The stock market is up this year which is good and President Trump wants to cut regulations which for many businesses is a good thing. It may not be great for the consumer, but for overall business world it should be good. In every market there are companies to invest in which should continue to do well and Ian Tam of Morningstar Research examined large US companies paying reasonable yields and showing steady earnings or companies you can buy and should do well over the next year. His criteria was:

market capitalization (greater than $30 billion)

expected dividend yield  – greater than 2%

consistency of historical earnings over a 5 year period – a low number is good

debt to equity ratios equal to or less than the median of the sector it belongs to

dividend payout less than 80%

Company                       Mkt Cap              Dividend         Earnings        Industry Rel     Trailing Div

($ Bil)                    Yield %            Varability       D/E Ratio         Payout Ratio

AT&T                           256.656                   4.7                        2.6                   0.7                      68.0

Reynolds American   87.794                  3.3                          3.3                  0.8                      76.2

Accenture                     78.884                  2.0                          1.6                 0.0                       42.3

CVS Health                   82.650                   2.5                          2.4                 0.9                      29.1

Unilever                       134.360                   2.9                          3.0                0.9                        67.5

Johnson & Johnson  332.476                  2.6                           2.8                0.6                        47.3

Proctor & Gamble      232.818                 2.9                           3.5                 0.4                       71.1

WPP Group                     31.241                  2.6                          2.0                0.9                         44.7

Infosys Tech                   34.604                2.5                         2.7                  0.0                         41.1

Novartis                          185.692               3.5                          6.0                  0.5                         57.5

The other companies on the list were Starbucks, American Electric Power, BHP Billiton, Emerson Electric and Raytheon

Linking to dividend paying stocks, all of them pay dividends which is good and should be paying for years to come. In your portfolio you should have these types of companies to pay you dividends and for the long term capital gains. The stocks typically have a range each year and there are buying opportunities for each, but the long term outlook always tend to be a buy and hold

There are more questions than answers, till the next time – to raising questions.

 

If you look out the window at this time in the northeast days are getting longer and the sun shines almost everyday. That is wonderful for most of us, as we go about our daily lives. The sun warms up the skin, the ground and in some places solar panels. A number of years ago, they were expensive and many governments gave and still give subsidies to generate electricity (pay more than its worth, for the greater good), the good news is the subsidies is shrinking every year. In 2016, solar prices fell to the point in countries that count on sunshine it is cheaper to generate electricity from the sun than coal or natural gas or oil. Solar prices are becoming incredibly competitive.

The cost of solar goes down, more and more single family roofs will be covered with solar panels because it is less expensive than to build a new gas plant or coal plant for the utility. They will always need backup, but solar is coming. In countries such as Spain, Chile, United Arab Emirates, India solar is a key to generating electricity and reducing people’s electric bills. In some middle east countries, companies are bidding on providing solar for 2.4 cents a kilowatt.

Linking to dividend paying stocks, in every industry there is competition for may dividend investors owning an utility is part of the package. Whatever the utility can generate at the lowest price and charge a decent return to have continuous revenues is what you are looking for. For utilities were sunshine is part of life, they should be investing in more solar than coal. If not ask why?

There are more questions than answers, till the next time – to raising questions.

 

 

How is the country organized? How should it be organized who should be included? In all societies there develops an elite or people who families seem to be closer to making power on a very regular basis. These families tend not to have to worry about paying the bills for they have income streams which give them a higher standard of living. There is another group which has grown up which we all like to believe is the higher group which is based on merit. In every generation, those with higher education or higher street smarts or the ability to start companies which go public and the owners take their share of rewards. For a long time we as a society have either been told this or believe it and it is the subject of a book by Christopher Hayes titled Twilight of the Elites published by Crown Publishers, NY, 2012. This believe in meritocracy or the best and brightest will rise to the top is beginning to die.

