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.

Are you missing out on a 8.47 dividend yielder near it 52 week low?

Safe Bulkers (SB) is on sale.  Did you miss buying Safe Bulkers (SB) just 8.4 percent above its 52 week low?  Safe Bulkers closed at $7.22 per share today (+$0.14 from yesterday).  This high dividend stocks yield is currently 8.47 percent.  The $0.15 quarterly dividend is safe, it has average five year earning power of $1.90, and it balance sheet is good.
 
The present $0.15 quarterly dividend is safe even if you disregard the small amount Safe Bulkers revenue generated from several ships not on long term contracts.  Those ships are operating in the depressed spot market, but they are not idle.  Here is a summary of the company's contracted vessels over the next three years.  This information comes from Safe Bulkers latest quarterly earnings press release
     2011: 75% of Safe Bulkers 16 ship fleet is contracted.  25% of the fleet is operating in the spot market.
     2012: the contracted fleet ownership days drops to 59%.  39% would have to operate in the spot market unless SB finds some long-term contracts to enter into.
     2013: the contracted ownership days drops to a little more to 52%.  48% of the fleet is not under contract yet.
 
These number do not include the new-build addition of 14 new ships to the fleet between today and 2014.
 
How can I calculate estimated revenues for SB over the next few years?  Here is my formula.  I will multiple the number of ships in the fleet (16) times the number of days the fleet is contracted (365 x the contacted percentage) times the time charter equivalent from 2010 ($29,300).  Safe Bulkers time-charter equivalent was $29,300 per day per ship in 2010.  Think of this number as the average revenue number per ship per day.  Some ships are on contract for higher and some are on contract for lower, but $29,300 turns out to be the average for the company fleet overall.  This will give me the estimate revenue for each year for the ships already under contract.
 
     2011: $128.3 million revenue from contracted shipping
     2012: $100.9 million revenue from contracted shipping
     2013: $88.97 million revenue from contracted shipping
 
It costs $53.264 million dollars to operate and maintain the fleet of 16 ships per year using the cost rates from Safe Bulkers most recent quarterly income statement.  I'm including the ships operating on the spot market for costs, but I'm excluding them from the revenues to help prove how strong and safe SB's dividend is.
 
Estimated net income from contracted shipping
     2011: $75.036 million ($128.3 M - $53.264 M = $75.036)
     2012: $47.636 million
     2013: $35.706 million
 
Could Safe Bulkers pay its current dividend of $0.15 per quarter per share with just its contracted shipping over the next few years?  Yes, it could mostly pay the dividend over the next few years just with its currently contracted fleet.  Safe Bulkers had 71,633,284 shares outstanding as of May 2nd, 2011 (including the underwriters option to purchase 750,000 shares on top of the 70,883,284 outstanding).  It would cost SB $42.997 million dollars per year to pay its current dividend out to all those shares.  You can plainly see that most of the dividends can be easily covered with just the contracted ships in the fleet.  Keep in mind that annual interest expenses only amount to $6.8 million per year.
 
Take the numbers above and then factor in the fact that the ships in the spot market will be contributing to the revenue stream along with the new build ships.  You can see why Safe Bulkers dividend is safe.  Don't forget that the CEO's family owns 60% of the stock in the company.  They have a huge incentive to provide a sustainable dividend.
 
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Should you buy Ford as Jim Cramer recommends?

Ford_balance_sheet_2006-2010

Jim Cramer was promoting Ford (F) on his Mad Money show tonight.  The Ford CEO has flowery things to say.  His company doesn't know how to make money.  Here is a quick valuation of Ford for those curious investors that are considering the non-dividend paying Ford.
 
Ford (F)
Market price: $13.95
Shares: 4.178 billion (diluted in 2010)
 
Dividend record
Dividend: none since 2006
Dividend yield: n/a
 
Earning power
5 yr average earnings: ($1.00)
10 yr average earnings: ($0.51)
Earnings are adjusted for changes in capitalization; Ford has been issuing shares for the last five years
          EPS      Net inc.         Adj. EPS
2006   ($6.72)   ($12,629 M)   ($3.02)
2007   ($1.38)   ($2,723 M)     ($0.65)
2008   ($6.50)   ($14,766 M)   ($3.53)
2009   $0.86     $2,717 M       $0.65
2010   $1.66     $6,561 M       $1.57
 
Ford has no proven earning power even when going back 10 years.
 
Balance sheet: declining assets, declining liabilities, and a slightly negative shareholder equity
Book value per share: ($0.16)
Price to book value per share: n/a because it is a negative number
Current ratio: 2.17 (over 2.0 is good)
Quick ratio: 2.07 (over 1.0 is good)
 
Conclusion: Ford pays no dividend and it is speculatively priced.  Don't buy Ford.  There are many better high dividend stocks like Safe Bulkers (SB).
 
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What is causing Southern Copper's 8.6% drop today and should you buy?

Southern Copper (SCCO) is down almost 9% as I write this. Why is this high dividend stock getting hammered by stock market participants? I'll tell you why.

Ollanta Humala, national socialist, just won the Peruvian presidency by a slim margin. "He campaigned as a center-left leader with the desire to create a more equitable framework for distributing the wealth from the country's key natural resources, with the goal of maintaining foreign investment and economic growth in the country while working to improve the conditions of an impoverished majority" according to the wikipedia article on Ollanta Humala. This means that the cost of doing business in Peru is going up for Southern Copper. His national socialist policies will fail just like every other attempt at national socialism. His government will blame capitalism for its failed policies. He will campaign for reelection threatening nationalization of the mining industries. This is the pattern in socialist countries like Venezuela, Bolivia, and many other in Latin America. Never forget that many mining companies have exposure to political risk.

