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JWR1945
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PostPosted: Sat Sep 25, 2004 10:08 am    Post subject: High Dividend Strategies Reply with quote

Dividend-Based Strategies

With a dividend-based approach, you purchase income streams. This has several advantages.
1) Valuations are automatically taken into account since you buy dividend amounts.
2) Dividend amounts are (reasonably well) predictable in the first decade even though prices are not. [This is the most important period for retirees.]
3) Dividend income streams increase to match inflation.
4) Dividend income streams last in perpetuity. [You will need to reinvest a fraction of your gains to compensate for those investments that go sour.]
5) Psychologically, while you are still in the accumulation stage, you can see your financial independence become a reality right before your eyes. You can match every one of your bills with an income stream. For example, you will reach stages when you no longer have to worry about the electric bill ever again. A specific income stream covers it.
6) Dividend-based approaches contain a value premium over the stock market as a whole. This includes the much-maligned utility stocks that have been thought (incorrectly) to be market laggards.

Related Research

That dividend-based strategies can outperform the market has been shown convincingly in James O'Shaughnessy's What Works On Wall Street and David Dreman's Contrarian Investment Strategies: The Next Generation. James O'Shaughnessy presents a complete set of data. This gives us confidence in his numbers. However, subtle flaws in his approach make us cautious when it comes to his more complex strategies. David Dreman presents representative samples from an extensive set of studies. There is sufficient overlap in his findings and those from O'Shaughnessy for us to have confidence in both. David Dreman is very thorough when it comes to the more practical side of investing. He identifies cause-and-effect relationships. This leads us to believe that observed advantages will persist.

The order of magnitude of outperformance from contrarian strategies is up to 3%. That is, the potential long-term advantage over the S&P500 index can be reliably estimated as high as a factor of 4 over 45 years. Historical returns suggest a greater upside potential, but I am reluctant to call higher numbers reliable.

High-dividend (yield) strategies do not perform as well as other contrarian strategies. Their upside potential is of the order of 1.2% to 1.5% above the return of the S&P500 index. Performance improves if you make sure that dividends are sustainable and that they are likely to increase with time. You can combine a high-dividend strategy with other value-based strategies to improve results.

Almost all studies, including James O'Shaughnessy's, have excluded utility stocks from investigation into high-dividend strategies. It has been assumed, without proof, that utilities underperform the market as a whole. Lowell Miller investigated this and reported in The Single Best Investment that the nominal annualized return of the Dow Jones Utility Index was 11.75% from 1945-1990. The S&P500 index had a nominal annualized return of 12.25% over that same period. The Dow Jones Utility Index had only half of the volatility of the S&P500 index. Lowell Miller went on to show that selecting utilities with middle level yields (relative to the utility sector, but much higher than those of the market overall) along with a high likelihood of dividend growth consistently outperformed the S&P500 index.

High-dividend stocks really shine when market prices plunge. They decline about half as much as the overall market. What is more, retirees and other investors are likely to stick with their investments as long as dividends remain stable or grow.

Today's Choices

Many will choose to stay on the sidelines during times of excessively high valuations. Others will remain committed to holding nothing but stocks regardless of valuations. At times such as this, it is important to consider the downside risk when making investment decisions.

It makes sense to select high-dividend stocks for stock allocations considering today's prices. For retirement portfolios, you can get a steady income stream of 3.8% from iShares Dow Jones Select Index DVY or 2.8% from Vanguard's VEIPX. The Dow Jones Utility Index has had a yield of 3.47% recently. Those who are willing to select individual stocks should be able to bring in a sustainable yield a little bit higher than 4%. There remains a substantial risk of a temporary loss of principal within the next decade.

Have fun.

John R.


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ben
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PostPosted: Sat Sep 25, 2004 11:35 am    Post subject: Reply with quote

It is tempting to use DVY to boost my US large (mid) cap dividends and hopefully also receive a bit of downside protection compared to VTI (tot US market). I am contemplating that my USA large/mid exposure could be 50/50% VTI and DVY.

My base portfolio yields around 3% currently and the unclemick approack of not touching anything else would therefore be possible at a 3% w/r (leaivng out the extremes).

If I knew that I could live of the 3% only it would make it easier for me to pull the FIRE-parachute! Very Happy



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Mike
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PostPosted: Sat Sep 25, 2004 5:38 pm    Post subject: Reply with quote

Quote:
It makes sense to select high-dividend stocks for stock allocations considering today's prices.

