TWO

There Are No Free ‘Income’ Lunches

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Image Source: Jeffrey Beall By Brian Nelson, CFA We often talk about certain areas of the market such as large cap growth and small cap value. One of the big takeaways of the book Value Trap is that it explains that there are not really growth or value stocks, but rather there are only undervalued, fairly valued, and overvalued stocks determined on the basis of a price-versus-fair value consideration. This will always be true. Each company is different, and no company can be distilled into a simple price-to-earnings (P/E) or price-to-book (P/B) metric to determine the attractiveness of its valuation. For example, a company with a low P/E can be overvalued because the market is missing its huge net debt … Read more

Why Are the Dividends of REITs So Risky?

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By Brian Nelson, CFA Not all REIT dividends are safe. Many REITs remain capital-market dependent, and some office REITs, retail REITs, and healthcare REITs may be difficult places to generate dependable long-term income in the coming decades, in our view. Office REIT SL Green (SLG) recently cut its payout 13% on December 5, 2022, while another office REIT Vornado Realty Trust (VNO) cut its dividend 29% on January 18, 2023. These are just two of the latest high-profile REIT dividend cuts, and there may be more to come. Contrary to popular opinion, the REIT sector has not been a great source of dependable, reliable income, particularly during the COVID-19 crisis. Five REITs cut their dividends in 2019: Medalist Diversified REIT … Read more

Dividend Increases/Decreases for the Week of December 23

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Below we provide a list of firms that raised their dividends during the week ending December 23. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week                AMCON Distributing (DIT): now $5.00 per share special dividend, was $0.18. ATN International (ATNI): now $0.21 per share quarterly dividend, was $0.17. Autoscope Technologies (AATC): now $0.13 per share quarterly dividend, was $0.12. Bird Construction (BIRDF): now CAD 0.0358 per share dividend, was CAD 0.0325. Builders Capital Mortgage (BCF:CA): now $0.2016 per share quarterly dividend. Cadiz 8.875% DEP PFD A (CDZIP): now $0.56 per share … Read more

REITs May Continue to Face Pressure

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Image: The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. By Brian Nelson, CFA Times are tough for equity REITs (VNQ) and mortgage REITs (REM), with the VNQ and REM down 25% and 30%, respectively, so far in 2022. This is against a backdrop of Valuentum’s simulated Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio that are doing far better. The lesson in 2022, … Read more

Something New!

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Hi everyone: To stay true to our mission, you’ll find something new regarding our methodology. In the coming weeks, you’ll see this table in our work going forward. We just wanted to let you know. We appreciate your membership very much!   ——————————————— About Our Name But how, you will ask, does one decide what [stocks are] “attractive”? Most analysts feel they must choose between two approaches customarily thought to be in opposition: “value” and “growth,”…We view that as fuzzy thinking…Growth is always a component of value [and] the very term “value investing” is redundant.                          — Warren Buffett, Berkshire Hathaway annual report, 1992 At Valuentum, we take Buffett’s thoughts one step further. We think the best opportunities arise from an understanding of … Read more

Must Watch: MPT Failures and High Yield Dividend Breakdown Spiral!

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Did you know that Valuentum’s income ideas are holding up great this year, far better than the traditional 60/40 stock/bond portfolio and what some call “sucker” yields, those companies with 8% dividend yields or higher? — The 60/40 stock/bond portfolio is down ~20% so far in 2022 and some high-yield stocks like mortgage REITs are down nearly 40%, but Valuentum’s income-oriented simulated newsletter portfolios, the Dividend Growth Newsletter portfolio and High Yield Dividend Newsletter portfolio, are estimated to be down just 8.4% and just 10.1%, respectively, in 2022. — Preventing huge drawdowns in retirement is the name of the game, and those pursuing modern portfolio theory (MPT) have been caught by surprise, while income investors reaching for 8%+ yields may have just experienced permanent … Read more

Announcing Valuentum’s Customer Appreciation Day Winners!

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In no particular order — the five winners… As a Chief Investment Strategist that oversees a significant amount of assets, it is vital to have unbiased research that we can lean on for decision making. Brian and the Valuentum team help provide a disciplined and fundamental approach to stock analysis without the typical Wall Street bias or conflicts of interest. The value we get on a monthly basis for having this detailed thought analysis and wise long-term thinking greatly outweighs the cost. We are very happy to have them on our short list of management we trust.  – Stephen H. (October 2022) —– I’d like you to know what my takeaways are from your research: 1) Be wary of capital … Read more

High Yield Dividend Newsletter Portfolio Continues to Deliver!

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Image: The year-to-date simulated performance of the High Yield Dividend Newsletter portfolio, which continues to hold up well during 2022, while offering an attractive forward estimated dividend yield. Data retrieved interim session October 19.   By Brian Nelson, CFA  Valuentum’s newsletter product suite continues to deliver in good times and bad. For those of you interested in high dividend paying stocks, we offer a High Yield Dividend Newsletter and a simulated High Yield Dividend Newsletter portfolio, which has been holding up well amid the weakness across both the stock and bond markets this year.   Based on our calculations, the simulated High Yield Dividend Newsletter portfolio now boasts an estimated forward dividend yield of ~5.44% and is down only approximately 10% on … Read more

New Payment Option! Valuentum Research Update!

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Hi everyone: — We’re excited to say that we’re adding additional payment flexibility at Valuentum. — Many members have expressed interest in paying via other providers, and we have added Square to the mix. You can use credit or debit card or bank (ACH) to pay via invoice. — With all of the goings-on in the financial technology and payments space, we wanted to continue to provide members options to pay their memberships how they want and through who they want. You can always reach out to us at info@valuentum.com. — You’ll notice that we’ve also tightened our focus at Valuentum during the past 12-24 months in advance of what has certainly become a more difficult 2022 than even some … Read more

Stay Away from Mortgage REITs!

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Image Source: Mortgage REITs have underperformed the broader stock market for years, and we don’t think individual investors and financial advisors should be dabbling in the mortgage markets via these instruments. By Brian Nelson, CFA On September 28, mortgage REIT (“mREIT”) Invesco Mortgage Capital (IVR) cut its dividend 28%, to $0.65 per common share. The bond markets have been experiencing a lot of pain of late, and mortgage rates have shot up considerably since the Fed started hiking. We think this spells trouble for mortgage REITs, which already suffer from highly unpredictable mortgage market dynamics. So far in 2022, the iShares Mortgage Real Estate Capped ETF (REM) has fallen more than 40% (on a price-only basis), and while its forward … Read more