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Post by kathiel on Feb 7, 2022 0:35:52 GMT
As an income investor, when a dividend is cut, I have to do something. Of course, I try to avoid dividend cuts, but sometimes they happen. Sometimes I know that this was going to happen, like T, sometimes I haven't anticipated it, like PEAK. So last week I needed to make up for some dividend cuts by selling a stock and replacing it with something with a higher dividend.
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Post by Deleted on Feb 7, 2022 1:21:53 GMT
Yes, not a welcome event. As you well know, it happens. Biggest lesson for me is sell quickly once it has been cut and maybe before it is cut if the rumor mill is going and looks possible. Unless it's an MLP or REIT, I get a little concerned of dividends 4%+ They need to have the earnings to support. I've also learned to sell companies - that don't pay dividends - quickly if something pops up unexpectedly - I let go of my FB after hearing repetitive concerns about competition combined with heavy spend for a vision. I have been burned by not selling in both instances. If I can book a gain, so much the better.
I try to stick with ones with solid dividend history - as with T that didn't hold up, but that was telegraphed forever - just have to accept the message. I am not lecturing, just streaming how I have worked through this unpleasant journey. I still like starting a hunt with the Aristocrats. To be honest, I am a little concerned about ABBV when Humira isn't a monopoly anymore. But only just a little right now.
I know this isn't your first rodeo - let us know what you pick and your process.
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Post by richardsok on Feb 7, 2022 4:23:02 GMT
Yes, not a welcome event. As you well know, it happens. Biggest lesson for me is sell quickly once it has been cut and maybe before it is cut if the rumor mill is going and looks possible. Unless it's an MLP or REIT, I get a little concerned of dividends 4%+ They need to have the earnings to support. I've also learned to sell companies - that don't pay dividends - quickly if something pops up unexpectedly - I let go of my FB after hearing repetitive concerns about competition combined with heavy spend for a vision. I have been burned by not selling in both instances. If I can book a gain, so much the better. I try to stick with ones with solid dividend history - as with T that didn't hold up, but that was telegraphed forever - just have to accept the message. I am not lecturing, just streaming how I have worked through this unpleasant journey. I still like starting a hunt with the Aristocrats. To be honest, I am a little concerned about ABBV when Humira isn't a monopoly anymore. But only just a little right now. I know this isn't your first rodeo - let us know what you pick and your process. A couple of procedures you might follow for a preliminary look: If you are interested in checking the stability of a higher yielding stock you might look it up over at finviz.com. They give a very detailed data panel on a great many equities. In most cases, among all the other information you can get A) dollar amount of annual distributions, B) dollar amount of EPS and C) estimated EPS for the upcoming year, D) PE, E) analysts consensus ---- all of which will give you a back-of-the-envelope idea if its earnings are supporting the distribution. The second idea is already known by many of us. Simple google "PIMCO UNII" and find the most recent coverage report for their closed end funds. Third: the prospect of interest rate hikes is doing ugly things to preferred ETFs and CEFs just now. But these trends can't last forever. When a bottom is found, an alert investor will be able to pick up some really good and reliable yielders -- which is just what I did in 2008. I am still holding the preferreds I bought back then, and wish I'd bought more. Watch the charts. PFF, HPS, PFFR, etc etc. I very much like preferreds for my estate; I am just not sure if this moment is the most opportune for collecting them. |
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Post by steelpony10 on Feb 7, 2022 16:08:27 GMT
As an income investor, when a dividend is cut, I have to do something. Of course, I try to avoid dividend cuts, but sometimes they happen. Sometimes I know that this was going to happen, like T, sometimes I haven't anticipated it, like PEAK. So last week I needed to make up for some dividend cuts by selling a stock and replacing it with something with a higher dividend. you generate excess to needs cash correct? How about going over an allocation occasionally to buy time so you don’t have to scramble or settle. You win either way. You can also just reshuffle or shift funds to what you hold to make up for the income loss. Since I don’t allocate I usually use this technique until I find a better solution. |
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Post by xray on Feb 7, 2022 18:02:33 GMT
kathiel, Your: As an income investor, when a dividend is cut, I have to do something. Of course, I try to avoid dividend cuts, but sometimes they happen. Sometimes I know that this was going to happen, like T, sometimes I haven't anticipated it, like PEAK. So last week I needed to make up for some dividend cuts by selling a stock and replacing it with something with a higher dividend. Income oriented investors (like many of us) have been taught (through our CapLoss lessons) that we can protect ourselves [IMHO] With that said.... 1... Use what we have been taught many many years back. Buy initial positions of a security (that passes our own careful analysis ... not conversation boards where opinions are given and are normally a "hint" of what we might want to look at for analysis) at 0-2%. If/when, the security in question passes the time "time" event (3-month period), and it is performing better than before the initial buy, buy another phase (2-4% of total portfolio. Maximum holding is always 6% maximum unless you know something and have a known winner (over a 12 month period).... 2... Dividend/distribution cuts are always known by many of us (like EDF as an example where two cuts have taken place and still many income investors still hold it. EDF should be performing better with the NAV increasing because of the shareholder cuts going into the NAV but is not and thus a "dud"). If we follow the NAV's and book values, we should always know the "RISK" to our portfolio's. "REDUCING" our number of shares (in reverse of adding share) has to be used to protect our portfolio's.... 3... When we sell a security we should never be in a hurry to replace. It could be worse than what we previously owned. What we should be looking for is a security with a "increasing" dividend which will also drive the MktPrc to go higher (CapGain). We should never follow the crowd into any security that has a decreasing book value or lower NAV. Buying a "UNDERVALUED" security at "DISCOUNT" is what we are always looking for (IMHO). Last year we found a few like I am mentioning with AVK and LGI which had EOY's (end of year distributions in addition to their dividend increases). Both were running at better NAV's (10star in my case) and above average distributions (>10%).... Something to think about.... One single opinion of the many I am sure.... Live Long and Prosper....
