Saturday, March 15, 2014

High Yield Reads - 3/15/14

Summary of recents posts and pieces of interest, sometimes enduring, to dividend investors:

  • "The Most Important Metric for Dividend Investors" by Todd Wenning. Put this one in the enduring interest category. Investors of all stripes need to know which numbers to focus in on. For dividend investors, spoiler alert,  the answer is FCF Cover, but Todd explains the important why and how.
  • High Quality, High Fees by Abby Woodham at Morningstar. Breaks down the First Trust Value Line Dividend Index. The holdings are pretty interesting and I wondered upon seeing TIm Horton's is it Todd Wenning's Dividend Compass come to life as an ETF?
  • DirecTV by BrooklynInvestor - ok its not a dividend paying company, but its the largest non-Buffett Berkshire Hathaway holding. Todd Combs and Ted Weschler own $1.5B worth of shares (4.2% of the company). Its not a dividend payer, but they do return cash to shareholders through massive buybacks. Management has bought back 65% of shares outstanding since 2006, and with a FCF yield of 10% (see previous article) this looks set to continue.
  • U.S. Risks National Blackout From Small-Scale Attack (WSJ) - 9 substations stand between nationwide power and nationwide blackout. Hardening substations alone seems unlikely to solve this problem. The FERC is looking to modernize the grid, Those type of projects fit into the business model of ITC Holdings which is a bit of a unique animal in the utility space. Because they are administered by the FERC they are allowed to earn 15% Return on Equity which is well beyond what most utilities earn 
  • The Startling Human Progress that Economists Fail to See by the great John Kay. "
    Militiades did not imagine that what he really needed was a fibreoptic cable."

    And finally, the tweet of the week from Manual of Ideas

    I was pretty surprised to see last fall to see the cautious Jim Grant so exuberantly embrace standing in front of the propellor, i.e. buy Lukoil and Russian stocks. For me this fails the first rule of investing: remember you are buying a part of a business. Who want to be an owner in name only with no rights? Safety first, Mr. Grant!

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