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.

TIP OF THE WEEK - An Extremely Useful Way to Examine 5 Years of a Company's Financials in Less Than Thirty Seconds.

An Extremely Useful Way to Examine 5 Years of a Company’s Financials in Less Than Thirty Seconds.

Jason Brizic

Apr. 1, 2011

You like to do your own investment analysis or you like to dig deeper than the articles you read on a company.  But you are frustrated with all the free investing services only showing the current financials or just three years.  You are a high dividend stock investor, so three years is just not good enough.  You want at least five years worth of financials without a lot of hassle. 

I’ll show you how to easily access five years worth of financials on any exchange listed stock for free and without registration.

You will be able to quickly view five years worth of income statements, balance sheets, and cash flow statements with Morningstar’s stock tool. 

Go to www.morningstar.com and type your desired stock ticker symbol into the Quote box at the top of the screen.  Then chose the Financials tab and you are there.  That was easy!

You can choose annual or quarterly views.  You can chose five years for free and ten years if you are a paid premium member.  The free info exceeds what I’ve seen on other sites like Google Finance, which only shows three years of financials.  Looking at five years of financials will put you ahead of many investors who are really just speculating.  You can even change the numbers to percentages in a single click.

Here are the financials for one of my favorite high dividend stocks, Safe Bulkers (SB):

http://financials.morningstar.com/income-statement/is.html?t=SB&region=USA&culture=en-US

For more tips, go here:

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

Examples of Speculative and Investment Common Stocks You've Got to See.

The second edition of Security Analysis provided several examples of speculative and investment common stocks.  The examples are so illustrative, but they are from 1940.  I wanted to bring the text of this section of the book into this blog with examples from several of the stocks that I have blogged about on www.myhighdividendstocks.com .

I chose the following stocks for examples: Goldcorp (GG), Proctor & Gamble (PG), American Capital Agency Corp. (AGNC), Seadrill Limited (SDRL), Safe Bulkers (SB), and AT&T.  Let me tell you why I chose these stocks.  I wanted to also include Terra Nitrogen (TNH), but the results table would have been too unreadable.

Goldcorp (GG)  I used to own Goldcorp when it was priced in the high teens and twenties.  I wanted to revisit it because it is also in many gold mining stock funds such as FSAGX.  I currently own FSAGX in my 401(k) account and I’m considering selling it.  You will see why momentarily.

Proctor & Gamble (PG)  This stock is often written about in dividend aristocrat articles.  It pays a modest dividend and grows its dividend annually like clockwork.  Many people watch this dividend stock.

American Capital Agency Corp. (AGNC)  I’ve included it because I have written many articles on this ultra-high dividend stock.  I don’t like it because its earnings can’t support the current dividend payout.  It balance sheet is horrible like all financial institutions (e.g. banks).

Seadrill Limited (SDRL)  This stock turned up on one of my high dividend stock screens and warrants further investigation to determine if it is speculative or investment grade.

Safe Bulkers (SB)  I love this high dividend stock with earning power and a strong balance sheet.  You will see why in moments.

AT&T (T)  I pays almost a 6% dividend and it is and dividend aristocrat.  Many eyes are on this one so I want to know at what price is it a value buy.

* * * * * * *

Examples of Speculative and Investment Common Stocks.  Our definition of an investment basis for common-stock purchases is a variance with the Wall Street practice in respect to common stocks of high rating.  For such issues a price of considerably more than 20 times average earnings is held to be warranted, and furthermore these stocks are designated as “investment issues” regardless of the price at which they sell.  According to our view, the high prices paid for “the best common stocks” make these purchases essentially speculative, because they require future growth to justify them.  Hence common-stock investment operations, as we define them, will occupy a middle ground in the market, lying between low-price issues that are speculative because of doubtful quality and well-entrenched issues that are speculative, none the less, because of their high price.

* * * * * * *

Image001

There were three groups of examples in Security Analysis.  Group A were common stocks speculative in December 1938 because of their high price (figures were adjusted to reflect changes in capitalization).  The companies in group A were: General Electric, Coca Cola, and Johns-Manville.  Proctor & Gamble and AT&T sort of fit into the Group A category.

Group B were common stocks speculative in December 1938 because of their irregular record.  Group B in 1938 was comprised of the following companies: Goodyear Tire and Rubber, Simmons, and Youngstown Sheet and Tube.  American Capital Agency Corp., Seadrill Limited and Goldcorp are definitely Group B.  Goldcorp also has a poor divided and a high price.  AGNC is irregular with a high price.

Group C were common stocks meeting investment tests in December 1938 from the quantitative standpoint.  They included Adams-Millis, American Safety Razor, and J.J. Newberry.  I have never heard of any of these stocks.  The only stock in my example that makes this cut is Safe Bulkers.  This is why Safe Bulkers is in my best dividend stocks category.

