My High Dividend Stocks Blog

My High Dividend Stocks
This is my high dividend stocks site where I help site members find high dividend stocks with earning power and strong balance sheets.

A first look at Hewlett-Packard (HPQ) after a 49.3% price decline

This is a first look at Hewlett-Packard (HPQ) after its 49.3% stock price decline since April 2010.


Hewlett-Packard manufactures and sells information technology products and services to businesses and consumers worldwide. With the recent EDS acquisition, we estimate services will constitute about one third of sales, slightly similar to personal computers (30%) but higher than printers (20%) and enterprise storage and servers (13%). The remainder of company sales come from software, financing, and other corporate investments.

Morningstar’s take on HPQ

Hewlett-Packard's services engagements are typically large, long-term in nature, and expensive for the customer to migrate to another vendor. HP has aggressively expanded its services offering in pursuit of the successful IBM IBM model in recent years, most notably with the acquisition of EDS in 2008. Services for HP are not simply a stand-alone offering, but rather a complementary segment to the other technology offerings. Stand-alone hardware can be quickly commodified; by wrapping software and services around its hardware strengths, HP raises customer switching costs by increasing its customers' reliance on the firm.

Market price: $27.27

Shares: 1.99 billion

Market cap: $54.18 billion

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DIVIDEND RECORD

HPQ has paid an $0.08 quarterly dividend since 1998 with the exception of 4Q2009 (no dividend).  Hewlett-Packard is not a dividend grower that keeps up with price inflation.  Price inflation has eroded about 39% of the dollars purchasing power since 1998, yet the dividend remained the same over this time period.  This is the same effect as a gradual dividend cut.  They finally increased the dividend to $0.12 per share in 2Q2011.

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Dividend: $0.12 quarterly

Dividend yield: 1.76%  ($0.48 DIV/$27.27 share price)

Dividend payout ratio: 11.3%  ($0.48 DIV/$4.26 EPS according to Google Finance)

EARNING POWER $3.99 EPS @ 1.99 billion shares

            EPS                   Net inc.             Shares               Adj EPS

2006     $2.18                $6,198 M           2,852 M             $3.11

2007     $2.68                $7,264 M           2,716 M             $3.65

2008     $3.25                $8,329 M           2,567 M             $4.19

2009     $3.14                $7,660 M           2,437 M             $3.85

2010     $3.69                $8,761 M           2,372 M             $4.40

2011E   $4.67E              $9,293 M E        1,990 M             $4.67 E

6 year average adjust earnings = $3.99 per share

Consider contrarian buying below $31.92 (8x avg. earnings)

Consider value buying below $47.88 (12x avg. earnings)

Consider investment buying between $47.89 and $79.79 (12x – 20x avg. earnings)

Consider speculative selling above $79.80 (20x avg. earnings)

BALANCE SHEET

Hewlett-Packard’s balance sheet is completely stagnant.

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Book value per share: $17.69

Price to book value ratio: 1.5

Current ratio: 1.15 TTM (over 2.0 is good)

Quick ratio: 0.70 TTM (over 1.0 is good)

CONCLUSION

Hewlett-Packard’s dividend is pathetic.  HPQ could be a high dividend stock if the executives would choose to pay 80% of earnings as dividends instead of 10%.  A $0.80/quarterly dividend would result in an 11.7% dividend yield and might get investors a reason not to sell the stock like they have since its $53.86 top in April 2010.  The company’s earnings have held up for the past five years, so something else is the cause of the stock’s decline since April 2010.  HQP does not have a strong balance sheet.  Shareholder equity is stagnant.  Don’t buy HPQ despite its low valuation until you know why the stock has lost 49.3% of its share price since April 2010.  A bear market in stocks informs me that there will be opportunities to buy HPQ at much lower prices.

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DISCLOSURE

I don’t own Hewlett-Packard.

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American Capital Agency Corp. (AGNC) report 3Q2011 financials after the market closes today.

American Capital Agency Corp. (AGNC) is a high dividend stock yielding 19.5%.  AGNC reports today after the close of the US markets.  Here is the 3 year chart of AGNC.  It is topping out.  More to follow in the next few days following the earning release this afternoon.

