What is your cash yield on assets?

[Maurice]

Cool, Ha, you've given me something else to obsessively track

 

[Zathras]

7%, HOWEVER that is from the pay off of a loan (essentially) and will be moving into dividend paying stocks. Outside of that source, 3.1% (dividends and bank interest).
I am targeting for 3% once money stops coming in.

 

[Zathras]

well yes and no. since in either case the share price varies it really amounts to the same thing if you pull a full 5% from a non dividend paying stock vs a dividend paying stock that drops the same 5% ex dividend as well as what ever the market action is on it also

And yes again
Say you have 1000 shares. After 10 years, you have fewer shares, while I still have the full number of shares and a dividend that kept up with inflation (sticking with large stable companies).
Yes, there are things that will balance it out, but dividends work at least as well as non-dividend payers and give you the benifit of not needing to sell when the stock is depressed.

 

[Lsbcal]

Yes, there are things that will balance it out, but dividends work at least as well as non-dividend payers and give you the benifit of not needing to sell when the stock is depressed.

I understand that dividends can be comforting, but I also don't get the emphasis on picking stocks or keeping stocks based on the dividends. If the stock is depressed it could be because the market thinks the company is not a good value. If stocks are depressed in general you will probably be selling bonds rather then equity to fund your income needs.

That said, I have one stock which has increased it's dividend regularly and whose payout ratio has not increased over the years (dividend is secure) and that has great cash flow. I did not keep it for it's dividend (which peaked at 2.4%) but because it has good growth prospects going forward and I have high cap gains in it. Just recently it has done well but over the last 5 years I'd have been much better off holding a total stock market fund.

 

[cute fuzzy bunny]

Bernstein described the function well in the four pillars.

"Good" stocks tend to have their day, then eventually stop being king of the hill and slide. There are clearly exceptions, but on the whole, the hot companies of this decade are probably not the hot companies of a decade or two ago. Its also hard to figure out which stocks are going to become "good" stocks, and once they're obviously good, most of their upside has already been realized.

"Bad" or value stocks have more upside, since its more likely that they'll "get better" eventually. In the meanwhile, they often pay a good dividend to make it worth your while to wait it out. Its easy to spot a bad company thats not that bad. Look...there they are!

Buy buying a fund or basket of "bad" stocks, you improve the odds of picking up the value premium and lower the odds of defaults.

I dont as a rule buy into investments looking purely at the dividend, but I do very much like ones that pay a good dividend, have good prospects to give me an extra 2-4% of capital appreciation a year, low default rate and reasonable volatility. Given the tax treatment offered on qualified dividends is the closest thing to a free lunch, I'll take 'em.

Zathras - I had the same conversation with the guy a dozen times, he doesnt get it. While technically a dividend causes the market computers to mark down an equity or fund, the subsequent bid/ask market action usually wipes away most of that adjustment.

Its not the same to say that you can sell shares instead of take the dividend. I can take the dividend from a stock thats taken a double digit hit to its share value without losing the share in a depreciated state and maintain the share holding until the price recovers.

Thats the beauty of the construction i'm using. Volatility is irrelevant. Unless there is a mass of defaults or a whole bunch of companies stop paying on their stock dividends and bond payments...not much to worry about.

In the event that such a horrid event should come about, I think I may buy a couple of gold bars. In the event of disaster, I'm going to hammer one into a shotgun and the other into a pot roast. I may get a third one to use for a door stopper.

 

[Zathras]

Don't get me wrong, I don't chase the best dividend yield and don't recommend doing so. Heck, if you wanted to I am sure you could find huge dividend yields right now. Citi is over 7% right now, but I wouldn't buy them at this point.
I do look for a company with a solid cash flow, that pays a dividend and has a history of doing so.
My dividends have increased 9% this year beating inflation handily. By the time I stop bringing money in I expect to have enough dividends to live off of without needing to reduce my positions.
So while dividends aren't the only consideration for me and I do buy some non-divedend paying stocks, dividends are a important part of the plan.

 

[Maurice]

Just checked it out, my %age is quite low, under 2% ytd, which is not surprising given my positions (e.g. half my net worth in a stock that has a dividend yield of ~1.2%). A good number of my index funds/etfs pay semi-annually or annually, so the data is still a bit skewed.


The absolute amount of cash thrown off was higher than I expected, though, about 36k through the 3rd quarter.

edit to add: I'm including ibond interest which isn't really cash yet.

 

[mathjak107]

Bernstein described the function well in the four pillars.


Zathras - I had the same conversation with the guy a dozen times, he doesnt get it. While technically a dividend causes the market computers to mark down an equity or fund, the subsequent bid/ask market action usually wipes away most of that adjustment.

Its not the same to say that you can sell shares instead of take the dividend. I can take the dividend from a stock thats taken a double digit hit to its share value without losing the share in a depreciated state and maintain the share holding until the price recovers.

Thats the beauty of the construction i'm using. Volatility is irrelevant. Unless there is a mass of defaults or a whole bunch of companies stop paying on their stock dividends and bond payments...not much to worry about.


.

yes we discussed this many times but your still assuming that after giving away say 5% of the companies value and the bids being adjusted downward by the same amount automatically by the exchanges that some how this will be a none event and market trading will bring it right back. i think maybe you better ask the holders of gm, ford, citibank, and many many others if that assumption is true. many of these depressed stocks wouldnt be down so much if they werent constantly taking that hit. problem s if they try to stop it now they will take even a bigger hit

 

[Zathras]

i think maybe you better ask the holders of gm, ford, citibank, and many many others of that assumption is true.