* * * * * * *

Comments on the Various Groups.  The companies listed in Group A are representative of the so-called “first-grade” or “blue-chip” industrials, which were particularly favored in the great speculation of 1928-1929 and in the markets of ensuing years.  They are characterized by a strong financial position, by presumably excellent prospects and in most cases by relatively stable or growing earnings in the past.  The market price of the shares; however, was higher than would be justified by their average earnings.  In fact the profits of the best year in the 1929-1938 decade were less than 8% of the December 1938 market price.  It is also characteristic of such issues that they sell for enormous premiums above the actual capital invested.

            The companies analyzed in Group B are obviously speculative, because of great instability of their earning records.  They show varying relationships of market price to average earnings, maximum earnings, and asset values.

            The common stocks shown in Group C are examples of those which meet specific and quantitative tests of investment quality.  These tests include the following:

1.      The earnings have been reasonably stable, allowing for the tremendous fluctuations in business conditions during the ten-year period.

2.      The average earnings bear a satisfactory ratio to market price.

3.      The financial set-up is sufficiently conservative, and the working-capital position is strong.

Although we do not suggest that common stock bought for investment be required to show asset values equal to the price paid, it is non the less characteristic of Group C that, as a whole, they will not sell for a huge premium above the companies’ actual resources.

            Common-stock investment, as we envisage it, will confine itself to issues making exhibits of the kind illustrated by Group C.  But the actual purchase of any such issue must require also that the purchaser be satisfied in his own mind that the prospects of the enterprise are at least reasonably favorable.

* * * * * * *

Safe Bulkers is a dry bulk shipper with around sixteen ships rented out to various customers.  The dry bulk market suffering due to the global recession and a glut of ships built during the boom, but Safe Bulkers is well positioned to prosper in even that harsh environment.  Its prospects and the industries are good.

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

Be seeing you!

Examples of Speculative and Investment Common Stocks You've Got to See.

The second edition of Security Analysis provided several examples of speculative and investment common stocks.  The examples are so illustrative, but they are from 1940.  I wanted to bring the text of this section of the book into this blog with examples from several of the stocks that I have blogged about on www.myhighdividendstocks.com .

I chose the following stocks for examples: Goldcorp (GG), Proctor & Gamble (PG), American Capital Agency Corp. (AGNC), Seadrill Limited (SDRL), Safe Bulkers (SB), and AT&T.  Let me tell you why I chose these stocks.  I wanted to also include Terra Nitrogen (TNH), but the results table would have been too unreadable.

Goldcorp (GG)  I used to own Goldcorp when it was priced in the high teens and twenties.  I wanted to revisit it because it is also in many gold mining stock funds such as FSAGX.  I currently own FSAGX in my 401(k) account and I’m considering selling it.  You will see why momentarily.

Proctor & Gamble (PG)  This stock is often written about in dividend aristocrat articles.  It pays a modest dividend and grows its dividend annually like clockwork.  Many people watch this dividend stock.

American Capital Agency Corp. (AGNC)  I’ve included it because I have written many articles on this ultra-high dividend stock.  I don’t like it because its earnings can’t support the current dividend payout.  It balance sheet is horrible like all financial institutions (e.g. banks).

Seadrill Limited (SDRL)  This stock turned up on one of my high dividend stock screens and warrants further investigation to determine if it is speculative or investment grade.

Safe Bulkers (SB)  I love this high dividend stock with earning power and a strong balance sheet.  You will see why in moments.

AT&T (T)  I pays almost a 6% dividend and it is and dividend aristocrat.  Many eyes are on this one so I want to know at what price is it a value buy.

* * * * * * *

Examples of Speculative and Investment Common Stocks.  Our definition of an investment basis for common-stock purchases is a variance with the Wall Street practice in respect to common stocks of high rating.  For such issues a price of considerably more than 20 times average earnings is held to be warranted, and furthermore these stocks are designated as “investment issues” regardless of the price at which they sell.  According to our view, the high prices paid for “the best common stocks” make these purchases essentially speculative, because they require future growth to justify them.  Hence common-stock investment operations, as we define them, will occupy a middle ground in the market, lying between low-price issues that are speculative because of doubtful quality and well-entrenched issues that are speculative, none the less, because of their high price.

* * * * * * *

There were three groups of examples in Security Analysis.  Group A were common stocks speculative in December 1938 because of their high price (figures were adjusted to reflect changes in capitalization).  The companies in group A were: General Electric, Coca Cola, and Johns-Manville.  Proctor & Gamble and AT&T sort of fit into the Group A category.

