The Advantage of a Gift Over Provision in a Trust Fund

During the 1820s, a rich British investor named Richard Wright set up a trust fund with 2,000 pounds worth of East India Company common stock, worth approximately $4.8 million in current U.S. dollars, in a trust fund for his great-nephew Daniel Vautier. The trust instrument stated that all the proceeds would be paid out when he was 25, and the trust would terminate at that time.

When Vautier turned 21, he petitioned the trustee to terminate the trust and either give all the East India stock to him, or liquidate it and give them the proceeds. It posed a fascinating legal question: “If the sole beneficiary consents to termination of the trust, but that is not what the settlor wanted, what prevails?”

The Judge, Lord Cottingham, argued that the desires of the living supersede those of the deceased: “I think that principal has been repeatedly acted upon; and where a … Read the rest of this article!

Master Limited Partnerships: 2018 and Beyond

After all the bankruptcies, restructurings, and share dilutions in the MLP sector during the 2014-2017 fall in the price of oil, I decided to take a close look at the balance sheets of these companies to determine which ones had seemingly learned their lessons and were better prepared for the next cycle’s pricing declines in the price of oil and other natural resource commodities.

Upon reviewing the top fifteen MLPs by market capitalization, I gave up on the exercise. I don’t think you could make the argument that any of the top fifteen MLPs could survive $50 per barrel oil without cutting their distributions to unitholders, and many of them would repeat the exact same hardships that previously occurred.

The terms of investing in the large oil MLP market segment is analogous to this: “If the price of oil is high, you will collect fat quarterly distributions. If it is … Read the rest of this article!

The Beat Goes On At Patreon

I am excited to announce that I have become a Creator at Patreon where I will provide regular updates concerning available opportunities aimed at helping you and your family build wealth, with a particular emphasis on high income stocks and the very high-quality blue chips that have been the regular subject of articles on The Conservative Income Investor. Other areas of minor emphasis will include case studies in dumb behavior not to emulate, typical investments that have a hidden or not widely-discussed risk, and even articles on convertible stocks which let you collect income upfront and convert into common stock at a certain ratio that can be conducive to an investor that wants income now while leaving the door open to the possibility of large capital gains that can help improve your net worth.

The content will be focused on wealth-building opportunities so that you will encounter direct, actionable ideas … Read the rest of this article!

Kraft Heinz Dividend Predictions Through 2023

Kraft-Heinz has excellent operating subsidiaries. The Heinz ketchup brand, launched shortly after the American Civil War, has a near monopoly on the American ketchup industry that has been untouched for over two centuries. If it were still a standalone company, it would be one of the top two dozen businesses in the world that you could hold for a 50+ year time frame. Since 2015, it has been merged with Kraft, giving the combined company a towering position in the cheese, ketchup, and grocery store meats categories.

But when you intend to build wealth, using a largely passive approach where you are maniacal in your analysis on the front-end of getting the decision right but taken on a hands-free approach once the pile of capital is allocated and then focus your future gaze towards adding to the collection, you ought to be focused on two components:

The quality of earnings: … Read the rest of this article!

Bill Ackman Wants United Technologies To Split Off Into Three Companies

The activist investors Bill Ackman and Dan Loeb are calling for the break-up of United Technologies into three publicly traded companies–the aerospace, the elevator, and the climate-control units.

Ackman offered the following comments to the press: “Other than Berkshire Hathaway, conglomerates have not had a great track record.”

That comment is bizarre because United Technologies, the company he wants to break up, is an example of a conglomerate delivering exceptional returns. It has a forty-year track record of 15% annual compounding, turning every $1 into $340. Put $25,000 into United Technologies back in the day? Boom, $8.5 million today. Even over the past decade, the compounding has occurred at a rate of 8% annualized (while dividends have grown by 10% annualized). Various sources say different things for the dividend history, but it has been growing annually for at least the past three decades.

The best part? During the 2008-2009 financial Read the rest of this article!