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American Capital Agency Corp (NASDAQ: AGNC) is expected to report their earnings today for quarter ended Jun 2009. Revenues are expected to come in at $22.10M. Shares of American Capital Agency Corp traded higher by 1.05% or $0.3/share to $28.86. In the past year, the shares have traded as low as $22.03 and as high as $30.76. On average, 7038620 shares of AGNC exchange hands on a given day and today's volume is recorded at 3092686. The shares are currently trading below the 200-day moving average but above the 50-day moving average. The stock may be range bound between these two levels where the 200-day moving average of $28.86 represents resistance and the 50-day moving average of $27.74 would be an area of support.

Link to original source: http://www.tickrwatch.com/2011/10/earnings-preview-nasdaq-agnc-nyse-arb.html

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A Review of Safe Bulkers (SB) 3Q2011 Financials

There was nothing special or concerning in Safe Bulkers (SB) third quarter 2011 financial report.

http://www.safebulkers.com/sbpr101711.pdf

This stock is a value buy under $7.00 per share, but there is significant downside risk due to deteriorating world economic conditions.  The dry bulk shipping market has an oversupply of ships and demand for shipping services at current prices is eroding due to a worldwide recession.  I think there will be another opportunity to buy SB for $2 - $3 per share like in March 2009.

DIVIDEND RECORD

Safe Bulkers is a high dividend stock.  It is currently yielding 8.93% ($0.60 annual DIV/$6.72 share price).

Safe Bulker’s dividend record remains unchanged.  The company management will pay its 14th consecutive dividend payment since the company’s IPO in 2008.  The dividend is unchanged at $0.15 per share.  The dividend payout ratio increased to 53.5% ($0.15 DIV/$0.28 EPS) from 45.5% last quarter ($0.15 DIV/$0.33 EPS).  I will become concerned when this value goes above 80%.  There diminished earnings are more than enough to pay the dividend in the future.

EARNING POWER

Safe Bulkers’ earning power will continue to decline as the world economic recession continues.  Several of its ships will have to take extremely low charter rates in the next few quarters.  The ships at the bottom of this graph will need to find charters in the dismal spot market.  The Pedhoulas Leader, Venus Heritage, and Venus History have charters that end in October 2011.  The Andreas K and the Panayiota K have charters that end in April and May 2012 respectively.  These ships will be a drag on earnings.

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Net income for the third quarter of 2011 decreased by 10% to $19.8 million from $22.0 million during the same period in 2010.  Net income for the first nine months of 2011 decreased by 16% to $66.2 million from $78.5 million during the same period in 2010.  The company’s management reported that the decrease in net income was mostly attributed to: slightly higher net revenues offset by a lower time charter equivalent (TCE) rate, higher vessel operating expenses, increased depreciation, losses on interest rate derivatives contracts, a decrease in interest expense, and some other small financial costs.  For details see their financial statement (linked above).

From Zack’s we read: Safe Bulkers (NYSE:SB - Snapshot Report) had sales growth of 1.4% during the last fiscal year. The company has reported $165.6 million in sales over the past 12 months and is expected to report $196.9 million in sales in the next fiscal year.  http://www.zacks.com/research/get_news.php?id=293l8525 .

The higher sales will come from some newbuild ships that are starting service in 2012.  Yawn!  Nothing exciting here and that’s good.  At least you can understand how Safe Bulkers earns its profits (unlike financial institutions and insurance companies).

BALANCE SHEET

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Current asset decreased quite a bit.  They gained possession of the MV Venus History on September 9th, 2011.  That accounts for the gains in Vessels, net.  And they received some advances for vessel acquisition.  All that added up to a 2.9% increase in total assets.

It is nice to see Safe Bulkers paying down some of their debts.  Total liabilities at the end of December 2010 were $561.239 million.  Total liabilities have dropped to $510.035 million as of September 2011.  This improved their overall balance sheet, but they are a little strapped for cash right now.

Book value per share improved from $3.70 in December 2010 to $4.50 in September 2011.  This is a nice increase of 21.6% in book value per share.

CONCLUSION

Safe Bulkers remains a buy below $7.00.  There is downside risk due to the world economy in recession.   You will have an opportunity to buy below book value.  I’m waiting for lows like in March 2009 (approx $2.00 - $3.00 per share).  I don’t own Safe Bulkers yet.

