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Investment Research Since 1978

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Bezos’ Law: Prices will be Lower, But what about for Income Investors?

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Great ideas don’t always translate into great investments. Remember Amazon almost going out of business in the dot com bust? When I think of Jeff Bezos I think of Steve Jobs. Both are, and were one of a kind. That doesn’t mean I’d buy their stocks. There’s plenty of ways to benefit from Bezos’ Law, which I define as whatever business Bezos decides to get into, “prices will be lower.” But, and here’s the catch, to make Bezos’ Law into the law of the land, Mr. Bezos needs LOTS of capital and GREAT people working for him. The ONLY way to make that work is with a high stock price to reward both … [Read more...]

Warren Buffett and Apple Paying a Dividend Would Be Nice

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“It’s our job, though, to over time deliver significant growth, bumpy or not. After all, as stewards of your capital, Berkshire directors have opted to retain all earnings,” writes Warren Buffett in his 2016 Annual Report Chairman’s letter. In other words, Berkshire doesn’t pay a dividend. It retains all earnings to invest in its companies or to acquire new ones. If you’re a Berkshire shareholder and need retirement income you need to rely on Berkshire’s capital gains to sell shares. I don’t like that and it's not how Mr. Buffett operates. He loves cash and invests it wisely (most of the … [Read more...]

Calculating Shareholder Yield

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To calculate the shareholder yield, pick up the annual report for a company you are interested in (preferably a non-financial company), and turn to the Statement of Cash Flows. In the Statement of Cash Flows, move down to the section labeled - Cash Flows from Financing Activities. For most companies, this is the last section of the Cash Flow Statement. To calculate shareholder yield, you have to determine the total amount of dividends that were paid to shareholders, the net amount of stock that was repurchased, and the net amount of debt that was repaid. Before you get started, remember you … [Read more...]

Is This the Calm Before the Storm?

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The average daily movement in stocks during the first quarter of 2017 was the lowest since 1965. What did stocks do back in 1965? Basically nothing for the next 16 years or, an entire retirement for many. That’s why you need to get paid to be in this market in the form of dividends. But how do you know which companies have the safest, most sacred dividends, and which companies look out for you, the investor? Allow me to help. My email address is ejsmith@youngresearch.com … [Read more...]

This is a $100 billion Dividend Opportunity

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If there is one sector of the stock market that has been damaged most by burdensome regulation and ultra-loose monetary policy over the last decade it is the Financial sector. Here the WSJ outlines the potential for the six biggest U.S. banks to return more than $100 billion to investors if Trump succeeds in a push to loosen bank regulation. The six biggest U.S. banks could potentially return more than $100 billion in capital to investors over time through dividends and share buybacks if the Trump administration succeeds in a push to loosen bank regulation. President Donald Trump on Friday … [Read more...]

This is How to Collect Special Dividends

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Bank shares used to be a reliable source of dividends, but following the global financial crisis, the Fed and other bank regulators put the brakes on the payout ratio of America’s biggest banks. Today, the payout ratio on America’s big banks has a soft limit at 30%. To get around the 30% payout limit of regulators, the big banks are now considering paying special dividends. The Wall Street Journal has the story. Two of the nation’s most prominent bankers on Tuesday hinted at higher dividends in the future, especially if bank stocks keep rising. This is mostly welcome news for investors, … [Read more...]

Vanguard’s Investment Advice in a Low Yield World

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Vanguard 's head of investment strategy and global chief economist Joseph Davis gives some advice to investors in a low yield world, don't be a hero. Bloomberg writes: “The next five years are going to be more challenging than the previous five years in investing,” said Joseph Davis, head of investment strategy and global chief economist at Malvern, Pennsylvania-based Vanguard, which oversees $3.8 trillion. “Be cautious of trying to be heroic in this environment.” Vanguard's global head of fixed income, Gregory Davis, echoes his colleague's sentiments. Given the uncertainty still facing the … [Read more...]

Dividend Growth is Key

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BlackRock’s Global Chief Investment Strategist Richard Turnill on the importance of dividend growth. This week’s chart shows how U.S. dividend stocks have outperformed the S&P 500 over the past year, a trend we have also seen in other regions, as ultralow bond yields have intensified the hunt for income. Year-to-date flows into dividend-focused exchange traded products (ETPs) have reached $7.4 billion, more than seven times the 2015 total, according to our data. So what’s next for dividend stocks? We don’t see strong demand for dividend stocks dissipating anytime due to low … [Read more...]

“For My Money the Sun Rises and Sets on…”

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I found this gem from Richard C. Young’s Intelligence Report, December 1988 issue. Some things never change. When it comes to serious money invested in common stocks, for my money, the sun rises and sets on dividends. With dividends as your friend, you have the miracle of compounding on your side through thick and thin. What question should you ask first before you invest in common stocks? You ask, what is today's yield on stocks compared to the historical yield on stocks? If the current yield is higher than the average yield over many cycles, you can take advantage of a period of value. … [Read more...]

Dividends are Back!

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Dividends are back. “The humble dividend is reclaiming its rightful place as the arbiter of stock-market value. In three of the four biggest developed markets, shares offer a higher yield than the longest-dated government bond, and in the fourth—the U.S.—the dividend yield beats even a 20-year bond,” writes James Mackintosh at The WSJ. But offering higher yields than the longest-dated government bonds is like jumping over a candle stick. “The low returns on the longest-dated bonds are extraordinary: 0.3% on Japan’s 40-year government bond, 0.9% on Germany’s 30-year bund, 2.1% on Britain’s … [Read more...]