"dapperdobbs" <GeorgeCFL[at]hotmail.com> wrote
- quote -

Sure but none of this is a surprise, IMO. You called all
this a "black swan" event, which suggests unforeseeablity. I
call it foreseeable, based in part on the past but also on
the presence of much inappropriately based credit. (I did
not foresee it, but from general reading it seems a number
of people like Buffett and Robert Shiller did.)


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The SEC website and 10k's are better than annual reports, exactly as
Douglas Johnson points out. I look for consistency of growth of
earnings, first, then the source of the earnings (the market the
company generates revenues from, the stability of the market, the
capital base required in the industry, and a general feel for the
honesty or integrity of the company). Things do change, so one must
spend a few minutes every quarter to be sure you know where your
companies are.

Note to Elle: sorry you had difficulty with the link I put up (it
seems like two links got posted somehow). Did you notice the headlines
about Bear Stearns today? Even guys with AAA mortgages can't find a
market for them, not so much, I gather, because there is a question
about the credit-worthiness, but simply because the field of buyers is
limited by increasing concentration of funds into fewer and fewer
institutional hands - and those are the guys who are writing things
off, thus squeezed to meet capital requirements, panicking in some
cases, and thus have no money to buy with (to lend, by buying bonds or
mortgage packages).

In a way, it is not dissimilar to the example you gave of a company
cutting or omitting a dividend. It isn't that the company is going out
of business (hopefully not), but it may very well be that intermediate-
term conditions for a few years have them without cash to pay the
dividend. The company going out of business would be a 'credit crisis'
while the few years cash shortage would be a 'liquidity crisis.'

An article early last year seemed to indicate that some bad guys were
trying to wring concessions out of corporations, due to the rippling
effects back then, but it now appears that the corporations held their
ground, and the ripples do not appear likely to impact there (unless a
company's line of business depends upon an industry where the ripples
ARE impacting ... there's always an 'if' somewhere ... just look at
the expression on Buffett's face).


On Mar 14, 4:08*pm, "Elle" <honda.lion...[at]spamnocox.net> wrote:
- quote -

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Good point you make. I believe the general rule of thumb is that
younger rapidly growing companies redeploy capital into the business,
then at some point when growth prospects slow, initiate a dividend. As
the business matures, more money may be paid out, and a 50% payout
ratio is not unusual.

Payout ratios also vary by industry, generally by the stability or
predictability, of revenues. Another way of saying that is
inelasticity of demand. 'Inelastic' means in good times or bad, people
will still demand products such as electricity, water, and food, but
may put off buying a new car (or new house).

Today's mess with incentive options and stock buybacks makes the
dividend picture a little more difficult, but the rate of increase in
dividends is significant, and any increase is predicated upon an
increase in earnings. IMO you are correct about the importance of the
payout ratio. It is likely that the payout ratio will vary more than
the actual dividend, as earnings fluctuate, but a 50% ratio is
probably a really good ballpark number.

On Mar 14, 4:08*pm, jIM <noreplysoc...[at]hotmail.com> wrote:
- quote -

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On Mar 14, 12:42*pm, "W. Wells" <ot...[at]nc.rr.com> wrote:
- quote -

I think the metric is payout ratio- percent of profits paid out. The
lower the better, with some latitude (maybe not as low as possible,
but if a company pay out 50 cents of every dollar of profit, there is
a possibility that lack of reinvestment into the business will hurt
the dividend down the line).

I would also look for dividend history- some stock charts show how
often the dividend price changes over time.

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"W. Wells" <otf70[at]nc.rr.com> wrote
- quote -

Do you mean for the long term or the short term?

I am speaking as a "defensive investor," namely someone
whose stock picks are conservative. I am not looking to beat
the market. I am looking to keep up with inflation, both
with dividend income and principal.

I find short term changes are often hard to predict. Often,
one needs information to which only company insiders have
access. We all eventually learn about companies in trouble,
and the market starts pricing in expected dividend cuts.
Whether the cuts come to fruition is another matter, though.

I expect any reputable entity that rates "likelihood of
maintaining dividends for the long term" is going to use as
input largely Ben Graham criteria. E.g.
-- Size of the company (larger is safer)
-- How long the company has been paying dividends (longer is
safer)
-- Earnings losses over last decade (fewer is safer)
-- Current ratio (higher is safer)

I also watch:
Dividend payout ratio (DPR), lower is safer.
Dividend increase record, the more years with increases, the
safer I expect it to be. I think that's not numerology
talking but instead a rough indicator of how in demand the
company's product is. Granted exceptions occur.

A few anecdotal observations:
A few years ago I was not so rigorous in my stock picks. I
still had large companies with a long history of dividend
increases, but the likes of, for example, PSD, SLE and CAG
still cut their dividends. If I had followed all the above
criteria, I might not have bought at least two of these
stocks. Looking at these companies' current DPRs and
extrapolating back to estimate what it would have been
without the cut suggests that, to some extent, I could have
anticipated the dividend cuts.

On the other hand, for a large, old company, insofar as the
health of a company is concerned, a dividend cut can, simply
stated, be a sound decision. While the price of a stock does
generally decline somewhat after a cut is announced,
shareholders do often applaud cuts. In the case of all three
companies above, the price recovered (and then some) within
two years or less. So I would say that one does garnish some
protection by choosing "large cap and older companies."

One reality of the past several months though is the hazard
of investing in financial institutions. Citigroup and
Washington Mutual, among others, slashed their dividends
stunningly. This was "despite" a 10+ year record of
increasing dividends. As I am sure you have read at this
point, one could argue that the way these banks financed
mortgages simply was not transparent to investors. And yet
on the other hand, many folks spoke of the evidence of a
housing bubble and the likelihood of its bursting. Naturally
banks would take a hit in such an instance. Indeed, I
estimate Citicorp (which ultimately became a part of
Citigroup, complicating tracking of the dividend history
here) cut its dividend in late 1988 and late 1990 by some
75%. By Nov, 1993, the dividend was back at its 1988 rate,
if what I pieced together using the New York Times's
archives, Citigroup's web site, and Yahoo's web site is
reasonably correct. Renamings and mergers greatly complicate
following the dividend history.

Will Trice's (and then my) posts on Graham's observations on
investing in banks is worth a read.

Dapperdobbs observations that this housing bubble bursting
and credit crisis is worse due to xyz certainly deserves
consideration, though.



Note to dapperdobbs: One of the kind regulars here sent me a
pdf version of the August 2007 Fidelity article on this
credit/housing crisis. For some reason, I never got it to
come up on the web with my computer.

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On Mar 14, 9:42 am, "W. Wells" <ot...[at]nc.rr.com> wrote:
- quote -

You might try getting Dividends Only from the Historical Quotes
feature available at finance.yahoo.com

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"W. Wells" <otf70[at]nc.rr.com> wrote:

- quote -

http://edgar.sec.gov/edgar.shtml has all public US company financial filings.
You'll be interested in the forms 10K -- annual report and 10Q -- quarterly
report. Focus on changes to cash flow.

-- Doug

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Where is a good place to check the ability of a company to continue paying
its dividend?

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