Is there any way to estimate how high dividend strategies have performed on a total return basis compared to TSM? Dogs of the Dow research would tend to indicate a favorable comparison. I have seen research that indicates equities with above average dividend yield tend to outperform below average dividend yielders, but the very highest dividend yield stocks tend to underperform. This makes me think that sticking with higher quality stocks with above average dividends may be best, but I am not sure how to quantify this. VEIPX has a slightly better 10 year record than the S&P index or TSM, so it likely meets the high quality standard. I would guess the I share fund does also. I don't know about a Mergent's portfolio.


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Mike
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PostPosted: Sat Sep 25, 2004 6:11 pm    Post subject: Reply with quote

The 3 1/3% yield that BigCharts lists for DVY is curiously close to the yield that Vanguard lists for annuities with simulated inflation adjustment. There doesn't seem to be any way to get around today's low yields affecting pay out ratios.

Comparing inflation adjusted annuity yield with non inflation adjusted annuity yield gives a rough idea of how much inflation lowers a retirees' spendable money. Inflation's effects are quite dramatic. Youngsters today might be better off choosing a government job, since this seems to be the only career with a reliable inflation adjusted pension plus health care. Private pensions will be eaten alive by inflation over the years, since the PBGC never grants inflation adjustments once pay out begins. The other option for the financially savvy would be to stick totally with a generous 401k plan, and manage one's own pension plan. The recent airline pension fiascos show the unreliability of company managed pensions.


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JWR1945
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PostPosted: Sun Sep 26, 2004 12:27 pm    Post subject: Reply with quote

Mike wrote:
Is there any way to estimate how high dividend strategies have performed on a total return basis compared to TSM?..I have seen research that indicates equities with above average dividend yield tend to outperform below average dividend yielders, but the very highest dividend yield stocks tend to underperform. This makes me think that sticking with higher quality stocks with above average dividends may be best, but I am not sure how to quantify this.

This is what you are after. I caution against any strategy that requires a high turnover (such as the Dogs of the Dow) or that is vulnerable to front running (such as the Dogs of the Dow). OTOH, David Dreman's research included measuring persistence. It lasted at least eight years. That means that your transaction costs can be very low.

Beware of Mergent's Dividend Achievers. Many of them are overpriced.

Dividend Achievers have increased dividends each year for ten consecutive years. This does not mean that all of them qualify as value stocks. For example, Avon Products AVP is on the list. My book (Spring 2004) shows that its current dividend yield as 0.74% and its (trailing) P/E is 27.29. Its ten-year dividend growth rate is 7.05%.

There are many good value stocks among the Dividend Achievers. There are many good value stocks that are not Dividend Achievers. At this time, I am following FNM (Fannie Mae), SLE (Sara Lee Corporation) and MRK (Merck). I excluded utilities in my original search. I intend to look at them soon.

Risk and Return

Next, I refer to Chapter 8 of Contrarian Investment Strategies: The Next Generation by David Dreman. These results are based upon the Compustat 1500, the 1500 largest stocks in the Compustat database. These correspond to what James O'Shaughnessy calls large capitalization stocks in What Works on Wall Street. Results are similar, but Dreman's methodology is superior.

Dreman divided these stocks into quintiles (of 300 stocks each) according to their dividend yields. Even though the composition of each quintile changes from year to year, it does so much less than with O'Shaughnessy's selection of only 50 stocks. The following results are for 1970-1996. Dreman has produced sufficient evidence for us to accept his observations as representative. O'Shaughnessy has presented a more detailed set of analysis tables [for slightly different conditions] that confirm that these results are representative.

The return (with dividends reinvested) for the quintile with the highest dividend yield was 16.1% with 8.2% coming from price appreciation and 8.0% coming from dividends [and 0.1% from rounding]. The return (with dividends reinvested) for the quintile with the second highest dividend yield was 17.5% with 12.1% coming from price appreciation and 5.4% coming from dividends. The market's return (with dividends reinvested) was 14.9% with 10.9% coming from price appreciation and 4.0% coming from dividends. [Reference: Figure 8-4.]

In down markets during 1970-1996, the highest dividend stocks fell 3.8% (per quarter, averaged) in down quarters as compared to 7.5% for the market overall. [Reference: Figure 7-5.]