So how much of Southern Copper's business is at risk in Peru? Answer: about 61% of it's 2007 copper production according to the wikipedia entry on Southern Copper. The company owns two major copper mines in southern Peru (Hamala's strongest political support is in southern Peru). The Cuajone mine produced 182 tons of copper in 2007. The Toquepala mine produced 177 tons of copper in 2007. They produced 359 tons combined. The company's northern Mexican mines produced 223 tons combined. The Peruvian mines produced 61% of SCCO's copper in 2007. I doubt these percentages have changed much in four years time.

Conclusion: Investors are fleeing Southern Copper due to the threat of higher taxation or nationalization at the barrels of Peruvian guns. SCCO needs to trade below 12 times five year average earnings on $1.92 to get me to consider buying. Wait until the stock falls below $23.04 before buying. Political uncertainty, a shaky dividend, and a worldwide double dip recession will definitely bring this high dividend stock down into an open pit mine.

Link to article: http://bloom.bg/l4AzJi

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TIP OF THE WEEK - See if Insiders are Buying or Selling Their Stocks

See if Insiders are Buying or Selling Their Stocks

Jason Brizic

June 3, 2011

It’s always a good idea to see if company insiders are net buyers of the high dividend stock you are considering purchasing.

Sometimes this can give you a warning even if you haven’t done the deep analysis on a company yet.

You can use Morningstar.com to see insiders transactions and total shares held.

I was curious to see how much American Capital Agency Corp. (AGNC) stock insiders own.  Go to www.morningstar.com.  Type in AGNC in the text box and then select Insiders tab.  There are several sub-tabs.  I like the one called Insider Activity.  There is table below that with the tabs Transaction History and Holding Summary.

Image001

Several executives of AGNC own no shares of the company.  That’s not a good sign.  Do the same on a stock you are curious about.

For more tips, go here:

http://www.myhighdividendstocks.com/category/tip-of-the-week

After the Dollar: What Comes Next? ((tags: Peter Schiff, US dollar, gold, world reserve currency

Peter Schiff lays out a case for gold to replace the ailing US dollar as the next world reserve currency.

If you like this article and want to know more about how gold could function as the world’s reserve currency, then read Murray Rothbard’s short book What has Government Done to Our Money? (available for free at http://mises.org/resources/617/What-Has-Government-Done-to-Our-Money )

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After the Dollar: What Comes Next?

by Peter Schiff

Recently by Peter Schiff: Raising the Roof on Debt

 

 

 

THE DOLLAR'S TERRIBLE FATE

My readers are familiar with my forecast that the US dollar is in terminal decline. America is tragically bankrupt, unable to pay its lenders without printing the dollars to do so, and enmeshed in an economic depression. The clock is ticking until the dollar faces a crisis of confidence like every other bubble before it. The key difference between this collapse and, say, the bursting of the housing bubble is that the US dollar is the backbone of the global economy. Its conflagration will leave a vacuum that needs to be filled.

Mainstream commentators often discuss three main contenders for the role: the euro, the yen, or China's RMB (known colloquially as the "yuan"). These other currencies, however, each suffer from a critical flaw that makes them unready to carry the reserve currency role in time for the dollar's collapse. When it comes to fiat alternatives, it appears the world would be going out of the frying pan and into the fire.

EURO: FRAYING AT THE EDGES

The euro is a ten-year-old experiment in uniting divergent political, economic, and cultural interests under one monolithic fiat currency held in the hands of one very powerful central bank.

If managed correctly, such a currency could serve to keep its member-governments honest – but that is not the world in which we live. Instead, the fiscally irresponsible members are discussing ditching the currency at the first sign of trouble. That is, they'd rather have their own national currencies to inflate in order to cover over their burdensome public debts. So, in order to keep the euro together, creditor states have been strong-armed into bailouts of the debtors – even though such measures violate the compact that created the common currency.

The question becomes: how long do Germans – still wrought with the memory of Weimar hyperinflation and the rise of the Third Reich – want to keep printing euros to pay the debts of the spendthrift Greeks? How many German politicians will ride to electoral victory on promises of unending bailouts and higher prices across Europe? This is the fundamental flaw of the euro.

And, of course, Greece isn't the only problem. Ireland and Portugal are vying for second-worst debt crisis in Europe. Spain, representing over 12% of eurozone GDP, saw sovereign yields jump from 4.1% at the beginning of 2010 to 6.6% by the end of the year. Yields on most other eurozone countries have been rising as well – a clear indication that the eurozone is an increasingly risky bet.

While a euro secession by the PIGS could actually leave a stronger currency region at the end, it would be a traumatic event. That prospect is undermining confidence in the euro at just the time when the world is considering where to go next.

Perhaps a mature currency that didn't falter so easily amidst the recent global financial crisis would be a good contender for the world's reserve. The euro, by contrast, is both young and in serious trouble. If less than two-dozen nations are too immense a burden for the euro to shoulder, should we expect better results when it's stretched across two hundred?

YUAN: CAPITALIST COUNTRY, COMMUNIST CURRENCY

The investment community is slowly coming around to my long-held excitement about the miraculous growth of China. This is no frenzy. In fact, if anything, I think many are still too skittish when it comes to this market. Yet, those that are jumping on the bandwagon are now proclaiming the Chinese yuan as the logical successor to the dying dollar. But while China is becoming an immense economic force, the yuan itself is hobbled by the country's communist past.

Foremost, China enforces stern capital controls on the yuan. A reserve currency must be freely and easily exchangeable with other currencies. Even within China's borders, one cannot exchange large amounts of yuan for dollars or any other currency.

China is slowly undertaking reforms to relieve these controls, but remember they were not put there arbitrarily. The controls allow China to suppress the value of the yuan, thereby maintaining artificially high exports, among other consequences. If China allowed the yuan to trade freely, it would lose the power it maintains over its money – and by extension, its people.

Let's remember that all fiat currencies are routinely manipulated and inflated. The People's Bank of China has reported M2 growth of over 140% in the past five years – almost entirely to maintain a stable exchange rate with a depreciating dollar. Given rampant inflation, combined with exchange restrictions and a serious lack of transparency, the yuan is simply not ready for primetime.