The left side of the following chart scares me.  Nothing has been solved in the world economy.  There is another financial crisis coming.  SB’s stock price will be a victim.  That huge decline is more than enough to wipe out any high dividend gains.

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Don't Trust Those Seasonally Adjusted Jobless Numbers

“Don’t trust those seasonally adjusted jobless numbers” is the title of an excellent Minyanville.com article by Lee Adler.  Mr. Adler goes beyond the Bureaucracy of Labor Statistics drivel to give you the real scoop on the state of jobless claims.  The bottom line is that we are still in the recession that started in 2008.  This is not good for the stock market.

http://www.minyanville.com/businessmarkets/articles/seasonally-adjusted-unemployment-claims-unemployment-data/10/20/2011/id/37497

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The Evil 1%

The Evil 1%

by Llewellyn H. Rockwell, Jr.

Recently by Llewellyn H. Rockwell, Jr.: The Dawn of Late Fascism

 

  

The "occupy" protest movement is thriving off the claim that the 99% are being exploited by the 1%, and there is truth in what they say. But they have the identities of the groups wrong. They imagine that it is the 1% of highest wealth holders who are the problem. In fact, that 1% includes some of the smartest, most innovative people in the country – the people who invent, market, and distribute material blessings to the whole population. They also own the capital that sustains productivity and growth.

But there is another 1% out there, those who do live parasitically off the population and exploit the 99%. Moreover, there is a long intellectual tradition, dating back to the late middle ages that draws attention to the strange reality that a tiny minority lives off the productive labor of the overwhelming majority.

I’m speaking of the State, which even today is made up of a tiny sliver of the population, but is the direct cause of all the impoverishing wars, inflation, taxes, regimentation, and social conflict. This 1% is the direct cause of the violence, the censorship, the unemployment, and vast amounts of poverty, too.

Look at the numbers, rounding from latest data. The U.S. population is 307 million. There are about 20 million government employees at all levels, which makes 6.5%. But 6.2 million of these people are public school teachers, whom I think we can say are not really the ruling elite. That takes us down to 4.4%.

We can knock of another half million who work for the post office, and probably the same who work for various service department bureaus. Probably another million do not work in any enforcement arm of the State, and there’s also the amazing labor-pool fluff that comes with any government work. Local governments do not cause nation-wide problems (usually), and the same might be said of the 50 states. The real problem is at the federal level (8.5 million), from which we can subtract fluff, drones, and service workers.

In the end, we end up with about 3 million people who constitute what is commonly called the State. For short, we can just call these people the 1%.

The 1% do not generate any wealth of their own. Everything they have they get by taking from others under the cover of law. They live at our expense. Without us, the State as an institution would die.

Here we come to the core of the issue. What is the State and what does it do? There is vast confusion about this issue, insofar as it is talked about at all. For hundreds of years, people have imagined that the State might be an organic institution that develops naturally out of some social contract. Or perhaps the State is our benefactor because it provides services we could not otherwise provide for ourselves.

In classrooms and in political discussions, there is very little if any honest talk about what the State is and what it does. But in the libertarian tradition, matters are much clearer. From Bastiat to Rothbard, the answer has been before our eyes. The State is the only institution in society that is permitted by law to use aggressive force against person and property.

Let’s understand through a simple example. Let’s say you go into a restaurant and hate the wallpaper. You can complain and try to persuade the owner to change it. If he doesn’t change it, you can decide not to go back. But if you break in, take money out of the cash register, buy paint, and cover the wallpaper yourself, you will be charged with criminal wrongdoing and perhaps go to jail. Everyone in society agrees that you did the wrong thing.

But the State is different. If it doesn’t like the wallpaper, it can pass a law (or maybe even not that) and send a memo. It can mandate a change. It doesn’t have to do the repainting. The State can make you repaint the place. If you refuse, you are guilty of criminal wrongdoing.

Same goals, different means, two very different sets of criminals. The State is the institution that essentially redefines criminal wrongdoing to make itself exempt from the law that governs everyone else.