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Post by Chahta on Feb 7, 2022 23:16:16 GMT
kathiel , @slooow , why would you ladies not put a chunk into SCHD (3% yield) and get the best of both worlds with no single stock risk? You can still buy stocks.
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Post by kathiel on Feb 8, 2022 0:05:27 GMT
kathiel you generate excess to needs cash correct? How about going over an allocation occasionally to buy time so you don’t have to scramble or settle. You win either way. You can also just reshuffle or shift funds to what you hold to make up for the income loss. Since I don’t allocate I usually use this technique until I find a better solution. Indeed, I do generate excess to needs cash. So when I get a dividend cut, I have time to consider what I want to do. This time, I sold the PEAK (I'd made a fair amount of cap gains on it) and replaced it with some GILD (paying over 4%). I also added a bit to some things I already own. In fact, I decided to let some of my better paying stocks run up a bit, going over my 5% allocation limit. Wise minds think alike! I'm not sure what to do about T - I think I'll await the spin off to decide. |
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Post by kathiel on Feb 8, 2022 0:06:22 GMT
kathiel , @slooow , why would you ladies not put a chunk into SCHD (3% yield) and get the best of both worlds with no single stock risk? You can still buy stocks. Chahta, 3% isn't enough for me. |
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Post by Deleted on Feb 8, 2022 0:16:44 GMT
Chahta - I've thought about it and I do sometimes wonder what it would be like to just have an etf like SCHD. I do enjoy research and learning. Kathy was with Josh Peters and I was too. I really think he showed us how to evaluate dividend stocks - not as well as him (speaking for myself), but well enough. I enjoy my strategy. Kathy is being modest - she is very good at evaluating pharma companies. She got me on board buying ABBV and I easily doubled my investment and have a great dividend - Kathy any worries there?
Maybe one day, but right now, I like picking the majority of what I hold.
SCHD was a great etf to get into a year or so ago.
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Post by Deleted on Feb 8, 2022 1:08:59 GMT
I didn't realize you held T. If I still held it, I'd wait too. It sounds like the new CEO is making progress. The nice thing I found with my two biggest losses was that it really didn't change a thing once replaced! That was actually a great thing for me to learn.
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Post by anitya on Feb 8, 2022 1:12:33 GMT
"Kathy was with Josh Peters and I was too."
Do you mind elaborating on the extent of your past and present business relationship with him?
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Post by Deleted on Feb 8, 2022 1:26:49 GMT
Sorry - Dividend Investor Newsletter at Morningstar. Only emailed with him a few times - he had a great newsletter and also wrote a book - The Ultimate Dividend Playbook. He regularly beat the S&P with much better yield.
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Post by kathiel on Feb 8, 2022 2:58:02 GMT
Back in the "old days" Josh Peters wrote the Dividend Investor Newsletter for M*. There were quite a number of us who subscribed and we talked to each other on the M* board for dividend investors. I learned a lot from him, (and from other posters on the board) and took some of his recommendations. I always researched the stocks on his bellwether lists, and often found things on those lists that I liked better than his recommendations. Like Sara, I remember emailing him a couple of times, but had no other relationship with him. I learned a lot from him about evaluating dividend stocks.