From page 169:

Quote:
However, what works fine in financial theory often doesn't consider investor psychology. Many investors, particularly the older generation, feel much more secure living on the dividends and keeping their capital intact. Sure they might have more capital in the end..which would require them to occasionally draw down on the principal for their living expenses. But their comfort level, as I have found, can often go down markedly. Following this strategy will not provide optimum returns, but it will outperform the market, before deducting dividends, and make a lot of people who depend on income sleep more soundly.

David Dreman introduced Indicator 5 for selecting a good value stock regardless of the value criteria.

Quote:
Indicator 5. An above-average dividend yield, which the company can sustain and increase.
..
In practice, I have found that indicator 5, an above-average and growing dividend yield, improved performance when used in conjunction with the primary rule of buying contrarian stocks.

If you select stocks with the highest dividend yields among separate industries, most of your choices will have lower dividend yields than just buying the stocks with the highest dividend yields in the overall market. The 1970-1996 performance of an Industry-Relative selection according to dividend yields is more consistent. Selecting stocks from the highest yielding quintile within its industry produced a return (with dividends reinvested) of 17.0% with 10.4% coming from price appreciation and 6.5% coming from dividends [and 0.1% from rounding]. The return (with dividends reinvested) for the quintile with the second highest dividend yield was 16.0% with 11.0% coming from price appreciation and 5.0% coming from dividends. The market's return (with dividends reinvested) was 14.9% with 10.9% coming from price appreciation and 4.0% coming from dividends. The return of 17.0% for the highest yielding quintile falls between the previous returns of 16.1% and 17.5% from the two highest yielding quintile of the overall market. [Reference: Figure 9-2.]

It appears that the Industry-Relative approach eliminates some of the worst companies among those with the highest yields.

In down markets during 1970-1996, the highest yielding Industry-Relative stocks fell 5.3% (per quarter, averaged) in down quarters compared to 7.5% for the market overall. [Reference: Figure 7-5.]

Notice the trade off of average performance (for the highest yielding quintile) and the downside risk.

IMHO, the winning combination investment books is David Dreman's Contrarian Investment Strategies: The Next Generation and Lowell Miller's The Single Best Investment.

Total Market, S&P500 and Dividend Strategies

David Dreman's findings (and James O'Shaughnessy's large cap findings) are based on 1500 stocks, which closely approximates any Total Market index based on capitalization.

In terms of the S&P500, I refer to my own research about The TIPS-Dividend Approximation. From that research, I concluded a retiree historically was better holding high dividend stocks than holding the S&P500 index provided that his dividend yield is 2.5% to 3.0% in times such as these when valuations are high. My analysis used TIPS as a surrogate for high yielding stocks. This means that the upside potential is of high dividend stocks was excluded. [The use of TIPS as a surrogate would have failed if it were not for our initial emphasis on safety in our Safe Withdrawal Rate studies.]

Have fun.

John R.


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JWR1945
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PostPosted: Sun Sep 26, 2004 12:45 pm    Post subject: Reply with quote

Mike wrote:
Comparing inflation adjusted annuity yield with non inflation adjusted annuity yield gives a rough idea of how much inflation lowers a retirees' spendable money. Inflation's effects are quite dramatic. Youngsters today might be better off choosing a government job, since this seems to be the only career with a reliable inflation adjusted pension plus health care. Private pensions will be eaten alive by inflation over the years, since the PBGC never grants inflation adjustments once pay out begins. The other option for the financially savvy would be to stick totally with a generous 401k plan, and manage one's own pension plan. The recent airline pension fiascoes show the unreliability of company managed pensions.

IIRC, the new Federal Employee Retirement System FERS has inflation matching constraints that can lower the cost of living adjustment by up to 1% when the inflation rate is above 2%. [The old Civil Service Retirement System CSRS, which I am under, matches inflation fully.]

FERS alone is not too generous. But you are enrolled in Social Security with FERS (and you pay for it!) and you collect its benefits. CSRS does not include Social Security benefits. [In fact, there are some complex formulas if you qualify for Social Security benefits from outside employment. Social Security payments are heavily progressive. The formulas are to correct for the fact that you are not destitute in spite of a low total amount of Social Security income. You have the Government pension.]

OTOH, the new FERS includes a 401k style Thrift Savings Plan with the Government matching 5% of you salary if you contribute 5%. The Thrift Savings Plan is portable. You do not lose money if you move to another job.

The congress usually insists that the Government be a model employer. That has helped our retirements.

Have fun.

John R.