YEN: BLACK HOLE OF DEBT

The Japanese yen is the third amigo at the international fiat fiesta. While it doesn't suffer the structural risks of the euro, the yen is subsisting in an environment of massive sovereign debt. Japan's debt-to-GDP ratio is the highest of any developed country at 225%, meaning there is a perpetual impetus to print more yen to pay it back. The yen must endure this debt-noose, making it a poor alternative to the USD, which suffers the very same problem.

While I believe Japan is in a much better position because it generally maintains a net trade surplus and because most of their debt is held domestically, it's still not a stable unit with which to conduct world trade.

Perhaps more importantly, with a world seeking yen reserves, the price of yen would increase drastically. This is politically unpalatable in Japan, where the export lobby is constantly trying to push the yen down to boost their sales overseas.

These two factors combine in such a way as to make the yen a plainly infeasible reserve currency. The appreciation in yen value would simultaneously make Japan's debt problems worse and cause its export industry to suffer greatly, meaning that Japan probably doesn't want this role any more than we want her to have it.

As an aside, if you type "yen as reserve currency" into Google, it will ask, "Did you mean: yuan as reserve currency?" I guess even the world's smartest search engine doubts the yen could fill that role.

THE SIMPLEST ANSWER IS OFTEN THE BEST

As J.P. Morgan famously said to Congress in 1913, "gold is money and nothing else." Morgan meant that gold was unmatched in its effectiveness as a store of value and medium of exchange.

Given that his namesake bank started accepting physical gold bullion this past February as counterparty collateral, why should the trend of a widespread return to gold be considered only a remote possibility? On the contrary, it should be expected – if for no other reason than every other currency is fundamentally dismal.

Markets are powerful things, and require a reliable medium of exchange. The call for sound money is not just philosophical; it is derived from the market itself. Throughout human history, merchants have always turned to pure gold and silver over every pretender. This is not the first experiment in a paper money system, nor is it the first widespread debasement of money. In fact, the lessons of history were impressed upon our well-read Founding Fathers to the point that they included the following clear language in the Constitution: "No state shall... make any Thing but gold and silver Coin a Tender in Payment of Debts."

While it has always been possible that another fiat currency would rise up to take the dollar's place, and thereby keep this irrational experiment in valueless money going awhile longer, the particular circumstances that abound today make it seem less and less likely to me. Instead, I'm seeing signs that the world is moving back to gold at a breakneck speed.

This is a return to normal and has many positive implications for the global economy. It's certainly a trend we can all welcome, and profit from.

June 2, 2011

Peter Schiff is president of Euro Pacific Capital and author of The Little Book of Bull Moves in Bear Markets and Crash Proof: How to Profit from the Coming Economic Collapse. His latest book is How an Economy Grows and Why It Crashes.

Copyright © 2011 Euro Pacific Capital

Link to original article: http://lewrockwell.com/schiff/schiff126.html

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SeaDrill (SDRL) is a high dividend stock, but it is also speculative at $35.67.

Seeking Alpha contributor Power Hedge published an article on May 31st titled “SeaDrill: Analyzing First Quarter Results, Dividend Increase.”  He said that SeaDrill’s (SDRL) overall results were largely in line with expectations and overall continue to make the company look like a good investment.  I disagree.  I think that SeaDrill is a high dividend stock currently yielding 8.4%, but the dividend is not stable and the common stock has been speculatively priced since September 2010.

SeaDrill (SDRL)

Market price: $35.67

Shares: 466.55 million (from the latest quarterly report)

Dividend Record

Dividend: increase from $0.65 to $0.70 quarterly + $0.05 special dividend for the next four quarters

Dividend yield: 8.4% (includes special dividend)

Dividend payout ratio: 125% ($3.00 dividend/$2.39 adjusted 2010 EPS)  The dividend is in jeopardy.

Earning power

Earnings adjusted for changes in capitalization due to stock issuance

            EPS                 Net inc.           Adj EPS

2006    $0.61               $214 M            $0.46

2007    $1.20               $502 M            $1.08

2008    ($0.41)             ($164 M)         ($0.35)

2009    $3.00               $1,261 M         $2.70

2010    $2.73               $1,117 M         $2.39

5 year average earnings = $1.26

Value territory below 12x five year average earnings = $15.12 (stock price was at $15 in July 2010)

Speculative territory above 20x five year average earnings = $25.20  This stock has been in speculative territory since September 2010.

Current market price is 28.3 times five year average earnings.  This is SPECULATIVE.

Balance sheet strength: looks alright, but I haven’t delved deeply into it.  It appears to be expanding rapidly.  I’m concerned about what will happen when there is another financial crisis and the price of oil drops to the $40/barrel range again.

Image002

Book value per share: $11.45  SDRL last visited this price in July 2009.

Price to book value per share: 3.11

Current ratio: 1.15 (2.0 or greater is good)

Quick ratio: 0.87 (1.0 or greater is good)

Technicals: link to the 3 year chart with all my favorite indicators - http://stockcharts.com/h-sc/ui?s=SDRL&p=W&b=5&g=0&id=p71303834325

Disclosure: I don’t own SeaDrill.

Conclusion: I would consider buying this high dividend stock below $15.12 when the stock enters value territory.  You might even get this deep water ocean driller at or below book value per share.

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SeaDrill: Analyzing First Quarter Results, Dividend Increase.

SeaDrill Ltd. (SDRL) reported its first quarter results on Friday, May 27. The overall results were largely in line with expectations and overall continue to make the company look like a good investment.