It is the same with every tax, every regulation, every mandate, and every single word of the federal code. It all represents coercion. Even in the area of money and banking, it is the State that created and sustains the Fed and the dollar because it forcibly limits competition in money and banking, preventing people from making gold or silver money, or innovating in other ways. And in some ways, this is the most dreadful intervention of all, because it allows the State to destroy our money on a whim.

The State is everybody’s enemy. Why don’t the protesters get this? Because they are victims of propaganda by the State, doled out in public school, that attempts to blame all human suffering on private parties and free enterprise. They do not comprehend that the real enemy is the institution that brainwashes them to think the way they do.

They are right that society is rife with conflicts, and that the contest is wildly lopsided. It is indeed the 99% vs. the 1%. They’re just wrong about the identity of the enemy.

October 21, 2011

Llewellyn H. Rockwell, Jr. [send him mail], former editorial assistant to Ludwig von Mises and congressional chief of staff to Ron Paul, is founder and chairman of the Mises Institute, executor for the estate of Murray N. Rothbard, and editor of LewRockwell.com. See his books.

Copyright © 2011 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

Link to original article: http://lewrockwell.com/rockwell/the-evil-1-percent194.html

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TIP OF THE WEEK - Make Good Use of Your Drive Time

Make Good Use of Your Drive Time
October 21st, 2011

Make good use of your commute to work time. Turn off the radio. Most people have a 23 minute commute. That is enough time to listen to an article or two on your smart phone each way to work using some cool technology.

You can go to to some of your favorite financial websites like www.seekingalpha.com and copy the text of an article into a text-to-speech web app. Or you could copy portions of a quarterly financial statement to better understand how the company makes money. Threads from discussion boards make great audio articles. They are rife with pros and cons of a stock. You can begin listening to your article In about the time it would take to print the article.

I use a text to speech web app called SpokenText. It has a free trial that does not require a credit card. I pay $30.00 a year fee to use it. I use it extensively everyday.

www.spokentext.net

There a over a dozen natural sounding voices, but I use for consistently (Mike, Teagan, Charles, and Bob). These voices do not sound like the robotic voice of Stephen Hawking.

For more tips like this go to: www.myhighdividedstocks.com/tip-of-the-week

Buyback Blowback at Kodak.

I haven't finished my analysis of Safe Bulkers' (SB) third quarter financials.  So here is a good article that I read on the demise of Kodak.  Mr. Englund thinks that it would have been wiser for past Kodak executives not to have bought back shares (I agree) and not to pay dividends (I don't agree).  There is no evidence that Kodak would have innovated and adapted just because they would have had more capital.  The owners of the company (the shareholders) should be rewarded with 50% to 80% of the profits of the company.  The other 50% to 20% should be retained for innovation to gain market share.

I have a HD Kodak Zi-8 pocket camcorder which includes an external microphone jack.  I will use this to produce videos for this website.  Their external microphone jack was unique to Kodak, but they didn't advertise this product effectively.

There are a lot of companies buying back shares with the money they could use to improve their marketing and advertising.  Their buybacks will turn out to be a waste of money when the double-dip recession hits in full force.  Let Kodak be a lesson for them.

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Buyback Blowback at Kodak

by Eric Englund

Recently by Eric Englund: The New York Times Company Is Still Insolvent

 

   

The employment of more and better tools is feasible only to the extent that the capital required is available. Saving – that is, a surplus of production over consumption – is the indispensable condition of every further step toward technological improvement. Mere technological knowledge is of no use if the capital needed is lacking. ~ Ludwig von Mises

Eastman Kodak Company (EKC) has become another poster child pertaining to the foolishness of stock buybacks. With EKC’s roots going back to 1880, this company has been a world leader in photographic film and camera sales for well over a century. Keys to Kodak’s past success include research, development, innovation, and a keen focus on customer satisfaction. Success, however, can breed failure. EKC’s tremendous profitability, during the twentieth century, didn’t prepare it for the digital revolution. Over the years, EKC bought back billions-of-dollars worth of its common stock. Kodak’s top management, to be sure, would love to have this money back as EKC’s executive team has not yet developed a business model allowing it to profitably transition from an "analog" to a digital company. I fear time and cash are running out for this iconic company and bankruptcy is looming on the horizon.