Group B were common stocks speculative in December 1938 because of their irregular record.  Group B in 1938 was comprised of the following companies: Goodyear Tire and Rubber, Simmons, and Youngstown Sheet and Tube.  American Capital Agency Corp., Seadrill Limited and Goldcorp are definitely Group B.  Goldcorp also has a poor divided and a high price.  AGNC is irregular with a high price.

Group C were common stocks meeting investment tests in December 1938 from the quantitative standpoint.  They included Adams-Millis, American Safety Razor, and J.J. Newberry.  I have never heard of any of these stocks.  The only stock in my example that makes this cut is Safe Bulkers.  This is why Safe Bulkers is in my best dividend stocks category.

Item

Goldcorp (GG)

Proctor & Gamble (PG)

American Capital Agency Corp. (AGNC)

Seadrill Limited (SDRL)

Safe Bulkers (SB)

AT&T (T)

Dividend Yield

0.84%

3.14%

19.50%

7.46%

6.85%

5.77%

Earnings per share

2001

?

?

-

-

-

?

2002

?

?

-

-

-

?

2003

?

?

-

-

-

?

2004

?

?

-

-

-

?

2005

$0.35

?

-

-

?

?

2006

$0.51

$3.05*

-

$0.56

$1.48

$1.24

2007

$0.58

$3.64*

-

$1.32

$3.18

$2.02

2008

$1.85

$4.25*

$0.28

($0.43)

$1.81

$2.18

2009

$0.30

$4.73*

$0.94

$3.31

$2.51

$2.05

2010

$1.64

$4.47*

$2.30

?

$1.66

$3.36

10-yr. average

?

?

-

-

-

?

5-yr. average (2006-2010)

$0.98

$4.03

3-yr. average

$1.17

4-yr. average

$1.19

$2.13

$2.17

12 times 5Y average earnings

$11.71

$48.36

$14.08

$14.28

$25.56

$26.04

20 times 5Y average earnings

$19.60

$80.60

A Mechanical Check for Investment in Common Stocks. The First in a Series.

In this blog post I’m going discuss some aspects of the mechanical tests your should apply to common stocks you are considering to buy and at what price.

On March 16th, 2011 I wrote about not buying a common stock generally above 20 times average earnings in this post: http://bit.ly/MaxAvgPE .  I have to admit that I was a little lazy.  Like most people I used 20 times the current annual earnings to complete the table in that blog post because it the info was readily available, but a five or ten year average is more through and enlightening.  It takes a while to find all the earnings data for the past ten years and then to make adjustments for changes in capitalization, warrants, and convertible preferred stocks.

The excerpt below from Benjamin Graham’s Security Analysis 2nd edition is a devastating indictment on how speculative so-called investors are both in 1940 and today.

Over the next couple of days I’m going to calculate many values for testing common stocks for investment basis that I’ve already written about on this blog.  The goal is separate the speculative stocks from the investment stocks.  The list includes: GoldCorp (GG), Proctor & Gamble (PG), American Capital Agency Corp. (AGNC), SeaDrill (SDRL), Safe Bulkers (SB), and AT&T (T).

* * * * * * *

Higher Prices May Prevail for Speculative Commitments.  The intent of this distinction must be clearly understood.  We do not imply that it is a mistake to pay more than 20 times average earnings for any common stock.  We do suggest that such a price would be speculative.  The purchase may easily turn out to be highly profitable, but in that case it will have proved a wise or fortunate speculation.  It is proper to remark, moreover, that very few people are consistently wise or fortunate in their speculative operations.  Hence we may submit, as a corollary of no small practical importance, that people who habitually purchase common stocks at more than about 20 times their average earnings are likely to lose considerable money in the long run.  This is the more probable because, in the absence of such a mechanical check, they are prone to succumb recurrently to the lure of bull markets, which always find some specious argument to justify paying extravagant prices for common stocks.

            Other Requisites for Common Stocks of Investment Grade and a Corollary Therefrom.  It should be pointed out that if 20 times average earnings is taken as the upper limit of price for an investment purchase, then ordinarily the price paid should be substantially less than this maximum.  This suggests that about 12 or 12.5 times earnings may be suitable for the typical case of a company with neutral prospects.  We must emphasize also that a reasonable ratio of market price to average earnings is not the only requisite for a common-stock investment.  It is a necessary but not sufficient condition.  The company must be satisfactory also in its financial set-up and management, and not unsatisfactory in its prospects.

            From this principle there follows another important corollary, viz.: An attractive common-stock investment is an attractive speculation.  This is true because, if a common stock can meet the demand of a conservative investor that he get full value for his money plus not unsatisfactory future prospects, then such an issue must also have a fair chance of appreciating in market value.

* * * * * * * *

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

Be seeing you!