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Mike
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PostPosted: Sun Sep 26, 2004 4:40 pm    Post subject: Reply with quote

Thanks John. Carefully chosen high dividend value stocks have a good record, so upside potential is not lost by following this approach. I like the idea of living on the dividend, and leaving the principal intact. I have added the 2 books to my future reading wish list.

Quote:
The congress usually insists that the Government be a model employer. That has helped our retirements.

There is also the benefit of an employer that is not likely to go out of business, which makes the pension secure. A partial inflation adjust is better than none at all. Private employer plans taken over by the PBGC offer no inflation protection at all. Anyone working for a private employer would be wise to save enough money to compensate for this risk. Inflation is a tremendous burden to people in private pension plans.


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PostPosted: Mon Sep 27, 2004 3:08 am    Post subject: Reply with quote

JWR; what do you think aboyt DVY? Heavy in financials+a few others.



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JWR1945
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PostPosted: Mon Sep 27, 2004 6:44 am    Post subject: Reply with quote

ben wrote:
JWR; what do you think about DVY? Heavy in financials+a few others.

It looks pretty good to me. In most cases the price-to-earnings ratios look good as well as the dividend yield.

David Dreman explained that one of the reasons that professional investors seldom follow his value strategies is that they tell him that no one in his right mind would buy such companies (i.e., in the quintile least favored by the market). That is, professional managers look at the actual companies and run away.

Once a value screen has been set down, David Dreman favors making the final selection with a few additional criteria such as how well the other ratios look (such things as whether the company is likely to stay in business).

With a dividend screen, we should expect to see some current weaknesses among the companies along with some strengths. That is, we expect a mixed story. We are most interested in high dividends that can be sustained and/or will grow in the future.

Considering Lowell Miller's findings, I have no difficulty with the industry concentration. For example, before he actually looked into the matter, utility stocks were automatically thought to be laggards. The truth was different.

The industry concentration will tend to keep prices following the path of two sectors. This means that it could take a very long time (up to ten years) before you see dramatic price increases. They will rise suddenly when those sectors come into favor.

Have fun.

John R.

P.S. The link that Alec posted allows you to learn a tremendous amount of information about the individual companies themselves. See what Alec posted on The Dividend Duck thread.
http://nofeeboards.com/boards/viewtopic.php?p=23342#23342
Here is his reference to the iShares Dow Jones Select Dividend Index DVY
http://quicktake.morningstar.com/ETF/Portfolio.asp?Country=USA&Symbol=DVY&fdtab=portfolio


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Alec
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PostPosted: Tue Sep 28, 2004 3:44 pm    Post subject: high dividend strategies Reply with quote

hey all,

Regarding the breakdown b/w dividends and "price appreciation" when looking at total return, I think one still has to break the price appreciation down into "earnings growth" and "price appreciation". John Mauldin (sp) muffed this distinction a little when he said something like 80% of the return of the market [b/w 1982-1999]. After all, high dividend stocks usually have much higher payout ratios than lower dividend paying stocks, so they logically should have less earnings growth than the market. Of course, companies with lower payout ratios run into the agency problems [like flushing good money after bad projects, empire building, etc.].

Also, I'm not so sure that high dividend strategies with have the dividends increase with inflation. The market's real return has been roughly the market's dividend yield, but again, the high dividend payers may not be able to grow the dividends with inflation if they're paying out a lot. I do think that DVY does do some screens for payout ratios - like the stocks they include cannot have above a certain % payout ratio.

For taxable accounts, I would've recommended one of the value ETF's b/c the preferential treatment on cap gains, but now with the low taxes on qualifying dividends, something like DVY may not be that bad. Though, I still think I'd want to include SV with my TSM before MV or LV. Each to his own though.


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PostPosted: Tue Sep 28, 2004 4:19 pm    Post subject: Reply with quote

Quote:
...the high dividend payers may not be able to grow the dividends with inflation...

It rather makes sense that if TSM is likely to produce less total return going forward, high dividend yielding stocks are likely to produce less total return than they did in the past as well.


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PostPosted: Wed Sep 29, 2004 4:21 am    Post subject: Reply with quote

Since about 1967, Geraldine Weiss, (Investment Quality Trends newsletter, Dividends Don't Lie book) has been using a reduced set(?about 300?) of companies that aren't expected to go out of business anytime soon(her blue chips). Buys when the dividend gets to the upper quartile of their long term average and sells in the lower quartile. Shades of Graham and Dreman.

