There's nothing like an investment that pays off even if there's no capital appreciation. That's the appeal of renting out your home instead of selling it – you get income along with and investment. The way markets are behaving right now with the Fed rate hike delayed once again, most likely until 2016, and uncertainty driving investor decisions, picking a stock that can pay out in more than one way is a huge benefit.
Limited partnership entities differ from traditional corporations in the sense that they are obligated to pass on a lion's share of the profits to shareholders. That gives them an edge when it comes to dividend yields and makes them defensive even if they're not necessarily in a defensive sector of the economy.
The oil and gas pipeline industry might not seem like a defensive environment given what's happened with commodities and energy prices, but this sub-sector operates a little differently. Pipelines are more on the midstream segment of energy operations giving them a more stable business with steady growth prospects regardless of energy prices. Continue reading "This Pipeline LP Pays You Just To Hold It"→
The broader indices have been highly volatile recently due to weakness in China, an imminent Federal Reserve rate hike and persistently low oil prices. Navigating these volatile markets can be difficult. I posit that via investing in high-quality companies that offer the combination of high-quality dividends along with share buybacks may position an investor to contend with this volatility while potentially being rewarded handsomely during bull markets. On the front half of this dual synergy is the dividend space. This space offers many quality attributes such as decreased volatility, healthy yields, moderate risk exposure and a hedge against downside risk thus may be an ideal synergy for any long portfolio. Historically, companies that have an established track record of not only paying dividends but growing their dividends over the long-term have generally outperformed their respective index with decreased volatility. On the back half of this synergy is share buybacks. Share buybacks can serve as an effective way to drive shareholder value via returning capital to shareholders by repurchasing its own stock.
At times, I'll be using both The Vanguard High Dividend Yield ETF (VYM) and The PowerShares Buyback Achievers ETF (PKW) as proxies for this analysis. I will also select specific high-quality companies to exemplify these attributes. The combination of VYM and PKW may present an ideal investing strategy in which to invest and potentially capitalize on a cohort of companies that engage in both dividends and aggressive share buyback programs, particularly in these volatile markets. This article caps off a three-part series focusing on navigating volatile markets while focusing on high-quality companies that pay out dividends and engage in aggressive share buybacks. This series is primarily focused on these attributes utilizing ETFs as proxies to exemplify the mitigation of downside risk while being well positioned in bull markets. Continue reading "Navigating Volatile Markets Via Coupling Dividends And Share Buybacks - Part 3"→
Share buybacks can serve as an effective way to drive shareholder value via returning capital to shareholders by repurchasing its own stock. Share buybacks are primarily driven by companies that strongly feel their shares are undervalued based on current fundamentals, future growth prospects and cash on hand. Taken together, executive boards approve share buyback programs based on these attributes in concert with undervaluation on the open market. Additionally, the company of interest feels a sense of bullishness and confidence on the future and sustainability of their business.
Theoretically, repurchasing and retiring shares satisfies many shareholder friendly objectives:
1) Reducing the number of shares tilts the supply and demand curve thereby removing shares will decrease supply and in turn increase demand and drive the share price higher
2) Earnings per share increase since earnings are now dividend over fewer shares
3) If share buybacks are coupled with a dividend, the dividend yield may increase if the aggregate quarterly payout amount remains unchanged thus; as a result the payout will be divided over fewer shares.
I'll be using The PowerShares Buyback Achievers ETF (PKW) as a proxy for this analysis. PKW focuses on U.S. companies that have reduced their shares outstanding by at least 5% in the previous year and weights these holdings by market capitalization, subject to a 5% cap within the ETF portfolio. PKW may present an opportunistic niche in which to invest and potentially capitalize on a cohort of companies that engage in aggressive buyback programs, particularly in these volatile markets. Continue reading "Navigating Volatile Markets Via Share Buyback Investing - Part 2"→
It is amazing to read assertions from the Fed and others that the stock market is nowhere near being in a bubble. Several aspects of the financial environment are actually so extreme as to be unprecedented. Some indicate a bubble, and others a bubble in trouble.
Below are eight indicators we are watching closely, among others.
1) Record debt in U.S. dollars
Total dollar-denominated debt peaked at $52.7 trillion in early 2009. At the end of Q1 2015, it stands at $59 trillion, an unprecedented amount.