Even Jim Cramer is skeptical about AGNC.

Jim Cramer is now a critic of American Capital Agency Corp. (AGNC).

* * * * * * *

by Jason Smith | March 28th  |  Filed in: Dividend News

MORTGAGE REITS METRICS

Avg. Market Cap:

$1.3B

Avg. P/E Ratio:

10.9

Avg. Div Yield:

9.8%

Following comments by “Mad Money” host Jim Cramer about the group, the Mortage Investment Stocks is trading lower by 0.1% today.

Surprisingly, American Capital Agency (AGNC) is up 1% after Cramer questioned how the company can feature such a high yield. Shares of American Capital Agency currently yield a whopping 19.3% based on past distributions. Shares of Annaly Capital Management (NLY) are down about half a percent despite Cramer saying that is the one stock in the group that he recommends. “I feel real good about that one,” Cramer said in reference to Annaly.

Among other high-yielding mortgage REITs, Northstar Realty Finance (NRF) is up 2%. Those units now yield 8% based on past distributions. PennyMac Mortgage (PMT), with its 9.2% yield based on past distributions, is up 1%. Anworth Mortgage Asset (ANH), with a yield of 12.3% based on past distributions, is down 1% while Capstead Mortgage (CMO), which also sports a 12.3% yield based on past distributions, is down half a percent.

* * * * * * * *

Link to original article: http://www.tickerspy.com/newswire/?p=4245

AGNC has a whopping dividend, but diminishing earning power and a weak balance sheet.

Disclosure: I don’t own AGNC.

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

Be seeing you!

Why Interest Rates Will Rise. Why AGNC Will Lose.

Conditions are optimal for American Capital Agency Corp. (AGNC) to produce profits; however, those conditions are temporary.  The people who operate AGNC  are Keynesians.  Some of the senior officers used to work for Fannie Mae and/or Freddie Mac.  You must believe in the Keynesian mantra to work at those two government-sponsored enterprises.  Interest rates will rise and destroy AGNC's profitability.  Read the article from Gary North for a detailed explanation of why interest rates will rise.  This is the Austrian economics perspective.  Ignore it at your own peril if you own AGNC or any other mortgage REIT.

Why Interest Rates Will Rise.

by Gary North

Recently by Gary North: Milton Friedman's Contraption

 

  

The world is on a Keynesian spending spree. Western central banks are inflating as never before in peacetime. Western governments are running massive budget deficits.

The European Union in 1997 established a Stability and Growth Pact, which set guidelines for fiscal policy: an annual deficit of no more than 3% of GDP and a total government-debt-to-GDP ratio of no more than 60%.

The West is far beyond both limits. In a March 20 speech by a senior IMF official, we read the following.

In advanced economies, reducing unemployment is a priority. At the same time, however, public debt is piling up to unprecedented heights, creating worries in many advanced countries about fiscal sustainability. In fact, IMF analysis indicates that advanced economy fiscal deficits will average about 7 percent of GDP in 2011, and the average public debt ratio will exceed 100 percent of GDP for the first time since the end of World War II.

As is increasingly obvious, such a fiscal trend simply is not sustainable. While expansionary fiscal policy actions helped to save the global economy from a far deeper downturn, the fiscal fallout of the crisis must be addressed before it begins to impede the recovery, and to create new risks. The central challenge is to avert a potential future fiscal crisis, while at the same time create jobs and support social cohesion.

He is a standard Keynesian economist. He stated without qualification that "expansionary fiscal policy actions helped to save the global economy from a far deeper downturn." He assumed that his listeners would agree with him. This has been the Keynesian party line ever since 1936. It is not questioned. But now the acceptance of the Keynesian party line has removed all resistance to fiscal deficits on an unprecedented peacetime level.

"The central challenge is to avert a potential future fiscal crisis, while at the same time create jobs and support social cohesion." This is like saying, "Governments need to pursue policies of black and white – no gray." According to Keynesians, the fiscal crisis can be overcome by economic growth. But governments still pursue massive deficits, and central banks inflate. No Keynesian is willing to say, "Enough is enough. The economy is now on a path to self-sustained recovery. It is time to implement an exit strategy for both the deficits and monetary expansion." On the contrary, they call for extending the deficits. They praise the central banks' willingness to buy the IOUs of national governments.

The speaker was straightforward in his assessment of what must be done. The problem is, there is no major political party that will do this.

The immediate fiscal task among the advanced countries is to credibly reduce deficits and debts to sustainable levels, while remaining consistent with achieving the economy's long-term growth potential and reducing unemployment. Achieving the fiscal adjustment alone is no small task: The reduction in advanced economies' cyclically adjusted primary budget balance that will be needed to bring debt ratios back to their pre-crisis levels within the next two decades is very large – averaging around 8 percent of GDP – although there is considerable variation across countries. Large gross financing requirements – averaging over 25 percent of GDP both this year and next – only add to the urgency of creating credible medium-term fiscal adjustment plans.