If you go to an Opera, the deaths scenes take a long time, so will this dream because although society in general tends to believe it and there are many examples, President Obama from a child of a single mother eventually going to Harvard Law and becoming President is the best example. However there were many hurdles, an educational institution such as Harvard allows for 20% of its students to come from families of graduates (who have savings and can make donations to the school). Are these the best and brightest? One can then move institutions that the salary structure is higher than average? What do people do to make the money?  In the service economy, most of do not make things, it is strictly judgement and breaking the law can be more profitable for the company. The penalties for what is known as white collar crime are not as harsh as they are for street level crime. Cheating will always be present in any competitive environment to some degree, but systemic corruption comes about when it moves from anomaly to norm. An old law from Queen Elizabeth of Tudor times – Thomas Gresham said bad money drives out good.

Those two disconnects the morality and the penalty not to the bad, is why when we look around we see disconnects in many industries: in baseball and steroids; the church bishops and a priests who are pedophiles (the bishops worried about the priests rather than the boys of the church); when government’s call for evacuation in New Orleans and other places which is a good thing for the protection of its citizens it forgets many of them have nowhere to go and no money to pay; when the financial crisis of 2008 came because companies which ended up being bought by the largest financial institutions were selling mortgages on no income, no problem (Countrywide Financial was bought by Bank of America). What was the consequence of non payment? it turns out the financial sector almost collapsed and then moved on.

To solve the problem the inequity must be narrowed. However some of the solutions must start with the government. For example: in 2013 the top 400 people were paying taxes of 16.6%; the average middle income was 22%. The system was become a tool for maintaining and expanding wealth, not paying.

For estate taxes, there was a law you can give away $ 5 million tax free to your kids, but the rest is taxable at high rates. Every year the rate falls so the rich remain rich, are they the best and brightest or was it their grandfather? or some other family member?

Linking to dividend paying stocks, as you invest in companies more and more of them are in the service sector and you have to look at the morality of the senior people on top of the company. How did they get to the position? and why are they? In the broader aspect of the taxes and estate taxes, President Trump was promised tax reform what will change?

There are more questions than answers, till the next time – to raising questions.

 

 

 

 

 

According to Gayathree Ganesan of Reuters, Home Depot had a better than expected quarterly profit and sales as the US housing market is heating up. The news is good news for the economy and the stock has moved from $110 to $145 in the quarter. The stock is creating new highs and the question is will it continue to?

Home Depot is gaining share in a number of high value categories including appliances. If you think about the average person walking around Home Depot; one in 5 or 20% of the sales is over $900. Customers were spending more on flooring and appliances. The company is expecting a growth in sales of 4.6% to become a $100 billion in sales.

Last quarter, the same stores sales increased 5.8% beating the expected 3.8% growth and the company earned $1.44 a share ahead of the estimated $1.34. Home Depot’s board increased the quarterly divided to 89 cents from 69 cents a share.

Linking to dividend paying stocks, Home Depot is doing many things right in terms of execution as well as growing with the increased in home sales. Most of us will walk through the store at least once during the spring – summer or fall and you can remember the $900 transaction. If you are a regular are people spending close to $1,000 or more when they leave? If they are, then one can expect another good quarter. Every store or industry has some benchmark data that as a shareholder you can look to see if they are doing what they are suppose to. Ensure you know your companies benchmarks.

There are more questions than answers, till the next time – to raising questions.

When you buy a stock for the longer term,the most important information is profitability and ability to continue to make money. The financial position and ability to generate cash is your concern. Next you will concern yourself with management and their ability to execute on their business plan. At some point you will have done a basic SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis. Depending on how many shares you buy will depend on the length on the analysis. If you take a classic case of people for pipelines and those against you need to know something about the activists and what is their abilities to slow down or stop what you think the company should be doing. In the case of the pipeline, the Keystone Pipeline is designed to send oil that is trapped in sand or oil sands down to a refinery which can handle that type of crude. The alternative is the railway, but it is less expensive to send by pipeline.

The Keystone pipeline is also a symbol of global warming and it has many different views attached to it. At he moment, very few people will give up on their lifestyle but they can be concerned about global warming which is happening. A book which discusses the issue is Oil and Honey by Bill McKibben published by Henry Holt and Company, NY, 2013. The honey is he works with bee keeping and seeing what is happening to the bees and the environment helps deal with global warming issues. Mr. McKibben is a founded of 350.org which sends information from an environmental standpoint. On the other side was the Chamber of Commerce lobby which is one of the biggest lobbyist in Washington as well as the oil industry interests. Somewhere leaning to the oil industry are politicians. To play the game, the environmentalist have to learn how to lobby and which rules and regulations to press the politicians.