Me - being 11 yrs. into ER - I don't give spit about total return - just try to find a middle Ben Graham - combo of div plus div growth. Pushing either extreme - high div or high div growth - has been only semi successful in the past - although I still take small chances - aka AT&T.


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JWR1945
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PostPosted: Wed Sep 29, 2004 5:20 am    Post subject: Reply with quote

Alec wrote:
Regarding the breakdown b/w dividends and "price appreciation" when looking at total return, I think one still has to break the price appreciation down into "earnings growth" and "price appreciation". John Mauldin (sp) muffed this distinction a little when he said something like 80% of the return of the market [b/w 1982-1999]. After all, high dividend stocks usually have much higher payout ratios than lower dividend paying stocks, so they logically should have less earnings growth than the market. Of course, companies with lower payout ratios run into the agency problems [like flushing good money after bad projects, empire building, etc.].

I understand your concern. Numbers such as John Mauldin's covered multiple years. Reinvested dividends grow in price as well as one's initial holdings. If we write a single year's total return by R, the return due to price appreciation by r and the dividend yield as y, this relationship holds:

R = r + y. However, if we have two years, the relationship is a product of what Gummy calls gain multipliers G = 1 + R and g = 1 + r and the equation is: (1+annualized total return)^2 = (1+R1)*(1+R2) = (1+R1+R2+R1*R2) = 1+[r1+y1]+[r2+y2]+R1*R2) = (1+[r1+r2]+[y1+y2]+R1*R2. The problem pops up with the produce term R1*R2 = (r1+y1)*(r2+y2). You cannot simply add things up when looking at multiple years.

You can add price appreciation (alone) and dividend yields in a single year. You cannot with multiple years.

The numbers that I reported are David Dreman's numbers and they are single-year averages. High dividend yields and high total return are paired on a year-by-year basis. Growth rates may change as payout ratios change, but the single-year relationships remain the same.

Have fun.

John R.


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PostPosted: Wed Sep 29, 2004 7:04 am    Post subject: Reply with quote

Alec wrote:
After all, high dividend stocks usually have much higher payout ratios than lower dividend paying stocks, so they logically should have less earnings growth than the market.

Consider these comments regarding dividend increases. From pages 214-218 of The Single Best Investment by Lowell Miller:

Quote:
..The authors [Denis, Denis, and Sarin in the Journal of Financial and Quantitative Analysis, December 1994] found that changes in dividends proved to be intended or unintended signaling by management regarding cash flows at the company. Interestingly, though many academics had suggested that companies that raise their dividends would decrease their capital expenditures (or at least not increase investments), the authors found that just the opposite is true. Companies that increase their dividends are more likely to increase their reinvestment in the business, and companies that decrease their dividends are more likely to reduce capital expenditures. The conclusion is inescapable: companies that increase their dividends are companies that are making money - enough to run a thriving business and enough to share with stockholders in the here and now as well.
..
Does all this seem like common sense to you, and perhaps not exactly worth a Ph.D.? It should, because it is, in fact, no more and no less simple than common sense.

In any event, you don't have to be a professor of finance to know that if a company increases its dividend, management is saying good things about the future.
..
Like much of social science, the academic studies confirm what we know intuitively, or have concluded logically. They can even on occasion come up with a slightly startling and seemingly counterintuitive result, as when Denis, et al found that firms increasing dividends also increase capital spending. Many academics were surprised by this finding, assuming that money spent on dividends would be money diverted from reinvestment in the business. But academics are not investors. The simple fact in the real world is that success breads success.

Have fun.

John R.


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JWR1945
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PostPosted: Wed Sep 29, 2004 5:29 pm    Post subject: Reply with quote

Alec wrote:
Also, I'm not so sure that high dividend strategies will have the dividends increase with inflation.

This is a good question. I have collected data for the S&P500 index and posted them on another thread. With the S&P500 there were some bad years for starting a retirement, years in which the real dividend income fell. Their disappointing dividend income (after adjusting for inflation) is balanced in part by a very gradual price appreciation.

Have fun.

John R.