Urgency? What urgency? There is no sense of urgency. The deficits climb, the debt-to-GDP ratios climb, and politicians show no sign of being willing to reverse this.

Low interest rates have saved Western economies from suffering serious restraints on fiscal policy. This will not last much longer, he thinks.

This combination of rising debt but stable debt service payments is not likely to continue for long, however. Higher deficits and debts – together with normalizing economic growth – sooner or later will lead to higher interest rates. Evidence suggests that an increase in the debt-to-GDP ratio of 10 percentage points is associated with a rise in long-term interest rates of 30 to 50 basis points.

He identified the #1 problem: spiraling costs for government-funded medicine. The problem is, this is politically untouchable. He knows this. He failed to mention it. Instead, he merely described it.

To be credible, any advanced economy fiscal consolidation strategy must deal with the cost of entitlements that are a if not the key driver of long-term spending pressures. Of course, health care-related spending reforms will have to form a central part of any budget strategy. New projections by IMF staff show that for advanced economies, public spending on health care alone is expected to rise on average by 3 percent of GDP over the next two decades. Thus, for any budget consolidation plan to be credible, it must deal with the reality of rising health care costs. Inevitably, successful reforms in this area will include effective spending controls, but also bottom-up reforms that will improve the efficiency of health care provision.

Credibility is as credibility does. Western governments are doing nothing to bring these deficits under control. By this standard, the promises and assurances of politicians in the West are incredible.

This is the elephant in the living room. An IMF official at least mentioned its presence. He of course offered no suggestions as to how the elephant should be removed, or who will attempt to remove it. That is for politicians to decide.

Politicians have decided to let the elephant occupy the living room indefinitely.

Voters are unaware of the problem. They think that this elephant can be dealt with. But elephants must be fed, and their waste must be removed. By whom?

MEDICARE

Medicare for years has been running a deficit. This deficit has been funded by the general fund. The trustees expect this to continue. But they offer hope. The system will not be busted until 2029. By "solvent," they mean that the Trustees will not run out of nonmarketable IOUs to sell back each year from the Treasury, which has to come up with the money to buy these IOUs, year by year.

The trustees also make a major assumption. The legislation of 2010 will reduce Medicare costs, as promised. This was the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (the "Affordable Care Act" or ACA).

Much of the projected improvement in Medicare finances is due to a provision of the ACA that reduces payment updates for most Medicare goods and services other than physicians services and drugs by measured total economy multifactor productivity growth, which is projected to increase at a 1.1 percent annual rate on average. This provision is premised on the assumption that productivity growth in the health care sector can match that in the economy overall, rather than lag behind as has been the case in the past. This report notes that achieving this objective for long periods of time may prove difficult, and will probably require that payment and health care delivery systems be made more efficient than they are currently.

Anyone who believes that passing that law is going to reduce Medicare costs probably also believes that the elephant in the living room will soon go away of his own accord. The trustees know better, so they covered their backsides: "This report notes that achieving this objective for long periods of time may prove difficult." May prove difficult! Indeed!

The handwriting is now on the wall, written in red ink. No one seems to notice. The king does not call for a modern-day Daniel to translate. The message is in a foreign tongue: digits. The king does not call in the accountants to translate, because he knows what they will say. The message is much the same as it was in Daniel's day: MENE, MENE, TEKEL UPHARSIN. TEKEL means the same: "You have been weighed in the balance and found wanting."

Any politician who openly says, "It's time to cut back on Medicare," will find himself out of a job after the next election. The insurance companies welcomed Medicare as a way to get high-risk oldsters off their rolls. They kick you off when you turn 65. They will not pay for anything that Medicare would pay for. You can stay on the rolls by paying high premiums, but you will not be paid.

There is no way to go back. The elephant will remain in the living room. He will grow. He will consume more. The pile of dropping will increase.

Everyone in high places knows how this will end: in default. No one is willing to say the form that the default will take.

Some think it will end in hyperinflation. But that does not end the program. It will still be there on the far side of T-bill repudiation.

Some think it will be the unwillingness of central banks to buy government debt. They will cease inflating That will cause Great Depression 2.

Some think the oldsters will finally be cut off and returned to their children for medical care. At today's Medicare costs, that will be $11,000 per year of added insurance fees, which private companies will refuse to insure for people with existing conditions.

Someone will pay to get the elephant out of the living room. The taxpayers will not bear the costs of Medicare indefinitely.

