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For those in search of yield...
Old 01-09-2007, 12:23 AM   #1
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For those in search of yield...

An interesting article from Kiplingers with some Closed-End fund picks for income.

http://www.parsintl.com/pdf/12361-K-Nuveen.pdf
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Re: For those in search of yield...
Old 01-09-2007, 07:48 AM   #2
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Re: For those in search of yield...

(My) short answer:

Dividend stocks are currently all the rage. Generally the higher the dividend, the higher the risk.

Cash methinks will be king in '07. I've overweighted my VG MM.

But I watch (don't own) these guys like a hawk NEW ENT SID


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Re: For those in search of yield...
Old 01-09-2007, 08:33 AM   #3
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Re: For those in search of yield...

Quote:
Originally Posted by Olav23
An interesting article from Kiplingers with some Closed-End fund picks for income.

http://www.parsintl.com/pdf/12361-K-Nuveen.pdf
Olav,

That link gets me a blank tab in Firefox. Can you provide a working link?

Grumpy
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Re: For those in search of yield...
Old 01-09-2007, 08:37 AM   #4
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Re: For those in search of yield...

Quote:
Originally Posted by BUM
(My) short answer:

Dividend stocks are currently all the rage. Generally the higher the dividend, the higher the risk.
I think you got that backwards. The higher the dividend, the lower the price. The lower the price, the higher your expected return should be.
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Re: For those in search of yield...
Old 01-09-2007, 08:46 AM   #5
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Re: For those in search of yield...

Quote:
Originally Posted by BUM
(My) short answer:

Dividend stocks are currently all the rage. Generally the higher the dividend, the higher the risk.

Please explain. Several recent studies have shown that higher payout ratios actually lead to higher returns. In addition, unlike GAAP accounting, dividends are pretty hard to fake.

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Re: For those in search of yield...
Old 01-09-2007, 09:32 AM   #6
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Re: For those in search of yield...

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Originally Posted by saluki9
Please explain. Several recent studies have shown that higher payout ratios actually lead to higher returns. In addition, unlike GAAP accounting, dividends are pretty hard to fake.

Hi Saluki,

I'll "yield" to the pros around here since I'm no expert. A recent MFool article shows higher real returns for some stocks like PFE SID and a couple others. Dividends might be hard to fake but anyone who has run a business knows that earnings are managed. And there is no free money.

All I'm saying is quality dividend paying companies can be a great way to have your cake and eat it too. But when the dividend starts cutting into the corporate bone the blood loss shows up in the P&L and the share price.


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Re: For those in search of yield...
Old 01-09-2007, 10:13 AM   #7
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Re: For those in search of yield...

Quote:
Originally Posted by BUM
Hi Saluki,


All I'm saying is quality dividend paying companies can be a great way to have your cake and eat it too. But when the dividend starts cutting into the corporate bone the blood loss shows up in the P&L and the share price.
No need to yield to anybody. The great thing about Finance is that it's a very young field of study so there are lots of opinions.

One of the reasons researchers believe the high payout ratios lead to better returns is that if the cash isn't lying around the managers of the company will not be tempted to do stupid things with it. If they pay out most of their income in dividends and they want to invest in a new project, then they need to borrow the money and for the most part banks and bondholders tolerate less crap that shareholders do.

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Re: For those in search of yield...
Old 01-09-2007, 11:09 AM   #8
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Re: For those in search of yield...

I think high-dividend companies deserve as much scrutiny as high-profit or high-sales companies. There might be nothing wrong, or there might be a rotten infrastructure ready to collapse. Paying out all your cashflow as dividends is a lot different from borrowing heavily to market a high payout.

At one point in the 1990s Pfizer's troubles hammered their stock price such that their dividend exceeded 10%. People were attracted to the yield (despite its then-unfavorable taxation) and some of them poured money into the company. PFE held onto that high payout while they recovered, and eventually the rising stock price lowered the dividend. No one expected PFE to keep it at that level.

Contrast that to GM's sinking share price. Their dividend went north of 8% and a bunch of performance-chasing investors applied the PFE model to GM. A couple months later GM cut their dividend...
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Re: For those in search of yield...
Old 01-09-2007, 11:28 AM   #9
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Re: For those in search of yield...

Quote:
Originally Posted by grumpy
Olav,

That link gets me a blank tab in Firefox. Can you provide a working link?

Grumpy
Grumpy, get the link to work? Can you try loading it in IE instead of Firefox? Anyone else have a problem loading it? If so, feel free to IM me and I can send you the PDF directly.
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