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Post by kathiel on Feb 8, 2022 3:00:16 GMT
kathiel , You like this stuff don’t you? You broke out of that allocation box? Yikes! You need a tattoo now. Maybe a little cat paw print on your ankle with a bracelet of cats. You have the dough if you dump T. , LOL, No tattoos for me. Yup, I have the money if I dumped T - and even if I don't. |
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Post by kathiel on Feb 8, 2022 3:06:43 GMT
@slooow ,
I have no concerns about ABBV - it's doing great. It's got a great pipeline, and it purchased Allergen a few years back, which gave it Botox. It also has an eyedrop that improves age-related far-sightedness. How would you like to give your reading glasses for an eyedrop?
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Post by richardsok on Feb 8, 2022 4:03:01 GMT
kathiel , @slooow , why would you ladies not put a chunk into SCHD (3% yield) and get the best of both worlds with no single stock risk? You can still buy stocks. Or if it's steady income you're seeking, you might take a page from Xray's chatter and look into some of the preferreds that have been tumbling down into near-bargain territory lately. I do agree 3% isn't sufficient. But TWOpB is tossing off 7.7%, as are several preferred closed end funds nowadays. Can thing go lower? Certainly, but you're a lot closer to the bottom, (where ever that is) that you'd be six months ago. FPF, CNLPL, PFFR, DLNGpA or B (almost 9% ! ! ), and many more are certainly worth watching , if not buying, right here. You know my style is to watch the charts and try to find support before pulling a trigger. For safety I favor preferreds of stocks that are paying a dividend for the common -- and are earning it, but suit your own style. Good luck. |
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Post by anitya on Feb 8, 2022 7:26:53 GMT
Sorry - Dividend Investor Newsletter at Morningstar. Only emailed with him a few times - he had a great newsletter and also wrote a book - The Ultimate Dividend Playbook. He regularly beat the S&P with much better yield. Thanks. I did not realize they are the same person. I never subscribed to that newsletter cause I was not into individual stocks but I have heard a good deal about his success with the newsletter. |
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Post by Deleted on Feb 8, 2022 11:27:10 GMT
kathiel , @slooow , why would you ladies not put a chunk into SCHD (3% yield) and get the best of both worlds with no single stock risk? You can still buy stocks. Or if it's steady income you're seeking, you might take a page from Xray's chatter and look into some of the preferreds that have been tumbling down into near-bargain territory lately. I do agree 3% isn't sufficient. But TWOpB is tossing off 7.7%, as are several preferred closed end funds nowadays. Can thing go lower? Certainly, but you're a lot closer to the bottom, (where ever that is) that you'd be six months ago. FPF, CNLPL, PFFR, DLNGpA or B (almost 9% ! ! ), and many more are certainly worth watching , if not buying, right here. You know my style is to watch the charts and try to find support before pulling a trigger. For safety I favor preferreds of stocks that are paying a dividend for the common -- and are earning it, but suit your own style. Good luck. I know as much about buying and holding preferreds as I do about CEFS. Just enough to be dangerous. Top concern - as with all investment related matters - is making a mistake and losing my principal. Are you buying these? What are the main risks? What are the main rewards? How steady is the income in a rising rate environment? Inflation adjusted?
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Post by richardsok on Feb 8, 2022 15:30:13 GMT
Think of preferreds as second cousins to bonds, except in this environment they usually pay much more. In a raising rate environment the purchase price of a preferred will often drop, just like a bond. Preferreds issued by a struggling company will often be sold at a discount to its original issued price b/c the payout is perceived as risky. Preferreds issued by a blue chip company often sell at premium. Preferred dividends take precedence over common dividends, but behind bond payments. Large cap bank preferreds obviously pay less than preferreds of more speculative companies. (Less perceived risk in most big banks.)
If a company can no longer pay its common dividend it will usually continue to pay the preferred.
I am not buying now b/c the trend is bearish at the moment..... but I am watching closely. Just as in bonds, the lower the preferred share price falls, the greater the yield percentage.
FPF is a good bellweather to watch, IMO. Again, the further it drops, the greater the yield percentage. As you can see from the chart, FPF is fallen far enough that its yield is starting to look interesting.
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Post by runforfun on Feb 15, 2022 13:34:15 GMT
kathiel,@sara Do either of you still subscribe to Dividend Investor newsletter now that David Harrell has taken over? I looked into it over the years when Josh was editor, but never subscribed.