Which is more important, your income or your 'on-paper' value of your stocks?
As for GM and Ford, never bought them. They didn't meet my requirements for a well run company with a great cash flow.
I have taken no hit to my income from my Citi stocks. Sure, it is possible that I could, but so far I have not. Of course if you are selling your stock in Citi you definately would be taking a hit. Nice not to have to worry about that

 

[mathjak107]

both are important or ill give anyone here a nice return but i keep the principal... oh my god i think i invented the annuity.

 

[twaddle]

"Bad" or value stocks have more upside, since its more likely that they'll "get better" eventually. In the meanwhile, they often pay a good dividend to make it worth your while to wait it out. Its easy to spot a bad company thats not that bad. Look...there they are!

But you're a dirty market timer, right? If so, you should understand that value suffers most in times of distress.

Take junk bonds, for example. Brew says he likes the spread now. It's certainly better than it was during the bull run. But if we're in a bear, that spread is likely to double from here.

Likewise, the risk premium for value stocks is likely to get significantly higher from here. Market timers might want to wait a while.

 

[cute fuzzy bunny]

Nah, I aint a dirty market timer anymore. I washed up a little.

Doesnt matter how much it "suffers". I'm eating one pot and the other one doesnt have any value in it. Or much in the way of bonds either.

I do have a little vanguard junk in the near pot. Its not too junky. Had to hold me nose a little when I bought it but my only other plausible option was to eat more 6.25% cd's and I already had too many of those...

I just kinda feel like everythings gonna suck for a while. Probably a good time to stay close to the ground. But then again, I could be wrong...

 

[mathjak107]

saw jason zweig on tv the other night. he wrote a book on the psychological aspect of money. it was real interesting. they did experiments using brain scans and money decisions.
some of the interesting points were :

we have the same scan when making decisions about making money such as buying a stock as a druggie does when waiting for his next fix. we absolutley hate loosing money more than we like making it.

the scans of the thought ofloosing money were equivelent to stepping in dog crap or vomit.

the scans when we actually lost money were quite calmer than the scans of the thought of loosing money.

im pretty heavy in cash at this point as i have the same feelings as fuzzy but thats our brains getting us to believe our own bull crap i guess.

 

[haha]

But you're a dirty market timer, right? If so, you should understand that value suffers most in times of distress.

You may be using a corrupted definition of value. Using the Ben Graham or Warren Buffet definition at the right price Proctor and Gamble, Coca Cola, Johnson and Johnson, US Bank, Wells Fargo, and American Express would be value stocks. The term is in this sense is not defining a taxonomic class, so much as a set of quality and price/value observations that can only be made after full analysis of the individual stocks.

Ha

 

[twaddle]

You may be using a corrupted definition of value. Using the Ben Graham or Warren Buffet definition at the right price Proctor and Gamble, Coca Cola, Johnson and Johnson, US Bank, Wells Fargo, and American Express would be value stocks. The term is in this sense is not defining a taxonomic class, so much as a set of quality and price/value observations that can only be made after full analysis of the individual stocks.

Well, there's the academic definition (basically low P/B, with high yield considered a so-so proxy), and then there's Ben Graham's. On the Graham side, Tweedy Browne have a very compelling document describing some of the traits:

http://www.tweedybrowne.com/library_docs/papers/what_has_worked_all.pdf

But I only found it compelling until I looked at their fund's performance.

 

[haha]

Well, there's the academic definition (basically low P/B, with high yield considered a so-so proxy),

From my POV, this doesn't define value; rather it suggests junk. But I understand what you are saying. Historically the Ben Graham definition was first. It followed on John Burr Williams, and was intended to structure investment approach and improve performance. The "academic" definition which IMO should be read as the marketing definition was intended to create ancillary layers of advisory fee streams in the much more marketing intensive modern environment.

I am agnostic as to whether there is enduring value in academic finance beyond option theory and things of that sort, but I am sure that old time value investing will make money over the cycle, and not get you killed. And I have read J. Finance, etc. etc. off and on for years, so I am not unacquainted with the academic ideas.

I also believe that there are flaws in benchmarking performace to some index or another. For example, say you are a mountaineer planning a long dangerous ascent. Basically you can go light, which means faster- but at a risk should adversity strike while you are on the mountain. Or you can go in slower, but more covered fashion.

If the weather stays nice, the guys who go light reach the peak quicker. But should a storm arise, they may die. Should the guys who carried more safety gear be judged against the clear-weather ascent of the Go-Lightlies?

IMO, no.

Ha

 

[unclemick]

page 563, appendix: The New Speculation in Common Stocks first read 1973 in the 4th ed of Ben Graham's The Intelligent Investor.

In 1989 the light bulb sort of came on (so I'm a block head) - started buying and dollar cost averaging DRIP plan stocks from the middle of Moody's Handbook of Dividend Achievers(Mergent later bought this out).

erratic 8% - via 3-5% div.'s and spin offs, cash buyouts, mergers with cash kickers etc. 1989 - 2007. Down to 33 from a peak of over 50 DRIP's(two file cabinets). hormones like drugs are hard to kick. 40% of income some early years of ER.

1957 Speech is often overlooked when talking about Ben - skip all that fancy value/margin of safety crap - buy some middle way businesses that you know what they do and keep them. That way you avoid the magic, mystery and manipulation - boring but it works.

Yawn - so ok - maybe the Pats do have a good football team.

heh heh heh -

 

[cute fuzzy bunny]

Good? GOOD?!?

 

[niknah]

Do you live in the Palace at Versailles?

Ha

No, just an apartment in the city, it's a good spot popular with tourists.
And everything's close by so I don't have a car and I've always lived below my means.