A Brief History Of Eastman Kodak Company

George Eastman was a high school dropout who built an incredibly successful multi-national corporation. The company he founded, and which flourished under his leadership, is Eastman Kodak Company. George Eastman became interested in photography in 1878; and his vision, of bringing photography to the masses, came into focus over time. A few months before his 26th birthday, in April of 1880, Eastman founded a business to mass-produce photographic dry plates. Within five years, Eastman introduced the first transparent photographic film and this became a highly profitable product for the company. In 1888, the Kodak camera was introduced using the slogan "You press the button – we do the rest." George Eastman stated his objective was "…to make the camera as convenient as the pencil." In doing so, amateur photography became a growth industry with Kodak leading the way. Through continuous research and development, by 1900, Kodak introduced the Brownie camera; which sold for $1 and used film that sold for 15 cents per roll. This camera was highly popular and it launched Kodak, into the twentieth century, as the industry leader in both photographic film and cameras.

George Eastman’s Business Principles and Policies

Not only was George Eastman a visionary inventor and entrepreneur, he was a hard-working and astute businessman capable of successfully building a global business enterprise. Along these lines, Eastman Kodak Companyprovides the following information about its esteemed founder:

Eastman built his business on four basic principles:

  • Mass production at low cost
  • International distribution
  • Extensive advertising
  • A focus on the customer

He saw all four as being closely related. Mass production could not be justified without wide distribution. Distribution, in turn, needed the support of strong advertising. From the beginning, he imbued the company with the conviction that fulfilling customer needs and desires is the only road to corporate success.

To his basic principles of business, he added these policies:

  • Foster growth and development through continued research
  • Treat employees in a fair, self-respecting way
  • Reinvest profits to build and extend the business

George Eastman died in 1932. His principles and policies provided a foundation upon which to build continued success.

When examining Eastman’s policy of reinvesting profits to build and extend the business, it is self-evident he desired to build Kodak’s financial strength through retaining profits. A strong balance sheet allows a company to fund research and development in order to develop new products and services to fulfill customer needs and desires. Sound financial management goes hand-in-glove with retaining market leadership.

Eastman’s policy of financial conservatism was not adhered to by executives who succeeded him; and it shows.

Kodak Is On The Brink Of Bankruptcy

Initially, it may be difficult to grasp that Kodak is on the verge of bankruptcy. Well, during fiscal-year 2010, Kodak suffered a net loss of $687 million and saw its net worth drop to negative $1.075 billion – yes, Kodak has a negative net worth. EKC’s management understands it is in serious financial trouble and stated the following in the 2010 Annual Report:

Our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness, or to fund our other liquidity needs, including working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements. Our ability to generate cash is subject to general economic, financial, competitive, litigation, regulatory and other factors that are beyond our control. We cannot assure you that:

  • our businesses will generate sufficient cash flow from operations;
  • our plans to generate cash proceeds through the sale of non-core assets will be successful;
  • we will be able to repatriate or move cash to locations where and when it is needed;
  • we will realize cost savings, revenue growth and operating improvements resulting from the execution of our long-term strategic plan; or
  • future sources of funding will be available to us in amounts sufficient to enable us to fund our liquidity needs.

These are not words spoken by an upbeat executive management team looking toward a bright future in the digital age. Management has acknowledged EKC is in deep trouble; yet they won’t tell you it is financial mismanagement that has taken this company to a state of insolvency.

How Kodak Got Into This Financial Mess

A fundamental reason Kodak has fallen into financial distress is that, over the past decades, management had not adhered to George Eastman’s policy of reinvesting profits to build and extend Kodak’s business. Stock buybacks, in fact, are the polar opposite of this reinvestment policy. Share repurchases inherently deplete cash, working capital, and equity. Such capital depletion has deprived EKC’s management of the funds needed to support the implementation of a business model allowing Kodak to transition to a profitable digital imaging company.

Over the five-year period of 2000 to 2004, Kodak generated net earnings of $3.062 billion; and EKC turned a profit in each of these five years. Moreover, at fiscal year-end (FYE) 2004, Kodak’s retained earnings position stood at $7.922 billion; which is a pretty stout number. At fiscal year-end 12/31/04, EKC’s financial condition was sound.