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Post by Deleted on Feb 15, 2022 13:39:10 GMT
kathiel ,@sara Do either of you still subscribe to Dividend Investor newsletter now that David Harrell has taken over? I looked into it over the years when Josh was editor, but never subscribed. I get it free through my library. It has a different philosophy. They seem to accept dividend cuts better - Compass Minerals - frankly I have always though it was pushed as a holding. I would not feel confident following the new team like I did Josh. |
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Post by kathiel on Feb 15, 2022 15:39:53 GMT
I stopped subscribing not long after Josh left. I tried out the new guy for a while, but found it not helpful to me. So it's been years since I subscribed.
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Post by xray on Feb 15, 2022 19:55:44 GMT
richardsok, Your: If a company can no longer pay its common dividend it will usually continue to pay the preferred. --------- Hopefully, we will not continue to hold any securities that will no longer pay dividends. We normally, through analysis, will find that our individual analysis will give us a heads up when NAV and/or book vales continue to decrease and are going south).... Looking at my securities this past year: Eleven securities increased their dividends with none having to their reduce their dividends (while in portfolio). I don't believe this will continue and happen this year if the current negative market performance continues.... Live Long and Prosper....
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Post by roi2020 on Feb 16, 2022 1:59:39 GMT
kathiel ,@sara Do either of you still subscribe to Dividend Investor newsletter now that David Harrell has taken over? I looked into it over the years when Josh was editor, but never subscribed. I get it free through my library. It has a different philosophy. They seem to accept dividend cuts better - Compass Minerals - frankly I have always though it was pushed as a holding. I would not feel confident following the new team like I did Josh. My local library system subscribes to M* Investment Research Center (MIRC). MIRC provides free access to the following M* newsletters: StockInvestor, DividendInvestor, ETFInvestor, and FundInvestor. |
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Post by runforfun on Feb 16, 2022 12:55:30 GMT
kathiel,@sara, Thanks for the reply. I've downloaded a few of the free issues they offer (of course month/years old) and just didn't see additional value beyond my own research. Figured that $200 could be put to a better use, glad others agree. 
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Post by comlb on Mar 10, 2022 18:32:35 GMT
kathiel,interested in your thinking on Gilead. They seem to have been stuck in neutral for a long time. The core franchise in HIV is solid, but they seem lost on a next act? Kite deal did not seem to go too well. Is it now simply a waiting for Immunomedics/Trodelvy to play out? Still plenty of cash coming in, so there is time, but I would be curious how you would rank them versus say GSK or Merck or others?
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Post by Deleted on Mar 10, 2022 18:42:09 GMT
Love your picture!
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Post by kathiel on Mar 10, 2022 19:04:22 GMT
comlb, Gilled does seem to be stuck in a trading range. As an income investor, I can be content with the dividend for now. I own Merck and GSK as well. Merck's Keytruda franchise still has lots of potential, as the drug seems to get approved for a new indication at least monthly. Pfizer's covid treatment drug was originally developed for HIV, but has proved effective for covid. I would hope that Gilead is looking at their HIV pipeline with an eye to other viral diseases. GSK is getting ready to spin off its non-prescription division this summer. For growth, ABBV is my favorite right now, but I own a bunch of them.
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Post by win1177 on Mar 10, 2022 19:07:57 GMT
kathiel ,interested in your thinking on Gilead. They seem to have been stuck in neutral for a long time. The core franchise in HIV is solid, but they seem lost on a next act? Kite deal did not seem to go too well. Is it now simply a waiting for Immunomedics/Trodelvy to play out? Still plenty of cash coming in, so there is time, but I would be curious how you would rank them versus say GSK or Merck or others? I’m also interested in thoughts on GILD. It has seemed to “tread water” for years, trading in a range. Dividend is covered, but not much “forward progress” on capital gains. Dividend can only rise so far if earnings aren’t growing. What doe others think? Win |
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comlb
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Post by comlb on Mar 10, 2022 19:27:09 GMT
thanks kathiel, always appreciate your thoughts on these companies. I agree Abbvie has done an impressive job, and maybe the best so far at figuring out its next act. They got a cash cow in Botox and Allergan overall did not appear to be particularly well run so they can gain efficiencies to boot. I found it interesting that GSK turned down $68b offer from Unilever for their consumer health business. The market cap for GSK (the whole company) is $100b. Meanwhile, Consumer Health earns around 35% of revenue. One downside is the demerger will almost certainly result in a dividend cut. win1177, M* shows about $7.49 in free cash flow per share versus a dividend of $2.84 per share, so it seems well covered for awhile. I know it takes a long time for these pipelines pay off. M* says Trodelvy cold earn $7b by 2030. For comparison, the HIV business is $17b. So as near as I can tell, they have not fully figured out where the top line growth will come from? At least assuming the HIV business is mature and not in growth mode til through to then? |
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