and was satisfied with the stock's performance. However, when it got to the mid-60's, I thought it was much too high and sold it and bought higher yielding stocks instead.
Part of my reasoning was that the novelty of people buying bottled water, instead of drinking it from a tap or fountain, will fade because (a) unnecessary spending in a recession,(b) articles in various media claimed that bottled water is no better than tap water, (c) uses lots of energy to make bottles and transport them, and (d) it was a silly fad anyway.
I confess I did not look into what percentage of KO profits came from selling water in bottles, but assumed it is significant as you see their water everywhere, and being more expensive than coke must be highly profitable.
Procter & Gamble: Stock Dividend Analysis [View article]
My logic is that (a) the effective tax rate on dividends appears set to climb to over 40%, possibly over 45% with all the various stealth tax additions that don't make it to the headline rate, especially with new goodies to "fund healthcare reform", so with state taxes it would likely exceed 50%. This means that I cashed-in the next twelve years' worth of after-tax dividends last week, i.e. the dividends between now and 2022, and who knows who will still be around by then. (b) With the dead rats under the rug and the skeletons in the closet, I still see a better than 50-50 chance of another significant dip creating better buying opportunities within the next couple of years, so a bird in hand .....
Dividends Survive Despite Recession [View article]
I fully agree with, and share your philosophy of dividend investing. However, in all honesty, which of you would have predicted, two years ago, that DOW or GE or AA or PFE or BAC would slash their dividends? These are all companies that many (myself included) have invested in specifically for their once-stable dividend growth.
To get a handle on the scale of the decimation, here are a few examples of what's been happening:
(a) DOW increased their dividend in Spring 2007, and now it's been slashed back to its 1988 level.
(b) GE last increased their dividend in Fall 2007. Now it is back to its 1999 level.
(c) AA last increased their dividend in early 2007. Now it is back to its 1978 level (nominal! remember what a buck bought in '78?).
(d) AEP's dividend, slashed in 2002, then steadily increased since, until now it has regained its 1970 level (nominal !!!)
(e) NWL's dividend was slashed twice in the past six months, and is now at its 1989 level.
(f) IP's dividend was just slashed to return to its 1970 level.
(g) WY's dividend was just slashed, back to its 1988 level.
These are but a few examples. Adjust for inflation, and the picture gets uglier. While some stellar names mentioned in this article have increased their dividend, they are the exception, not the rule for 2008/2009, and the dividend slashing party may be just beginning. Additionally, there is no guarantee that some of these very companies will also cut when they find that their yields are much higher than their peers.
Yes, dividend investing is the way to go, but dividend cutting has gained momentum to an unprecedented extent in 2008/2009, and the title of this article would lead you to believe otherwise.
On May 18 09:50 AM David Van Knapp wrote:
> I second the comment by George Edwards. An attentive dividend investor
> is not invested in the whole S&P 500, nor even in just the dividend-paying
> stocks of the S&P 500. Instead, he or she is invested in the
> best dividend-paying stocks, whether or not they are in the S&P
> 500, including foreign stocks.
>
> Dividend-growth investing is a strategy that must be executed carefully
> over many years. Across-the-board one-year snapshot statistics on
> S&P 500 dividends are interesting, but not very relevant to the
> attentive dividend investor. The best dividend stocks must be ferretted
> out through stock-by-stock research. One quality of the "best" is
> that they raise their dividends annually. Companies only do that
> if they can afford to. So companies that are in financial difficulty
> cannot qualify as "best," because their dividends are in peril, even
> if they have raised them for many years consecutively.
Dividends Survive Despite Recession [View article]
To complete the picture, one should note that when dividends are cut, it is usually by 60%-100% of their previous level, but when they are increased, it is usually by 3%-8%. These annual increases, when they follow a drastic cut, imply that it may well take decades for slashed dividends to return to their former nominal level, let alone their former inflation-adjusted level.
It would have been informative had you tallied the total cuts in $ and the total increases in $ for the S&P500 this year. You would have found that total cuts greatly exceed total increases, and would have titled your article "Dividends Decimated by Recession", in the interest of truth and clarity.
The wholesale decimation of dividends is another reason that equities are unlikely to recover to their former bubblesphere valuations for a very long time.
Where Have All the Buybacks Gone? [View article]
(number of shares outstanding before buyback) / (number of shares outstanding after buyback)
Without this necessary adjustment, buybacks disproportionately benefit management's options at shareholders expense. This leads them to buy back their stock, no matter how high the price, just to make sure their most recent and expensive options can be liquidated at a profit.
On Apr 10 12:44 PM stonebluff wrote:
> Has anyone tackled a study of the damage done by buybacks to American
> financial corporations? I cannot understand the rationale for buybacks
> except when the assets underlying the shares plainly exceed in value
> the price of the shares. Then, and only then, do the shrareholders
> as a group benefit. Buybacks otherwise benefit only EX shareholders,
> who sell into the buyback storm. With buybacks, management is making
> an investment decision with regard to my money; I would prefer to
> invest it myself. Give me cash dividends. I'll invest them where
> I choose. Buybacks carry even a mild odor of corruption, since managers
> with options are commonly large and regular vendors of their companies'
> shares, and buybacks tend to mask the dilution caused by prodigal
> use of options.,
S&P 500 Watch: March 'Winners' Are Actually the Biggest Losers [View article]
I still maintain that at current levels stocks are not "cheap" except relative to the bubble era. Dividends are being slashed at astonsihing rates, and historically, companies which drastically cut dividends have restored them slowly, if at all. Thus, I expect SP500 dividends will not climb back to 2007 levels for many years, and this suggests to me that stocks will be worth less than they were in 2007 for many years as well.
Preview from Europe: Stocks Log Worst January Ever [View article]
There was another Ponty Python (the "Village Idiot" perhaps?) in which the idiots discuss stock investments intelligently, as the pundits blather stupidly about them. If you can locate it, please consider posting it as appropriate.
S&P 500 Dividend Aristocrats: Past, Present and Future [View article]
Part of my reasoning was that the novelty of people buying bottled water, instead of drinking it from a tap or fountain, will fade because (a) unnecessary spending in a recession,(b) articles in various media claimed that bottled water is no better than tap water, (c) uses lots of energy to make bottles and transport them, and (d) it was a silly fad anyway.
I confess I did not look into what percentage of KO profits came from selling water in bottles, but assumed it is significant as you see their water everywhere, and being more expensive than coke must be highly profitable.