Linked here is a detailed quantitative analysis of Colgate-Palmolive Company (CL). Below are some highlights from the above linked analysis: [more]
With all the other investment strategies out there, why should investors consider dividend or income investing? There are a multitude of reasons to follow a dividend growth strategy. These include: investment stability, security of cash, continuous feedback, potential higher returns, low maintenance, et. al. But for me the most important reason is the inflation hedge that a growing dividend will provide in my retirement years. [more]
Everyone loves a deal and loves getting something at a rock bottom price. Dividend investors are no different. However, as long-term buy-and-hold investors, we aren’t known for our ability (or desire) to time the market and call the bottom. That’s not to say we can’t enjoy the benefits of buying at the bottom. So, how does a long-term buy-and-hold investor accomplish this? [more]
Linked here is a detailed quantitative analysis of Wal-Mart Stores, Inc. (WMT). Below are some highlights from the above linked analysis: [more]
Have you ever pondered the concept of forever or infinity? It is truly mind boggling! What is even more astonishing is that when I buy a stock, my target holding period is forever. For most people, myself included, that is hard to grasp and to carry out. When things start going bad, our primal instinct of flight kicks in and we want to sell. In many cases, that is the time we should be buying. Holding a stock through an economic downturn is much easier when it pays a rising dividend. [more]
I have often heard that a person’s character is determined by how they behave when no one else is looking and during difficult times. In much the same way, we can learn a lot about a company’s management when they face adversity. One metric I look at closely during a downturn is cash generation relative to earnings. [more]
Linked here is a detailed quantitative analysis of Lowe's Companies, Inc. (LOW). Below are some highlights from the above linked analysis: [more]
Ned Davis Research examined the relative performances of stocks between 1972 and 2006 and established a link between rising dividends and superior long-term returns. The study found S&P 500 stocks that consistently increased their dividends returned 10.4% total return (dividends + share price appreciation), while those that did not increase their dividends returned only 8.2%. The 2.2% advantage of the dividend raisers would equate to an additional $1,802 per $100 invested in 1972. [more]
This is the sixth and final installment in a multi-part series that looks at various options used by income investors to boost their yield while waiting for dividend growth to lift their portfolio’s overall yield-on-cost. Last week we looked at Master Limited Partnerships (MLPs). This week we are looking at Time. [more]
Linked here is a detailed quantitative analysis of McGrath RentCorp (MGRC). Below are some highlights from the above linked analysis: [more]
Growing up in the late 60’s early 70’s, I spent a fair amount of time reading comic books. I don’t remember much about them, but I do remember several of classic ads. Of course, there was the Charles Atlas ad where the beach bully kicked sand on the skinny boy and his girlfriend. But the ad that I remember the best was the “Magnificent Marvelous Money Machine“. It was a wooden block with some rollers in which you would put a one dollar bill in one side and a five dollar bill would come out the other. [more]
This is the fifth installment in a multi-part series that looks at various options used by income investors to boost their yield while waiting for dividend growth to lift their portfolio's overall yield-on-cost. Last week we looked at Bonds. This week we are looking at Master Limited Partnerships (MLPs).
A MLP is by far the most unique investment we will look at in this series. It combines the tax benefits of a limited partnership with the liquidity of common stock. MLPs are a product of the U.S. Tax Reform Act of 1986 and the U.S. Revenue Act of 1987. These laws define which companies are eligible to structure their operations as MLPs. To qualify, a firm must earn 90% of its income through activities or interest and dividend payments relating to natural resources, such as petroleum and natural gas extraction and transportation. Certain real estate operations may also qualify as MLPs.
Like other limited partnerships, MLPs pay no income tax, instead the liability is passed to the unit holders (MLPs' name for shareholders). Instead of dividends, MLPs pay quarterly required distributions (QRD), based on the stated amount in the contract between the unit holders and the general partner. These distributions are not taxed when they are received. They are treated as a return of capital, thus reducing the cost basis of the investment. MLPs are extremely tax efficient.
However, this tax efficiency comes with a price. Once a year, each investor receives a K-1 statement providing details of the unit holder's share of the partnership's net income. K-1s can be quite large (I've had some up 30-40 pages) and complex for those without a tax background. Unit holders will record items such as their pro-rata share of the MLP's depreciation, state taxes, etc. on their individual tax form. In addition to the tax burden, MLPs require more bookkeeping to track their basis. Each year the share basis is adjusted down by the amount of cash distributions and also adjusted by the unit holders allocation of net income. Below are some MLPs that have a history of increasing their unit distributions each year:
Enterprise Products Partners LP (EPD) - Yield: 6.60%
EPD is an integrated provider of natural gas and natural gas liquids services, including processing, fractionation, storage, transportation and terminalling. Years of distribution growth: 11
TC PipeLines LP (TCLP) - Yield: 7.80%
TCLP has interests in three interstate natural gas pipelines, including a 46.5% stake in Great Lakes Gas Transmission LP. Years of distribution growth: 11
Suburban Propane Partners LP (SPH) - Yield: 7.10%
SPH markets propane gas and other refined fuels to residential, commercial, industrial, and agricultural customers. Years of distribution growth: 11
Buckeye Partners LP (BPL) - Yield: 6.40%
BPL is one of the largest independent U.S. pipeline common carriers of refined petroleum products, with over 5,400 miles of pipeline. Years of distribution growth: 15
One way to avoid some of the tax headaches is to own MLPs via funds. The funds deal with the K-1s and issue 1099s to shareholders of the fund. This too comes with a price. Note the management fees of the MLP funds below:
Fiduciary-Claymore MLP Opportunity (FMO) - Yield 7.01%
Fiduciary/Claymore MLP Opportunity Fund is a closed ended equity mutual fund launched by Claymore Securities, Inc. It is co-managed by Claymore Advisors, LLC and Fiduciary Asset Management, LLC.
- Total Assets: $444.3 million
- Expense Ratio: 2.92%
Tortoise Energy Capital Corporation (TYY) - Yield: 6.43%
Tortoise Energy Capital Corp. is a close-ended equity mutual fund launched and managed by Tortoise Capital Advisors L.L.C. It invests in the public equity markets of the United States.
- Total Assets: $22.6 million
- Expense Ratio: 3.92%
Tortoise North American Energy Corporation (TYN) - Yield: 6.30%
Tortoise North American Energy Corporation is a close-ended equity mutual fund launched and advised by Tortoise Capital Advisors, L.L.C. The fund primarily invests in the public equity markets of North America.
- Total Assets: $148.9 billion
- Expense Ratio: 3.21%
Even if I could accept the high fees, there is one other item about MLPs that gives me pause. They are notoriously late in their tax reporting. It was usually well into February before the first K-1 shows up. Then I would normally get one or more corrected K-1s, sometimes as late as early April. MLPs provide excellent yields and are a tax efficient way to invest, but you must prepared to deal with their quirky characteristics.
Full Disclosure: No position in the aforementioned securities. See a list of all my income holdings here.
Increasing Dividend Yield Part IV: Bonds [more]
Linked here is a detailed quantitative analysis of Kimberly Clark Corp. (KMB). Below are some highlights from the above linked analysis: [more]