Linking to dividend paying stocks, as an investor you are more concerned with the financial results on a consistent basis. As a person living in the globe you are concerned with global warming and hopefully your investments and your view of the world mesh together. If they do not, then you have to worry how does the other side play to change the nature of your investments? Books such as Oil and Honey will give your a view of the other side; do not worry they are people just like you.

There are more questions than answers, till the next time – to raising questions.

In some cities around the US, there are people looking at the garbage to see what the garbage tells them about us in general. Many of us seen Indiana Jones looking for lost treasurers in the movies; however in real life what we throw away can be studied to see how people really behave. An interesting book about the subject is Rubbish – The Archaeology of Garbage – what our garbage tells us about ourselves by William Rathje and Cullen Murphy published by Harper Collins, NY, 1992. The book is the results of the Garbage Project where researchers went in garbage dumps to see what we throw away. The dumps were identified by what part of the city the garbage came from to see if there were differences between affluent and less affluent neighborhoods. The answer is a little bit. for example less affluent people buy smaller sizes of products; more affluent buy the super sized.

Generally we all report we eat less sugar and sweets than we do; and we over report the healthy foods. The researchers had people prepare logs and then compared it to their garbage. An interesting fact was with red meat we tend to cut off the fat; however when we eat less red meat, we are eating more hotdogs and processed meats with higher fat contents. The fat is hidden so we do not worry about it; but we believe we are eating healthier.

The project looked at garbage dumps and many people believe things will break down in the dump particularly the organics. The reality, the organics breakdown if they are near an oxygen source; once the material is buried the billions of bugs do not go to the bottom of the dump. they stay on top. What should be breaking down will not be for multiple lifetimes.

Linking to dividend paying stocks, whether you are looking for trends and trying to predict how people will behave or breaking down a myth of what a dump does and does not do. Looking at garbage can be another tool, for if someone tells you the next greatest and big thing to save the world, you can use your knowledge to help you evaluate. Garbage dumps are not going away and we will still be big users of garbage companies, how we deal with it may make you money for a long time to come.

There are more questions than answers, till the next time – to raising questions.

 

 

 

6 months ago. if you wanted to see the NBA All-star game you would had to book tickets to Charlotte, North Carolina. Then a law was passed against LGBT people and although no players are openly gay, the NBA felt the law was sending the wrong message. The NBA all-star game was in flux and New Orleans Convention People and the Greater New Orleans Sports Foundation teamed up to make a pitch to the NBA. They won and the all-star game is dovetailing into Mardi Gras. Mardi Gras is the big festival in New Orleans with floats and marching bands and street parties and technically related to a Christian time just before you give up your bad things or one last chance to be bad without hurting anyone. If you miss the Christian theme, it is a party and can symbolize the end of winter.

For New Orleans, Mardi Gras brings in thousands of people to New Orleans and the NBA all-star game is icing on the top. Hotel rooms are booked, extra security is coming and  more people are working to service the demands of the tourists. Given New Orleans is a tourist or convention town, the all-star game adds to the city.

Linking to dividend paying stocks, for the most part, dividend paying companies do not have to jump up at every opportunity which comes by, most of the time they have learned to say no or we will get back to you. In the case of the all-star game if the infrastructure of the Convention Center, the New Orleans Sports Foundation, and the Mayor’s office had not been in place, the all-star game would go somewhere else. Dividend paying companies have the infrastructure in place to do and that is what investors are paying for. The ability to supplement the core business of the company. Congratulations New Orleans.

There are more questions than answers, till the next time – to raising questions.