First, a few highlights from SeaDrill’s first quarter earnings report:

  • SeaDrill had Q1 2011 EBITDA of $573 million.
  • SeaDrill reported Q1 net income of $823 million. This gives the company a trailing EPS for the quarter of $1.84.
  • SeaDrill increased the dividend to $0.70 per share per quarter. The company also declared an additional special dividend of $0.20 per share to be paid in quarterly installments of $0.05 per share each quarter for the next four quarters.
  • SeaDrill ordered a harsh environment drilling rig named West Linus. The company has already signed a five-year contract with ConocoPhillips (COP) for this rig. I briefly discussed this rig and included the details of this contract in an earlier article on Seeking Alpha, which you can read here.
  • SeaDrill ordered two new tender rigs and leased them out to Chevron (CVX). The rigs will be under a five-year lease with Chevron once delivered.
  • SeaDrill takes delivery of one ultra-deepwater semi-submersible rig and one semi-tender rig.

SeaDrill’s overall results showed little change from the fourth quarter of 2010. Most of the differences were caused by various accounting rules. The company’s first quarter results explain the causes of the numbers.

  • Revenues dropped from $1,169 million in Q4 2010 to $1,110 million in Q1 2011.
  • Operating profit dropped from $479 million in Q4 2010 to $430 million in Q1 2011. The fourth quarter results included a $26 million gain on the sale of the West Larissa jack-up rig. This is a non-recurring gain and is not included in the first quarter results. That accounts for more than half of the decline in operating profit. The remainder is due to small declines in revenues (and thus profits) from the Floaters, Well Services, and Tender Rigs divisions. The decline in the Tender Rigs profit was also due to non-recurring revenues that were booked in the fourth quarter.
  • Operating cash flow in Q1 2011 was $509 million. This represents an increase of approximately $39.6 million from Q4 2010. Q4 2010 operating cash flow was $479.4 million.
  • SeaDrill’s net income and earnings per share show substantial improvements over Q4 2010. Net income in Q1 2011 was $823 million. Net income in Q4 2010 was $268.1 million. Q1 2011 basic EPS was $1.84 compared to $0.61 in Q4 2010. Most of this was due to a gain of $477 million from the Seawell deconsolidation. SeaDrill’s interest expenses on its debt for the quarter also dropped from $109 million in Q4 2010 to $77 million in Q1 2011.

SeaDrill’s net income for the quarter is abnormally high and it is unlikely that the company will be able to repeat those numbers throughout the year. SeaDrill reported a first quarter EPS of $1.84. Annualized, that works out to $7.36 for the full year 2011. The company had an EPS of $2.73 for the full year 2010. It becomes rather obvious that the company cannot be growing at the rate that the numbers seem to show. It makes more sense to look at the company’s cash flow when comparing quarterly results in this case.

SeaDrill had Q1 2011 operating cash flows of $509 million. This is an increase of $39.6 million (8.26%) over the fourth quarter of 2010. While not as impressive as net income growth, this is still a respectable growth rate. It is also much more realistic and repeatable. If SeaDrill maintains the same operating cash flow for the remaining quarters of the year, it would have a full year 2011 OCF of $2,036 million. This represents an increase of 56.5% over the 2010 OCF of $1,300.4 million. If the company does indeed succeed in reaching an OCF of $2,036 million, this would almost certainly result in an additional dividend increase in a later quarter of this year.

SeaDrill is now paying a forward dividend of $3.00 per share (including special dividend). This gives the stock a forward dividend yield of 8.44% at the May 27 closing price of $35.56 per share. At a dividend yield that high, the company does not have to grow very much to outperform. It does look poised to continue its growth trajectory, however.

SeaDrill secured new contracts for $1.2 billion in this quarter. To put that number into perspective, it is more than SeaDrill’s net income in 2010. It is also very close to the company’s operating cash flow from 2010. As I have mentioned in previous articles on SeaDrill, the company is currently having no problems getting new contracts for its rigs. Furthermore, the company is securing day rates on new contracts that are very close to the current outstanding rates. SeaDrill looks like it is well positioned to take advantage of the growth in offshore drilling.

SeaDrill has continued to expand its fleet throughout the first quarter as it has done for the past several quarters. On November 10, 2010, SeaDrill CEO Alf Thorkildsen briefly discussed the company’s growth potential in a press release:

Our commitment to establish SeaDrill as a leading drilling contractor through investing in new high specification offshore drilling units built by quality yards has been well received by our customers and investors. With the most modern drilling fleet in the world and a total contract backlog of $11.5 billion, we have created a solid platform for further growth and a continued high return to our shareholders.

As Mr. Thorkildsen noted, SeaDrill has a revenue backlog of approximately $11 billion. This is roughly equal to 10 quarters of revenues. The company has expanded since then, however. The company ordered three new rigs in the first quarter, which are under contract (two to Chevron and one to ConocoPhillips). During the quarter, the company had 42 offshore rigs in operation and three stacked units. One of these stacked units will be returning to operation in the second quarter which should have a favorable impact on operational cash flow. The company will be selling the West Juno rig in June and expects to realize an $18 million gain on the sale price.

SeaDrill will also retire the T8 tender rig and expects this to have no adverse impact on the income statement for the second quarter. SeaDrill is retiring the T8 rig because of its age; the company specifically states that the modern fleet is a major competitive advantage for the company (and I agree) and this is one of the oldest rigs owned by the company. West Juno was built in 2010, so the disposal of this rig will not contribute much to the modernization.

Simply put, SeaDrill Ltd. Has a very high dividend that on its own is likely to make the company outperform - particularly if the S&P 500 stays relatively flat over the next year. In addition to that, however, SeaDrill also has rather impressive growth characteristics that should enable the company to outperform. The stock continues to look cheap at these levels.

Zack's Investment Research expects full year EPS to be $2.90 in 2011 and $3.23 in 2012. I would not be surprised to see EPS come in a bit higher than Zack’s predicts due to the abnormally large EPS from this quarter. A 2011 EPS of $2.90 gives the company a forward P/E for the current year of 12.26. The $3.23 EPS estimate for 2012 gives the stock a P/E of 11 for 2012. It gives the stock a PEG ratio of 1.08. Assuming that Zack’s is correct, the fair value for the stock is $32.94. It's predicting $0.68 EPS for the current quarter (Q2). I think that it's right; the current quarter will probably not be as high as the first quarter was.