Kodak, by 2005, had become the leading seller of digital cameras in the United States. In fact, for Kodak, digital camera sales amounted to $5.7 billion in 2005; which was fully 50% of the company’s sales volume that year. In spite of Kodak’s No. 1 ranking, in U.S. digital camera sales, this company suffered an operating loss of $1.073 billion in 2005. It is clear this is the year in which Kodak hit the tipping point where its margin-rich, film-based photography business had been displaced by digital imaging; a commoditized business with thin margins. With digital cameras yielding slim profit margins, it is no wonder Kodak’s CEO – Antonio M. Perez – called them a "crappy business".

For Kodak, indeed, digital imaging has been a crappy business; as EKC has not turned an operating profit since 2003 (2004 was a profitable year due to significant earnings from discontinued operations). Over the past six years, Kodak has lost $2.525 billion. Retained earnings, by fiscal year-end 2010, had declined to $4.969 billion.

If Kodak had a positive retained earnings position of $4.969 billion, at fiscal year-end 2010, then how did it have a net worth of negative $1.075 billion? Over the decades, after all, Kodak had been a very profitable company and had built up a substantial retained earnings position. A quick perusal of Kodak’s FYE 2010 balance sheet provides an answer to this question. With $5.994 billion of treasury stock (a contra-equity balance sheet entry) leaping off of the balance sheet, it is unmistakable that stock buybacks have played a significant role in depleting Kodak’s cash, working capital, and equity over the years. When a corporation’s treasury stock position exceeds its retained earnings by over $1 billion, it shouldn’t be a surprise to see a company with a negative net worth.

Kodak’s dividend payouts, most certainly, haven’t served to preserve the company’s capital base either. From 2000 through 2008, Kodak paid out $2.757 billion in dividends; while no dividends were paid in 2009 and 2010. During the five-year span of 2004 through 2008, in which Kodak suffered an operating loss each year, this company paid out $714 million in dividends. EKC’s executives, undoubtedly, would love to have this money back almost as much as they wish the company had never engaged in stock buybacks.

Conclusion

The future is uncertain; hence it is impossible to foresee what twists and turns a business may encounter while attempting to remain on a path of customer satisfaction and profitability. Technology evolves rapidly while consumer tastes are ever changing. As Kodak has discovered, it must still develop a viable business model in order for the company to survive in the new era of digital imaging.

Kodak’s management has also discovered that reinventing their company has become a time consuming and expensive undertaking; and they are rapidly running out of money. For the very reason that the future is uncertain, Kodak should never have engaged in the financially-draining practice of stock buybacks. If Antonio M. Perez could wave a magic wand and receive back the $6 billion Kodak squandered in share repurchases, you’d witness a CEO waving his arms wildly. Kodak, accordingly, would suddenly regain the needed capital to continue the search for its own unique path to profitability in this uncertain world. Alas, it isn’t so.

Kodak’s stock, today, is selling for $1.27 per share. It once sold for $95 per share; so much for the assertion that share repurchases enhance shareholder value. I’ve never understood how people can believe weakening a company’s balance sheet, via stock buybacks, improves the value of a company.

Following all of George Eastman’s principles and policies would have prevented Kodak’s unfolding financial disaster.

October 19, 2011

Eric Englund [send him mail], who has an MBA from Boise State University, lives in the state of Oregon. He is the publisher of The Hyperinflation Survival Guide by Dr. Gerald Swanson. He is also a member of The National Society, Sons of the American Revolution. You are invited to visit his website.

Copyright © 2011 Eric Englund

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Safe Bulkers (SB) reported 3Q2011 financials yesterday. It is yielding 9.13%

My current favorite high dividend stock , Safe Bulkers (SB), reported third quarter financials yesterday. 

http://www.safebulkers.com/sbpr101711.pdf

In summary, they will continue to pay their $0.15 quarterly dividend.  Safe Bulker’s dividend currently yields 9.13%.  Their dividend payout ratio remains around a conservative 50% level.  Earnings have decreased a few percentage points consistent with a horrible market in dry bulk shipping.  The balance sheet results were mixed.  Shareholder equity was up good, but current ratio and quick ratio were both down.

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I will provide in-depth analysis tomorrow.