In the bible, a few days after Jesus was born, the Roman Governor went to Bethlehem and killed all the infants – it is known as the Massacre of the Innocents and Peter Paul Rubens painted the subject. Herod the Great did it because of rumors of the birth of the next king and he did not want to be challenged. After the United States was discovered and immigrants from Europe begin to flood into the country for opportunity, they first went to the cities and then when offered free land moved inwards. As they moved inwards, it was discovered natives used a large tract of land for hunting and considered the land their territory. A few settlers were likely welcomed, however as more came conflict happened. In reality, Britain and France were firmly established in the North American and used the native tribes in their battles against each other to take leadership of the continent. Britain eventually won the Indian Wars and later lost the Independence War to establish the United States.

During the Indian wars, the battles went on and one of the garrison of Fort William Henry at the southern end of Lake George in what is now upstate New York was massacred. The call for revenge or remembrance was on the British side. What happened is the story of the White Devil by Stephen Brumwell published by Da Capo Press, Cambridge, Mass, 2004. Part of the reasons, the British and French were using the natives was the military was based on battle in open spaces. Anyone who travels the northeast will quickly realize there was not many open spaces. Somebody had to adapt. Eventually the British picked Major Robert Rodgers who would write the manual for fighting in the woods. Rogers Rangers ( yes Special Forces trace their lineage to the Ranger of Major Rogers) for fighting in the woods is similar to guerilla warfare. For example. when marching through the woods – march in single file, each person about 20 yards apart to prevent surprise. Major Rogers wrote there remain a thousand occurrences and circumstances for which no established procedure existed; at these times every man’s reason and judgement must be his guide. Above all, it was essential for the commander of such troops to preserve a firmness and presence of mind of every occasion.

In war, people desire revenged for losses, whether they should or should not is something to be dwelled on afterwards. In the case of the British they lost a Fort and sent Rogers Rangers to defeat the enemy (generally meaning the males of fighting age. The Rangers travelled north to the St. Lawrence and wiped out an established native village near the St. Francis River and Lake St. Pierre – the people were killed and the village burned. Was it necessary for all the lost of life? was it necessary to drop the Atomic bombs in Japan? We do know the battles soon stopped and forthe natives, Major Rogers was called the White Devil and in the urban areas of the United States Rogers was considered a hero.

Linking to dividend paying stocks, fortunately in business people are not killed, companies are, but not people. Dividend paying companies have established a market share and margins to produce profits and can buy their opposition or work to ensure the opposition do not take market share or margins from them. We celebrate success, which is a good thing, knowing decisions were made which allowed success to happen.

There are more questions than answers, till the next time – to raising questions.

 

 

This fall will be the 10th anniversary of Apple’s smartphone and a new phone with many bells and whistles will be coming. The stock has risen in one year from $92 to $133 can it rise another 40 points or more? Apple reported that after 3 quarters of declining revenue, revenue rose. The question is how much and why? Ian McGugan wrote an article on whether it can or not.

According to Mr. McGugan  Apple phones already count for one in every 5 smartphones sold worldwide. The company rakes in about 92% of the profits in the sector and has the largest cash reserve outside the US for tax reasons of any US-based company. (President Trump is considering lowering the tax rate for bringing the money back to the US which would be worth billions to Apple).

The launch in the fall is one of the reasons why the stock has gone up because the tech world and Madison Avenue know how to hype and most of believe the innovations of the future will make life better. The question is how do yo value the company? Aswath Damodaran loves to do business valuations (his blog is worth reading Musing on Markets) and he believes the valuation of $129 is good. This is below the $150 Goldman Sachs believes is reasonable. Mr. Damodaran would be a seller at $140.

Mr. Damodaran is the greatest corporate cash machine in history and is fully deserving its market value. However given its size, there is not a lot of room to grow. Thus Professor Damodaran believes the growth rate will be 1.5% a year for the next 5 years and operating margins will decline from 29% to 25%. Apple is being valued as a mature company not a growth company.

Linking to dividend paying stocks, Apple pays a dividend and generates cash, given the world still sees it as a growth company, the way to buy and sell Apple is on the swings. For growth investors will tend to sell as Apple’s growth is slow so the stock will decline. However, the margins are still very healthy which means the stock will go back up. Patience and thinking about dividend company swings between their normal highs and lows is what will make you capital gains and collect dividends along the way.

There are more questions than answers, till the next time – to raising questions.