Net income can be a poor way to evaluate this company for the previously mentioned reasons, however. If SeaDrill can maintain the same OCF throughout the year that it did in the first quarter, then the P/OCF ratio is 7.73 ($4.60 of OCF per share). SeaDrill had negative FCF for the first quarter as is typical for this company (for more information, read my article on SeaDrill’s business model). Analysts are expecting earnings growth for the next year of 11.36%.

At the current prices, an investor buying today is getting the 8.44% dividend for free. The stock has been hovering between $32 and $36 for months -- it is near the top of the range now. If you are willing to be patient, an even better entry price may present itself. The stock is certainly not a bad value at its current price, though.

Disclosure: I am long SDRL.

Link to Power Hedge’s article: http://seekingalpha.com/article/272628-seadrill-analyzing-first-quarter-results-dividend-increase

More Motley Fools are taking notice of high dividend stock Safe Bulkers (SB)

The Motley Fools are taking notice of my current favorite high dividend stock – Safe Bulkers (SB).  I agree with the positive reasons for being long this stock.

Disclosure: I don’t own Safe Bulkers (SB)  right now, but I want to.   I’m working on freeing up some funds to purchase this high dividend stock while it is still on sale at a low price.

Click on this link to see all the articles I’ve written on Safe Bulkers:  http://www.myhighdividendstocks.com/category/high-dividend-stocks/sb

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4-Star Stocks Poised to Pop: Safe Bulkers

By Brian D. Pacampara | More Articles
May 31, 2011 | Comments (0)

Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, dry bulk shipper Safe Bulkers (NYSE: SB  ) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Safe Bulkers' business and see what CAPS investors are saying about the stock right now.

Safe Bulkers facts

Headquarters (Founded)

Athens, Greece (2007)

Market Cap

$521.7 million

Industry

Shipping

Trailing-12-Month Revenue

$165 million

Management

Chairman/CEO Polys Hajioannou

CFO Konstantinos Adamopoulos

Return on Capital (Average, Past 2 Years)

13.3%

Cash/Debt

$48.2 million / $486.4 million

Dividend Yield

8.2%

Competitors

Eagle Bulk Shipping (Nasdaq: EGLE  )

DryShips (Nasdaq: DRYS  )

Navios Maritime Holdings (NYSE: NM  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 92% of the 228 members who have rated Safe Bulkers believe the stock will outperform the S&P 500 going forward. These bulls include dh1000 and All-Star TSIF, who is ranked in the top 0.1% of our community.

Earlier this year, dh1000 listed several of Safe Bulkers' positives: "Relatively new ships on contracts for varying periods of time (staggered terms) with solid customers; reasonable debt and good dividends."

Currently, Safe Bulkers even sports a cheapish P/E of 4.6. That represents a discount to rivals like Eagle Bulk (10.0), DryShips (6.1), and Navios Maritime (7.9).

CAPS All-Star TSIF elaborates on the bargain opportunity:

The excess shipping is creating bargains for those who can afford to buy new ones from cancelled orders left at distressed shipyards, but they have to come to market profitably. I think Safe Bulkers after it's drop the last two months has a decent chance of holding it's own, which is all you really need right now. If they can maintain thieir dividend, (which at today's depressed share price is almost 8%, they should be able to hold up handily against the S&P).

What do you think about Safe Bulkers, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!  

Link to original article: http://www.fool.com/retirement/general/2011/05/31/4-star-stocks-poised-to-pop-safe-bulkers.aspx

What's wrong with insider trading?

Doug Casey on Insider Trading

Interviewed by Louis James, Editor, International Speculator

Recently: Doug Casey on Ron Paul

 
  

L: So, Doug, several people have asked us to talk about the scandal that deposed the head of the IMF; what’s your take on it?

Doug: To all appearances, it couldn’t have happened to a nicer guy, but I’ve got insider trading on my mind – let’s talk about DSK next week.

L: Ah. Raj Rajaratnam’s troubles got you riled up?

Doug: It’s a disgrace. Rajaratnam is – or was – a productive member of society who, even if he did break the law, may very well have done nothing morally wrong –

L: Good grief, Doug, you want the SEC to invite us over for tea and a chat? I know better than to expect you to ever beat around the bush, but …

Doug: The SEC is concerned with the enforcement of a set of stupid, counterproductive, expensive, completely unnecessary, and destructive laws. It does so by having its bureaucracy create a myriad of even more stupid, counterproductive, expensive, completely unnecessary, and destructive regulations.

L: But you’d say that about all government law.

Doug: I would, actually, although I know that confuses some people because there is an overlap between government law and what might be called natural law. But this one is topical at the moment, and worth debunking here and now, even though by this time next week people will have totally forgotten that the guy has been locked away for years… along with about 2.2 million others now in American prisons – most of whom absolutely shouldn’t be there.

L: Okay, okay, but for the record – there must be a few snoops who read these things – we abide by all securities and all U.S. law at Casey Research. In fact, the ethics policy I had to sign and that is strictly applied to all of us here at Casey Research exceeds SEC standards, because we not only don’t want to run afoul the law, our reputation is our business and we don’t want to give anyone any reason to doubt our integrity.

This reminds me of your old stunt, asking the Feds in your audiences to stand up and identify themselves, because you knew who they were. Amazing that you got a few to fall for that.

So… where to begin?

Doug: With a definition, as always. The SEC’s definition of insider trading is constantly evolving and growing, though the definition itself – forget about its application – is imprecise and arbitrary. But, more or less, it says that any officer, director, holder of more than 10% of a public company’s stock, or anyone they talk to about material information regarding the company, is an insider.