RE-THINKING KEYNES

John Maynard Keynes wrote in the depths of the worldwide depression. His most famous book was published in 1936: The General Theory of Employment, Interest and Money, soon captured the minds of younger economists. A decade later, Keynes died. At the time of his death, it was clear that his explanation of the Great Depression would become dominant.

In 1948, the first edition Paul Samuelson's Economics textbook appeared. It became the dominant textbook in the West. It was called neo-Keynesian. That is, it was only partially incoherent, unlike Keynes' General Theory, which is totally incoherent. (Skeptics who think I am exaggerating have either never read The General Theory or have spent years reading textbooks to prepare them to believe they understand The General Theory when they read it after they have received their Ph.Ds in economics.)

Keynes' publisher, Macmillan, had published Lionel Robbins' excellent book, The Great Depression, in 1934. It was short, readable, and theoretically accurate. It is online for free here.

In 1937, Macmillan published another book on the causes of the depression, Banking and the Business Cycle, by three economists. It is online for free here.

If these two books had carried the day in the economics profession, the West would be far richer today, if we assume that decisions made by private property owners are more efficient than decisions made by politicians and central bankers, none of whom can be held personally economically accountable for the outcome of their decisions. These two books were coherent, accurate, and committed to the free market. They are forgotten today. Were it not for the Mises Institute's program of online posting and physical reprinting of out-of-print books on free market, they would probably not be available.

The world's economists are allied to the politicians. They defend massive government deficits as necessary to avoid recessions and unemployment. But unemployment is higher than anything since the Great Depression. The policies have clearly failed. Nevertheless, apologists use the familiar argument from counter-factual history: the rate of unemployment would be much higher today if it had not been for the deficits and central bank inflation. This needs to be proven. They do not attempt to prove it.

The Keynesians have been given a free ride by non-Austrian School economists. While economists gripe about this or that minor technical detail about the deficits and the central bank inflation, there is no full-scale critique of these policies by mainstream economists. They have bet the farm on the positive outcome of the policies.

The rise of commodity prices testifies to a growing problem. Price inflation apart from energy and food has remained low. Energy and food prices are dismissed as irrelevant in the medium-term, because they are volatile. They go down, too. But when price categories do not go down, as these two have not ever since late 2008, the statisticians are supposed to incorporate them into their statistical model. Government statisticians are resisting this.

As the rise in prices forces a rise in interest rates, debt will become a major drain in consumer spending. Consumers respond to rising monthly expenditures by cutting back on borrowing. Governments do not. They call on the central bank to intervene and buy bonds with newly created money. This cannot go on much longer. The inflation premium in the bond market will increase.

Government is absorbing the savings of Americans. The sink holes that constitute the Federal government's constituencies will absorb the money that would otherwise have gone to finance businesses. Economic growth will slow. Then it will become contraction.

CONCLUSION

The IMF bureaucrat ended his speech with this.

In sum, there is no doubt that given the evolution of the recovery, countries are grappling with increasingly-complex and increasingly-diverse challenges. This is certainly true of fiscal policy. But to move toward a future of strong, sustainable, and balanced growth, these fiscal challenges need to be addressed urgently. The time for action is now.

Thank you for your attention.

The problem: no one in power is paying attention. The time for action is now, he said. Salaried economists have been saying this for years. But no one takes any action.

Government debts will increase until rates go up. Then lenders will still lend. Private capital will suffer. It will be crowded out at the governments' low rates.

The Federal Reserve System is buying most new Treasury debt today. The monetary base is rising. Monetary inflation is increasing. Price inflation is increasing. This is why interest rates will be going up.

If you are in debt for anything on a floating-rate basis, you are in trouble.

March 24, 2011

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

Copyright © 2011 Gary North

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

Be seeing you!

The Party is Almost Over For American Capital Agency Corp.

Mortgage REITs are among the highest dividend yielders. I have been warning for over a quarter about the end of the party for American Capital Agency Corp. (AGNC). Now others are taking notice.

http://www.fool.com/investing/dividends-income/2011/03/24/beginning-of-the-en...

AGNC has been above 100% dividend payout ratio for two quarters now. Others in the industry are beginning to make cuts. It's only a matter of time for AGNC.

There will be an opportunity to buy AGNC after the dividend cut and after the next Federal Reserve induced financial crash.

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

Be seeing you!

A Suggested Basis of Maximum Appraisal for Investment.

Stay away from purchases of all these high dividend stocks yielding over 6% and a P/E ratio above 20 listed in the table below.  The following excerpt is straight out of Security Analysis 2nd Ed. Pg 537-538.  Please read this 71 year old wisdom and then examine the table of high dividend stocks that you should avoid for investment right now.

