For a company with a wildly impressive track record of rewarding shareholders, Best Buy sure is an ugly company. Since 1985, Best Buy has compounded wealth for shareholders at a rate of 20.58% annually for shareholders. Yes, this is a company that has been even better than the quintessential dividend stock of the Old Philip Morris, which has rewarded shareholders with huge dividend checks that now come from Altria, Philip Morris International, Kraft, and Mondelez. A mere $10,000 invested into Best Buy in 1985 would be over $2,612,000 today. Millionaire status could have been reached with a mere $3,850 investment in Best Buy.
Yet, we are here to talk about the future (as … Read the rest of this article!
From 1926 through 1991, a company called Eastern Airlines flew an unofficial monopoly over the northeasterly American skies. Headquartered in Miami, it was one of the “Big Four” airlines and featured hubs in Chicago, Orlando, and Tampa Bay. During the 1960s and 1970s, it had an extended period of delivering shareholders very good returns at a rate of 15.2% annually. That was because the company was reporting earnings per share growth of 13% and paid a small dividend, and investors were enamored with the stock. Around the mid-1980s, the stock started trading in the valuation range of 10-13x earnings, leading many people to think that the stock was cheap and worthy of purchase … Read the rest of this article!
With BP on my mind after writing last night’s article, I was once again a bit surprised to study the full effects that dividend payments can have—not just in terms of total returns—but also in providing a cushion against the next fall in the price of stock. The list of companies with worse PR issues than BP is indeed short, and people who remark that the price has little changed since 2010 are, of course, right.
But here is what I see: $1.68 in 2011 dividends, $1.98 in 2012 dividends, $2.19 in 2013 dividends, $2.34 in 2014 dividends, and (projected) $2.40 dividends in 2015. The price at both the start of 2011 and … Read the rest of this article!
When people talk about the checklist of elements that make for a good investment, one of the things you will invariably hear people say is this: Good management. Find companies that are being run by intelligent, forward-thinking people that can anticipate what will come and the risks posed in the future, and you will do well knowing that you entrusted your capital to good hands. The problem with this? A lot of times, talking about good management is a mere platitude and not something that you can actionably make decisions based on—if you visit a corporate website, you will see a lot of people looking regal in their suits accompanied by a list … Read the rest of this article!
Even though I completely understand why investors find dividend cuts unpleasant, I hold the opinion that it is incredibly self-destructive to sell a profitable company after a dividend cut because it is almost assured that the price of the stock has fallen and you would be engaging in the practice of selling low. My opinion on this is intensified when it comes to commodity investing. Outside of, say, Exxon and Chevron, dividend cuts in the sector are fair game. You can grow production of oil and oil equivalents all you want, but if the price of the commodity falls 40%, 50%, 60%, it is unlikely that the company will generate the cash flow … Read the rest of this article!