Like most of the SEC’s rules, the ones on insider trading are arbitrary. They’re similar to the tax laws, in that you often can’t know whether you’re breaking them or not. You’d almost have to live with a specialized attorney to keep from getting in trouble. They can’t be enforced in anything but a sporadic way – basically to cause fear, in the hope that fear will keep the plebes in line. But worse, they are unnecessary and destructive.

L: One thing at a time, then. Unnecessary?

Doug: Yes. There’s nothing wrong with insider trading, per se. For example, there’s nothing wrong with a manager, who knows his company will report a good quarter, buying shares in his company in advance. This causes no one any harm. Let me repeat that: the fact that an insider knows – or thinks he knows – good news is coming and buys shares does not hurt anyone. Actually, it spreads out the buying pressure and may help everyone buy at better prices. Moreover, if someone needs to sell urgently on a given day, maybe for tax reasons, or maybe because their kid needs an operation, then the fact that someone is in there buying with gusto does him a lot of good.

L: But people say it isn’t fair.

Doug: There’s no such thing as fair. “Fair” is necessarily an arbitrary and contentious word, usually employed by busybodies and losers. You think it’s fair to the antelope when the lion eats it? Was it fair to the dinosaurs when Mother Nature wiped them out? Or how about this: is giving everyone an equal share of something fair, if some worked for it harder than others? The guy who knows something and buys has not taken anything from unwilling hands – just uninformed hands – and people have to make decisions with varying amounts of uncertainty all the time. You can’t regulate uncertainty or the uneven spread of information out of existence any more than you can regulate the capacity to intuit the significance of information into every human skull. Not only is it impossible to do, it’s ethically wrong to try. If you’re no good at this game, don’t play it. Life’s not fair. Get over it.

L: I’ve long seen fairness as a false ideal, created by people whom I suspect were simply jealous of those who had more than they did. It’s the have-nots, or want-mores, trying to use power over others to compel them to share what they would not share willingly, instead of working hard to become haves themselves, honestly.

This has caused nothing but harm to all people – especially poor people, actually – because calls for “fairness” often wind up with the ends justifying the means. Assuaging the plight of poverty-stricken people seems like a noble enough reason, perhaps enough to justify a little bit of force, a mild redistribution, especially from those who don’t really need all they have… But this is not justice; it’s brute force with a benevolent mask. And once a governing system has been given such power, it can use it for less noble goals – and in time, it always does. So-called social justice is just the opposite of what it claims to be. Taking from people what they will not give willingly is theft, and by any other name, it smells just as bad.

Justice is hard enough to achieve, though it can be done, with effort. Fairness is just jealousy dolled up.

Sorry… That one really gets me. Back to insider trading. Buying on good news is one thing – what about on the sell side? What if someone knows a company is going to be sued, or have a patent rejected, or some such negative insider info?

Doug: What of it? So, they get out before others do. Some kid gets to the water fountain before the rest – it happens. And, again, it can spread out the selling, actually blunting the impact of the bad news.

Look, there’s no problem with insiders buying or selling based on their knowledge. Even if news is kept airtight until it’s press-released, some people will get it before others. Only the people paying close attention at that time will be able to act immediately. Is that “fair” to everyone else? If the exchanges slapped trading halts on every share every time a company reported news, everyone would be trying to buy or sell the moment the halts were lifted, greatly magnifying the swings, both up and down. This would tend to cause more harm to all shareholders. The whole idea is simply silly.

The fact is that there are many buyers and sellers, each with different levels of knowledge, ability, and need, and the more important differences – in understanding and insight, for example – are internal and individual. There’s no way to truly level the playing field. It’s an impossible ideal, and therefore a destructive goal.

L: What if an insider knows there’s bad news and is telling people otherwise, urging them to buy, like the proverbial used car salesman who fills a knocking transmission with sawdust to quiet the sound?

Doug: Well, that’s fraud then. It’s got nothing to do with being an insider, it’s got to do with lying. A crook is a crook, and he doesn’t stop being a crook just because there are rules – rules just change the way he cheats people. There are ways to deal with this – even laws, if you want to use them. I’m not defending deceit, fraud, or theft. All I’m saying is that it’s impossible for everyone to hear of financially relevant news at the same time, and that it would be counterproductive if it could be made to happen.

Further, if shareholders really want to try equalizing trading opportunities by demanding certain policies regarding trading and the handling of material information, they could do that. This could all be dealt with by contract between the company and its employees. Or by allowing exchanges to regulate this in different ways, appealing to investors who care about different things.

Instead, we get the SEC, which should really be called the Swindlers Encouragement Commission, telling people it’s making sure everything’s fair, thus luring the lambs to the slaughter. The investment world is full of sharks, and it always will be – all the SEC does is lower the average guy’s defenses, which really does encourage swindlers. Just look at Bernie Madoff, a perfect example. The SEC has never prevented a fraud, to my knowledge. Rather, by making everyone think they’re protected, it makes a fraud much easier to perpetrate. Lambs to the slaughter.

L: Don’t hold back, Doug…

Doug: [Chuckles] It gets worse: adding insult to injury, the SEC costs business billions of dollars annually – probably scores of billions, if you take all the secondary and trickle-down costs into account: direct fees, legal fees, printing, mailing, and other costs of compliance. They have a direct budget cost of something over a billion dollars per year, but that’s trivial relative to the indirect costs they impose on the economy. They ought to be ashamed, diverting a significant fraction of GDP from productive use into the pockets of parasites, in the name of protecting business and investors, when they do the opposite. The SEC is like a Pied Piper who attracts ravening hordes of rats with his flute instead of getting rid of them – and then charges people tenfold for the “service.”

This is one agency I would abolish, immediately and completely. Not a single one of its functions should even be handed off to other agencies. The SEC serves absolutely no useful purpose whatsoever – just the opposite. It’s not a question of getting it under control, or paring it back. It should be eliminated in toto.