* * * * * * *

The investor in common stocks, equally with the speculator, is dependent on future rather than past earnings.  His fundamental basis of appraisal must be an intelligent and conservative estimate of the future earning power.  But his measure of future earnings can be conservative only if it is limited by actual performance oer a period of time.  We have suggested, however, that the profits of the most recent year, taken singly, might be accepted as the gage of future earnings, if (1) general business conditions in that year were not exceptionally good, (2) the company has shown an upward trend of earnings for some years past and (3) the investor’s study of the industry gives him confidence in its continued growth.  In a very exceptional case, the investor may be justified in counting on higher earnings in the future than at any time in the past.  This might follow from developments involving a patent or the discovery of new ore in a mine or some similar specific and significant occurrence.  But in most instances he will derive the investment value of a common stock from the average earnings of a period between five and ten years.  This does not mean that all common stocks with the same average earnings should have the same value.  The common stock investor (i.e., the conservative buyer) will properly accord a more liberal valuation to those issues which have current earnings above the average or which may reasonably be considered to possess better than average prospects or an inherently stable earning power.  But it is the essence of our viewpoint that some moderate upper limit must in every case be placed on the multiplier in order to stay within the bounds of conservative valuation.  We would suggest that about 20 times average earnings is as high a price as can be paid in an investment purchase of common stock.

Although this rule is of necessity arbitrary in its nature, it is not entirely so.  Investment presupposes demonstrable value, and the typical common stock’s value can be demonstrated only by means of an established, i.e., an average, earning power.  But it is difficult to see how average earnings of less than 5% upon the market price could ever be considered as vindicating that price.  Clearly such a price-earnings ratio could not provide that margin of safety which we have associated with the investor’s position.  It might be accepted by a purchaser in the expectation that future earnings will be larger than in the past.  But in the original and most useful sense of the term such a basis of valuation is speculative.  It falls outside the purview of common-stock investment.

* * * * * * *

The list below only considers stocks with a current P/E of 20 and above.  Determining average earnings over a five year period require a lot of work.  But stay away from purchases of all these high dividend stocks yielding over 6% and a P/E ratio above 20:

Company name

Symbol

 Market cap

 P/E ratio

Image001
 Div yield (%)

 52w price change (%)

 

Alon Holdings Blue Square Israel Ltd  

BSI

446.92M

25.49

37.14

-20.40

Teekay Tankers Ltd.  

TNK

504.27M

26.27

12.81

-14.49

ING Global Equity Divid.&Premium Opp-ETF  

IGD

1.02B

24.71

11.19

-14.17

Cheniere Energy Partners, LP  

CQP

2.86B

27.11

9.88

14.21

Fifth Street Finance Corp.  

FSC

710.26M

21.60

9.79

8.65

Frontier Communications Corp  

FTR

7.90B

24.87

9.53

4.93

Vector Group Ltd.  

VGR

1.22B

23.86

9.36

15.32

Apollo Investment Corp.  

AINV

2.18B

40.07

9.29

-3.68

Calumet Specialty Products Partners, LP  

CLMT

714.42M

43.75

9.09

-2.04

Encore Energy Partners LP  

ENP

1.02B

31.91

9.02

8.73

DHT Holdings Inc  

DHT

223.08M

35.04

8.93

7.95

Otelco, Inc. (USA)  

OTT

244.07M

362.03

8.83

18.24

StoneMor Partners LP  

STON

466.96M

22.41

8.73

23.72

H&Q Life Sciences Investors  

HQL

246.16M

23.07

8.73

12.35

America First Tax Exempt Investors, LP  

ATAX

171.40M

67.39

8.68

-1.87

Gladstone Commercial Corporation  

GOOD

172.48M

188.29

8.27

25.55

Hercules Technology Growth Capital Inc  

HTGC

454.86M

97.56

8.18

4.98

BreitBurn Energy Partners LP  

BBEP

1.21B

33.89

8.01

35.73

Martin Midstream Partners LP  

MMLP

792.46M

60.84

7.77

24.03

CommonWealth REIT  

CWH

1.76B

56.21

7.74

-14.81

Baltic Trading Ltd  

BALT

197.35M

23.34

7.58

-36.74

Penn Virginia Resource Partners LP  

PVR

1.33B

30.80

7.51

4.55

Monmouth RE Inv. Corp.  

MNR

276.32M

23.55

7.43

2.15

Enerplus Corp (USA)  

ERF

5.35B

41.16

7.24

30.42

Vanguard Natural Resources, LLC  

VNR

934.10M

25.01

7.24

27.48

Medical Properties Trust, Inc.  

MPW

1.21B

97.43

6.97

3.80

Legacy Reserves LP  

LGCY

1.31B

42.30

6.91

33.96

Agree Realty Corporation  

ADC

224.46M

23.55

Time For a PE Ratio History Lesson.