CONCLUSION – Safe Bulkers remains a buy below $7.00 per share.  However, worldwide double dip recession will take the American stock market and Safe Bulkers lower.  I think there will be opportunities to buy SB below $5.00 per share.  I’m waiting to get closer to the bottom.

Disclosure: I don’t own Safe Bulkers, but I want to.

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First look at Carnival Corporation (CCL)

I recently took a cruise vacation to Mexico on Carnival Cruise Lines (CCL).  This was my third cruise on Carnival spanning over a decade and I had a wonderful experience each time.  I will cruise with them again.  They treat their returning clients well.  This got me thinking about the company as an investment.

I was pleased to find out that Carnival has a decent dividend yield of 3.0%

Carnival Corporation (CCL)

Market price: $33.25

Shares: 778.42 million

Market capitalization: $25.88 billion

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DIVIDEND RECORD

Carnival was a dividend grower until 2009.  They eliminated their dividend for the year of 2009.  In 2010, they began paying a $0.10 quarterly dividend.  Now they are paying a $0.25 quarterly dividend.

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Dividend: $0.25 quarterly

Dividend yield: 3.0%  ($1.00 annual dividend/$33.25 market price)

Dividend payout ratio: 40.8% ($1.00 annual dividend/$2.45 EPS according to Google Finance)

Carnival would become a 6% high dividend stock if its market price dropped to $16.66 if they kept their current dividend the same.

EARNING POWER

(Earnings adjusted for changes in market capitalization)

            EPS       Net inc.             Shares               Adj EPS

2006     $2.77    $2,279 M           823 M                $2.93

2007     $2.95    $2,408 M           828 M                $3.09

2008     $2.90    $2,330 M           816 M                $2.99

2009     $2.24    $1,790 M           804 M                $2.30

2010     $2.47    $1,978 M           778.42 M           $2.54

2011E   $2.45E                                                  $2.45E

Six year average adjusted EPS = $2.71

Consider contrarian buying below $21.68 (less than 8 times average EPS)

Consider value buying below $32.52 (less than 12 times average EPS)

Consider investment buying between $32.53 and $54.19 (between 12 times and 20 times average EPS)

Consider speculative selling above $54.20 (above 20 times average EPS)

BALANCE SHEET STRENGTH

I’m concerned about their low current ratio and quick ratios.  They don’t have much current assets or cash assets to pay short term liabilities.  This needs to be investigated before making a buy.

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Book value per share: $31.12

Price to BV ratio: 1.06 (good)

Current ratio: 0.22 (over 2.0 is good)

Quick ratio: 0.11 (over 1.0 is good)

CONCLUSION

Wait for a low price below $21.68 after the US recession sets in.  They will revisit the 2008-2009 lows.

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DISCLOSURE – I don’t own Carnival Corporation (CCL)

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10 Essential Fiscal Charts Demonstrating America's Disastrous Condition

The sovereign debt crisis is not just for Europeans.  The Americans will get their turn also.  These charts don’t even consider the $70 - $100 trillion dollars in unfunded liabilities for Social Security and Medicare.

You should buy gold now while its cheap.  You will have the opportunity to buy high dividend stocks cheap when the stock market bottoms after the start of the next recession.

10 Essential Fiscal Charts Demonstrating America's Disastrous Condition


By now nobody should have any doubts as to just how disturbing America's fiscal debacle is. For those naive and innocent few who still think there is a Hollywood ending with a pot of gold awaiting everyone at the end of the rainbow, we present the following "10 essential fiscal charts" from the Pew Policy Institute. To be sure, these are all charts summarizing data that has appeared on Zero Hedge repeatedly over the years in some way shape or form. Pew does, however, have a flair for dramatic visual presentation. In Pew's own words: "Since April 2010, the Pew Fiscal Analysis Initiative has published several reports explaining the medium-and long-term fiscal challenges facing the federal government. With stagnating economic conditions and the passage of new legislation, especially the Budget Control Act of 2011, the outlook for the deficit and debt has changed considerably over the past six months. We have created 10 charts that illustrate how the choices made over the last 10 years contributed to our nation’s debt and the challenges currently facing the Joint Select Committee on Deficit Reduction." So without further ado...

http://www.zerohedge.com/news/10-essential-fiscal-charts-demonstrating-americas-disastrous-condition

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