L: On some level, I think everyone in the market knows this is true. They go along with the insider trading charade because Big Brother is watching, but they know they’ve read things others have not, they know people others do not, they have relevant experience others do not. To hear the bawdy tales around the trendy pubs in financial districts, everyone thinks they know something others don’t. Nobody is trying to be fair – they are trying to win. Short sellers are perhaps the brassiest of the lot; their very positions proclaim that they think they know something others do not. Their counterparties to the short sells know this, and willingly enter into contract with them, pitting their own knowledge and understanding against that of the shorts.

It’s all about skating around the edges without crossing the lines… and for some, it’s all about crossing the lines without getting caught. I think this really is a case of the emperor’s new clothes, at least among investors. But if everyone knows this, why does the myth persist?

Doug: The public and the fat cats – and absolutely the politicians – all think that a high stock market is, almost by definition, a good thing. But a high stock market doesn’t necessarily mean an economy is doing well, or that public companies are doing well – it just means there’s a perception that this is the case. Or worse, in some cases – like now, I suspect – it means nothing at all, other than that people are afraid to hold currency, government bonds, real estate, or other assets and so-called assets. An artificially high stock market can send dangerous, false signals to businessmen and investors. It can cause false confidence – the kind Wile E. Coyote still has when he runs off a cliff. But the government seems to love a high stock market…

Of course short sellers love to see an overpriced market too. And speaking of short sellers, I’d go further and say that they provide a very valuable positive service to other market participants.

L: How so?

Doug: To start with, they’re always on the lookout for frauds. They’re really the policemen of the market, taking down inflated stock prices of bad companies, and alerting other investors of the danger.

Plus, when they short a stock, no matter how the trade goes, they have to actually buy it back at some point, to be able to deliver on the contract. If they are right about a company being grossly overvalued, their selling provides a warning by driving down the price. Further, they are there to provide a bid after they’ve been proven right. By then, almost no one else is buying, and the shorts offer some liquidity, a bid, to the fools and amateurs who didn’t do their homework. And if they are wrong, being forced to cover their short position can push the stock higher, to the benefit of the incorrectly judged company.

L: So, it’s the Wild West?

Doug: First, the Wild West wasn’t nearly as wild as Hollywood has made it out to be. It had an unregulated economy that worked quite well most of the time – better than ours does now, I’d say, given the huge wealth it created for so many people who had the grit to go out there and take nature on. But that’s a conversation for another day. Second, “security” is a fiction – it doesn’t exist once you leave your mother’s womb.

What I’m saying now, to use your metaphor, is that at least out in the Wild West, people knew that they had to be on their guard and take extra care. In the so-called Civilized East, that was just as true – but the need was masked by the veneer of civilization, and people were conned in droves.

And that’s still true today; every investor who enters the market needs to understand that on the other side of every single trade he makes, is another human being. As in all walks of life, not all human beings are equally honest, or smart, or friendly. Remembering this would encourage investors to do more homework.

L: So, back to Raj Rajaratnam. He didn’t do anything wrong?

Doug: I don’t know – I don’t have all the facts of the case at my disposal. If he did something unethical, shame on him. From what I know, it would appear the possible real wrongdoers were the executives of the companies who relayed information to him – if their deal with the company required them to keep it confidential. Of course, if that was the case, then Raj may have been guilty of receiving stolen goods. But that is not what he’s been convicted of. He’s only been convicted of breaking SEC rules.

But I do know one thing: Raj was a very smart and productive guy – that’s how he became a billionaire. Now, instead of creating value and wealth in society, he’s going to be locked up in a cage for years, and transformed into a burden on society.

In any event, if he committed a tort, it should be the subject of a civil suit. It’s not something that should automatically be the subject of a criminal prosecution. If a crime is involved, let an action be brought by the party who was stolen from – not by a government agency, acting on its own.

L: Well, if people want to help him, Rajaratnam’s brother is leading a letter-writing campaign. But the SEC isn’t going away any time soon, so this is all academic. Are there any real-world investment implications you want to point out?

Doug: Sure. Remember that government regulation is just another distortion in the marketplace, like taxes, trade barriers, inflation, and so forth. All such distortions have consequences, and one of them is to create opportunities for speculators. I haven’t done it, I confess, but I think someone who studied the SEC’s predatory behavior could make a substantial fortune predicting outcomes. It’s full of young hotshot attorneys looking to make their bones by attacking guys like Raj. Then they can join a law firm, and charge $1000 an hour to defend clients against the next crop of hotshot young SEC attorneys, who will do the same thing. It’s a very corrupt system.

L: You’ve said things like that several times. It occurs to me to ask what speculators would do in a true free-market economy, where there are no such distortions?

Doug: We’d all have to find another line of work. In a free-market economy there would be very few speculators, because there would be very few distortions in the way the world works.

L: I think I’d become a venture capitalist. It’s the next best thing – plenty of volatility and speculative upside… but it is riskier, because you’re betting on specific innovations, not trends that have to play out sooner or later.

Doug: Perhaps I’d invest in nanotech research, to hasten the day when they can rejuvenate my body and I can play polo properly again. But for now, I really want to urge people who agree with us about the SEC to think long and hard about the issues. They should be crystal clear in their minds, so they can raise their voices in opposition when others around them mindlessly parrot the party line on insider trading. Hope may be scant of changing the system, but that’s no reason to hesitate to debunk erroneous conventional wisdom. It should be debunked because it’s the right thing to do, and because falsehoods and lies are everyone’s enemy. The current corrupt system will go the way of the dodo eventually, on its own. But the more people there are reminding everyone that one just can’t escape the “caveat emptor” dictum, the sooner and the easier the transition will be.

But most of all – the most practical advice I can give investors now – is not to be taken in themselves by the SEC con. There are more sharks than ever in the water, and nothing the SEC does reduces that number. Always, always keep your guard up, and do your homework. Start with researching the people in any given play. That’s what we do at Casey Research: People is the first of our eight Ps of resource speculation.

L: Great – words to the wise. Thanks, Doug.

Doug: My pleasure, as always. Until next week.

L: Next week.