The S&P 500 index has had quite a run since its March 2009 bottom.  It hit bottom at 666 points on March 9th, 2009 and has powered 94.5% higher to 1,249 today.

http://bit.ly/SP5003yrs

I think it’s time to reexamine the S&P 500 PE ratio.  Are we closer to a market top or a market bottom?  The price to earnings ratio for the S&P 500 is currently 18 (http://www.decisionpoint.com/tac/Swenlin.html ).  It has been around or above 20 since 2003.  I don’t think that the market is anywhere near the value level.

Time for a little price to earnings ratio history lesson.  The following excerpt comes from the book Security Analysis (2nd Edition) pg. 536 and it is enlightening 71 years later.

* * * * * * *

In previous chapters various references have been made to Wall Street’s ideas on the relation of earnings to values.  A given common stock is generally considered to be worth a certain number of times its current earnings.  This number of times, or multiplier, depends partly on the prevailing psychology and partly on the nature and record of the enterprise.  Prior to the 1927-1929 bull market ten times earnings was the accepted standard of measurement.  More accurately speaking, it was the common point of departure for valuing common stocks, so that an issue would have to be considered exceptionally desirable to justify a higher ratio, and conversely.

            Beginning about 1927 the ten-times-earnings standard was superseded by a rather confusing set of new yardsticks.  On the one hand, there was a tendency to value common stocks in general more liberally than before.  This was summarized in a famous dictum of a financial leader implying that good stocks were worth fifteen times their earnings.1  There was also the tendency to make more sweeping distinctions in the valuations of different kinds of common stocks.  Companies in especially favored groups, e.g., public utilities and chain stores, in 1928-1929, sold at a very high multiple of current earnings, say, twenty-five to forty times.  This was true also of the “blue chip” issues, which comprised leading units in miscellaneous fields.  As pointed out before, these generous valuations were based upon the assumed continuance of the upward trend shown over a longer or shorter period in the past.  Subsequent to 1932 there developed a tendency for prices to rule higher in relation to earnings because of the sharp drop in long-term interest rates.

* * * * * * *

This chart confirms that there has been a change in investor valuation of common stocks over the years.  The bottoms of S&P 500 has been rising.  Too bad the chart cuts off in 2003.

Image001

  How low did the S&P 500 P/E ratio fall to during the Panic of 2008-2009?

It didn’t fall during the panic.  On the contrary, it skyrocketed because earnings were falling faster than stock prices.    It has settled in the 18-20 PE range since the end of 2009.  Dividend yields tend to be highest at market bottoms.  The last time the S&P 500 yielded over 6% was in 1982.  We are closer to the top of the market than the bottom.  If you are in the market, then you should make plans to get out before the next financial crisis.

Current price to earnings ratios of stock mentioned often on this blog:

American Capital Agency Corp. (AGNC) – 4.00

SafeBulkers Inc. (SB) – 4.98

SeaDrill (SDRL) – 13.70

Terra Nitrogen (TNH) – 13.51

AGNC and SafeBulkers are high dividend stocks in the value zone, but only SafeBulkers has earning power and a strong 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!

(download)

Safe Bulkers, Inc. Announces Filing of 2010 Annual Report.

 I'm going to read the annual report this weekend.  I'll blog about anything interesting I find next week.

Here is a link to the 3 year chart for Safe Bulkers: http://stockcharts.com/h-sc/ui?s=SB&p=W&b=5&g=0&id=p43475946092

I like this company, but I would wait for a pullback to the $6.20 - $6.00 range.

Disclosure: I don't own Safe Bulkers right now.

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

SOURCE: Safe Bulkers, Inc.

Mar 04, 2011 13:00 ET

Safe Bulkers, Inc. Announces Filing of 2010 Annual Report on Form 20-F

ATHENS, GREECE--(Marketwire - March 4, 2011) - Safe Bulkers, Inc. (the "Company") (NYSE: SB), an international provider of marine drybulk transportation services, announced today that it has filed its 2010 Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (the "SEC").

The 2010 Annual Report on Form 20-F is available by link through the Company's website, www.safebulkers.com, under Investor Relations > SEC Filings.

Alternatively, shareholders may also receive a hard copy of the 2010 Annual Report on Form 20-F, free of charge, by request to Capital Link, using the contact details provided at the end of this press release.

About Safe Bulkers, Inc.

The Company is an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for some of the world's largest users of marine drybulk transportation services. The Company's common stock is listed on the NYSE, where it trades under the symbol "SB." The Company's current fleet consists of 16 drybulk vessels, all built post-2003, and the Company has contracted to acquire nine additional drybulk newbuild vessels to be delivered at various times through 2013.