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PostPosted: Wed Sep 29, 2004 6:53 pm    Post subject: Reply with quote

Quote:
Geraldine Weiss

I remembered reading favorable reviews about her in a book by Mark Hulbert, so I Googled her name and found an interview in Forbes where she talks about dividend on the Dow. She first though the market would collapse when Dow dividend fell below 3%, then changed her mind and now thinks the new range is 1.5% to 3% on the Dow.

http://forbes.com/2002/02/12/0212adviser.html


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PostPosted: Wed Sep 29, 2004 7:35 pm    Post subject: Reply with quote

James Dlugosch sounds a cautionary note on high dividend stocks. He suggests that they are currently over valued, which would make potential capital losses more than offset their dividend yield. The dividend yield itself is not very generous by historical norms. I wonder if this situation is similar to buying long bonds when yields are low. You would get the dividend from the bond regardless of the future price of the bond, but might still come out way ahead by waiting for better rates before buying.

http://cbs.marketwatch.com/news/story.asp?dist=&param=archive&siteid=mktw&guid=%7B75D20DFC%2D0004%2D430C%2DBA19%2D8AF25103B8D8%7D


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PostPosted: Thu Sep 30, 2004 2:56 am    Post subject: Reply with quote

Thanks for providing the Forbes link, Mike.

Juicy Quote #1: "We advise our subscribers to allocate an average of 25%-30% of assets in the stock market. For safety, I like insured CDs, treasuries, but not corporate bonds." (The article is from February 2002)

Juicy Quote #2: "dividends provide a cushion of safety when a stock starts going down. When the stock price drops, the yield gets to very attractive levels, so many investors will step in and buy, reversing the trend of the stock. Of course, when you don't have a dividend, you have nothing to stop a decline."

Juicy Quote #3: "My projections were based on the fact that going back as far as research will take anybody, the DJIA fluctuated between dividend yield extremes of 3% at overvalued and 6% at undervalued....I'm thinking that perhaps this profile of value for the DJIA has changed now that the index includes a stock that does not pay a dividend (Microsoft) and includes several stocks that pay minuscule dividends (like Intel). ... I would take a chance on the 3% yield being a good buying area. "

Juicy Quote #4: "I frankly include REITs in the service only because so many readers ask for them. I'm not crazy about REITs because by law they have to pay out 90% of their earnings as dividend. When their earnings falter, that dividend is going to go down."


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PostPosted: Thu Sep 30, 2004 6:59 am    Post subject: Reply with quote

Mike wrote:
James Dlugosch sounds a cautionary note on high dividend stocks. He suggests that they are currently over valued, which would make potential capital losses more than offset their dividend yield. The dividend yield itself is not very generous by historical norms.

I do not see evidence that high dividend stocks are overvalued compared to other stocks. I will agree that stocks are overvalued in general.

If you look at his time period, we would call him a short-term trader. He is talking in terms of only one or two years, not in terms of a decade or longer.

I recommend including value indicators along with dividend yields (and dividend growth rates). This should keep you from making the worst choices.

Quote:
I wonder if this situation is similar to buying long bonds when yields are low. You would get the dividend from the bond regardless of the future price of the bond, but might still come out way ahead by waiting for better rates before buying.

Viewed over 10 to 20 years, we would expect dividend producing stock prices to grow while bond prices (i.e., par value) remain constant. Earnings and dividend amounts should continue to grow close to historical rates (1.5% and 1.1% to 1.2% after adjusting for inflation). This will eventually overcome the effects of multiple compression (i.e., reductions in the price-to-earnings ratio of the market).

You can run into problems in the short and medium terms. It is a good idea to have at least part of your money in something that can be cashed out without worrying about major short-term price decreases. I-bonds and TIPS come to mind.

For the investor as opposed to the speculator or trader, part of the beauty of dividend-based strategies is that your income stream remains secure even when bad things happen to prices.

Have fun.

John R.


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PostPosted: Thu Sep 30, 2004 7:15 am    Post subject: Reply with quote

Geraldine Weiss's approach sounds very much like David Dreman's industry-specific approach: buy the highest yielding companies in each industry group. David Dreman, Lowell Miller and just about everyone else places some quality constraints on purchases. So does Geraldine Weiss.

Many of the differences are only along the edges (or at the margins). Geraldine Weiss is more willing to sell than David Dreman. Yet, how much different is it for Dreman to recommend selling whenever a value stock has returned to normal levels of value indicators (price-to-earnings, price-to-book, price-to-cash flow and dividend yields) than for Geraldine Weiss to sell when a company's dividend yields are in its own overvalued territory? Lowell Miller would place more emphasis on starting from a good initial dividend yield, but both Miller and Weiss pay special attention to dividend growth.

My impression is that we have a winning overall strategy. Geraldine Weiss's strong performance is documented in the Hulbert Financial Digest. [Her ratings have gone up since 2002. Her record shows consistent outperformance.]

Have fun.

John R.


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