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      May 27, 2011

      Doug Casey (send him mailis a best-selling author and chairman of Casey Research, LLC., publishers of Casey’s International Speculator.

      Copyright © 2001 Casey and Associates

      The Best of Doug Casey

    TIP OF THE WEEK - Find potential value/contrarian stocks using a "Map of the Market"

    Find potential value/contrarian stocks using a “Map of the Market”

    Jason Brizic

    May 27, 2011

    I sometimes use market visualization tools to spot potential value stocks that I miss using stock screeners.

    I look for beat down stocks headed for value territory.  Stocks that are down 30% or more during a bull market deserve at least a quick valuation to see if they have any redeeming qualities overlooked by growth investors.

    SmartMoney.com’s “Map of the Market” tool is an excellent visualization of the S&P 500’s ups and downs.  This tool really helps you see sector rotation over a period of time also.  The bad news is that it doesn’t incorporate total return.  That means that it doesn’t include dividends paid into the return on a stock.  But I don’t use it to find dividend stocks.  I’m looking for contrarian investment opportunities.

    Go to www.smartmoney.com.  Click on the Tools tab and then find Map of the Market under Featured Tools.  Or follow this link: http://www.smartmoney.com/map-of-the-market/?link=SM_topnav_tools .  I choose the following settings in the legend/control panel area:

    Show Change since: 52 weeks

    Highlight Top 5: Losers 

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    My eye was drawn to the Basic Materials sector.  What is that big red company amongst all that green?  It turned out to be Weyerhaeuser (WY).  I hadn’t heard of them before.  They are a paper and timber company.  Their stock price is in the dumps because of the housing depression.  I did a quick valuation on the company and it has a lackluster dividend and very little earning power.  Its balance sheet looks okay.  I didn’t find a diamond today, but now you have another method to find some contrarian stocks.

    For more tips, go here:

    http://www.myhighdividendstocks.com/category/tip-of-the-week

    What will it take for Philip Morris (PM) to become a high dividend stock?

    Philip Morris International (PM) just bought the global rights to nicotine aerosol technology.  This move could help protect revenues and profits.  This dividend stock is currently yielding 3.68%.  I’m going to run PM through my quick valuation checks to see what will it take to make PM a high dividend stock?

    Philip Morris International (PM)

    Market price: $70.30

    Shares: 1.78 billion

    Dividend record: dividend increases every year for the past three years

    Dividend: $0.64 quarterly

    Dividend yield: 3.68%

    Dividend payout ratio: $2.56 dividend divided by $4.08 most recent EPS = 62%

    Stock price necessary for 6% dividend yield: $42.67

    Earning power: a very stable $3.67 five year average earnings

    Earnings yield: 5.9%

    (Earnings adjusted for changes in capitalization)

                EPS     Net. Inc.          Adj. EPS

    2006    $2.91   $6,130 M         $3.44

    2007    $2.86   $6,038 M         $3.39

    2008    $3.31   $6,890 M         $3.87

    2009    $3.24   $6,342 M         $3.56

    2010    $3.92   $7,259 M         $4.08

    5 year average earning power per share: $3.67

    Value territory @ below 12 times average earnings = $44.04 (it was near this price as recently as May 2010)

    Speculative territory @ above 20 times average earnings = $73.40.  PM’s price is approaching speculative territory at 19.2 times it five year average earnings.

    Balance sheet – huge hits to shareholder equity need to be investigated

    Book value: $1.90 (what? Where did all the equity go?)

    Image003

    Price to book value: 37 (this is horrendous)

    Current ratio: 1.07 (above 2.0 is good.  PM will be strained to pay some short term debts coming due)

    Quick ratio: 0.37 (above 1.0 is good)

    Conclusion: If you want to own it, then put PM on your watch list for a target price of $44.04.  I will consider performing detailed analysis on PM if the price drops considerably toward the $44.04 target.  If you own it, then consider selling it at $73.40 and above.  The balance sheet scares me.

    Disclosure: I don’t own Philip Morris (PM), or plan to until it yields 6% and improves its balance sheet

    Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

    Be seeing you!

    * * * * * * *

    Philip Morris International Buys Nicotine Aerosol Technology

    By Melissa Korn

       Of DOW JONES NEWSWIRES

     

    NEW YORK (Dow Jones)--Philip Morris International Inc. (PM) bought the global rights to technology that creates nicotine in the form of an aerosol as the company seeks smokeless and potentially less harmful alternatives to traditional cigarettes.

    The world's biggest tobacco company by revenue, which sells cigarettes such as Marlboro and L&M outside the U.S., bought the patent from inventors including Jed Rose, director of Duke University's Duke Center for Nicotine and Smoking Cessation Research. Terms of the deal weren't disclosed.

    It's too early to say what form a product might eventually take or whether it will contain tobacco, Philip Morris spokesman Peter Nixon said. He said translating the technology into a product could take "a few years."

    Nicotine itself isn't believed to cause many common smoking-related diseases. Explaining that the ailments are often linked instead to combustion, Philip Morris said the new, non-burning technology "has the potential to reduce the harm of smoking."

    A number of companies have expanded their smokeless tobacco offerings in recent years amid increasing bans on indoor smoking and continued concerns over the harmful effects of cigarettes. Philip Morris is in a partnership with Swedish Match AB (SWMA.SK), which makes moist snuff products called snus, for international marketing of smokeless tobacco. British American Tobacco PLC (BATS.LN, BTI), one of Philip Morris's major competitors, launched a startup in April to develop new nicotine-based, non-tobacco products.

    Meanwhile, in the U.S., Altria Group Inc. (MO) recently began testing spit-free, tobacco-coated sticks that resemble toothpicks and Reynolds American Inc. (RAI) launched an advertising campaign this week for its Camel Snus product to coincide with an expanded smoking ban in New York City.

    -By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

    Link to original article: http://online.wsj.com/article/BT-CO-20110526-712786.html

    Image001