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.

How Do These High-Yielding REITs Really Make Their Money?

American Capital Agency Corp. (AGNC) and the other high dividend stocks called REITs are quite leveraged.  They are at the mercy of the banks that issue/supply their repurchase agreements.  They are borrowed short (repurchase agreements) and lent long (agency securities) just like commercial banks.  That’s fine so long as there are no financial crisis’s looming in the future.  Guess what?  The structural problems caused by fractional-reserve banking are not fixed.  Central banks around the world are printing money which just masks the problems and make them worse.

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They pledge their existing assets (agency securities) as collateral to other banks in return for a very short term loan through repurchase agreements.  The repurchase agreements loans and new stock offerings get them the capital necessary to purchase new agency securities from Fannie, Freddie, and to a lesser extent Ginnie.  They use the income generated from the agency securities and the sale of some agency securities to pay off the repurchase agreement loans when they come due.  Some of the risks to their income are badly performing agency securities (remember those toxic mortgage backed securities and what happens when people who are unemployed stop paying their mortgages) and a decline in the price of agency securities (for the same reason mentioned and Federal Reserve intervention in the MBS market).

Because they are borrowed short and lent long they won’t have the money coming in to keep their current dividend payments during the next financial crisis.  For example, AGNC has a quick ratio of 0.08.  I like to see this ratio above 1.0 meaning that the company has more current assets than current liabilities.  The cash equivalents that AGNC has on hand (current assets) are miniscule compared to their billions in repurchase agreements (current liabilities).

For comparison let’s look at Safe Bulkers quick ratio.  It is 3.30.  They have over three times their current liabilities in current assets that could be liquidated in an emergency to keep paying their fat dividend.

How Do These High-Yielding REITs Really Make Their Money?

By Jim Royal
January 18, 2011

As investors, we need to understand how our companies truly make their money. And there's a neat trick developed for just that purpose. It's called the DuPont Formula.

By using the DuPont Formula, you can get a better grasp on exactly where your company is producing its profit and where it might have a competitive advantage. Named after the company where it was pioneered, the DuPont Formula breaks down return on equity into three components:

Return on equity = Net margins x asset turnover x leverage ratio

High net margins show that a company is able to get customers to pay more for its products. (Think luxury goods companies.) High asset turnover indicates that a company needs to invest less of its capital, since it uses its assets more efficiently to generate sales. (Think service industries, which often do not have high capital investments.) Finally, the leverage ratio shows how much the company is relying on debt to create profit.

Generally, the higher these numbers, the better. Of course, too much debt can sink a company, so beware of companies with very high leverage ratios.

Let's take a look at Annaly Capital Management (NYSE: NLY) and a few of its sector and industry peers.

Company

Return on Equity

Net Margins

Asset Turnover

Leverage Ratio

Annaly Capital Management

8.2%

79.7%

0.01

8.03

Chimera Investment (NYSE: CIM)

18.5%

91.6%

0.09

2.28

American Capital Agency (Nasdaq: AGNC)

28.4%

92.1%

0.03

10.46

Anworth Mortgage Asset (NYSE: ANH)

12.7%

88.2%

0.02

6.95

Source: Capital IQ, a division of Standard & Poor's.

Each of these companies offers a truly amazing dividend, ranging from 12.7% for Anworth to 19% for American Capital Agency. And how do these guys do it? This DuPont formula screen shows clearly: high leverage and fat net margins. Net margins for these group ranges from 80% to 92%, while most are very highly leveraged, with the exception of Chimera. Those tasty dividends bring out the gambler in some investors, which may explain why you might want to avoid some of these too-tempting stocks.

Breaking down a company's return on equity can often give you some insight into how it's competing against peers and what type of strategy it's using to juice its return on equity.

Jim Royal, Ph.D., owns shares of Annaly. The Fool owns shares of Annaly Capital Management.

Link to the original article: http://www.fool.com/investing/dividends-income/2011/01/18/how-do-these-high-yielding-reits-really-make-their.aspx

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A Disturbing Fact Regarding S&P500 Dividend Yields

I recently embarked on a quest to find S&P500 stocks yielding over 6 percent.  I was shocked by the results.  There are only seven S&P500 stocks currently yielding over 6 percent.

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Company

Ticker

Yield

Industry

Frontier Communications

FTR

7.71%

Rural telecom

Windstream

WIN

7.17%

Rural telecom

Diamond Offshore Drilling

DO

6.73%

Oil drilling

Altria

MO

6.42%

Tobacco

Century Link

CTL

6.28%

Rural telecom

Reynolds American

RAI

6.13%

Tobacco

Pitney Bowes

PBI

6.12%

Mail processing

That is just plain sad.  I once read that the S&P500 yielded around 6.7% back in 1982.  Today the index yields a paltry 1.7%.  A depression level bear market could bring the S&P500 yields back to the 6.7% level.  That depression will come when the Federal Reserve stops buying US Treasury debt.  You had better be holding high dividend stocks with earning power and strong balance sheets in your hand when the music stops.

Look for some analysis on these stocks in future posts.

There will be a multitude of stocks currently yielding between 4.00 and 5.99% that will become high dividend stocks when the Federal Reserve tightens and investors run for the exits.  This will mark the return of the bear market.  There will be high dividend stock bargains not seen since March 2009 when that happens.  Subscribe to www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

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What Wall Street Firm Just Took Notice of Safe Bulkers?

Citigroup initiates coverage on Safe Bulkers Inc. (SB).  More of the big boys on Wall Street are starting to take notice of this excellent high dividend stock.

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Equities research analysts at Citigroup (NYSE: C) initiated coverage on shares of Safe Bulkers, Inc. (NYSE: SB) in a research note to clients and investors on Friday. The analysts set a “hold” rating and a $10.00 price target on the stock.

Separately, analysts at Zacks Investment Research reiterated a “neutral” rating on shares of Safe Bulkers, Inc. in a research note to investors on Monday, January 3rd.

Safe Bulkers, Inc. (Safe Bulkers) is an international provider of marine dry bulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along global shipping routes for some of the global consumers of marine dry bulk transportation services. As of January 31, 2010, the Company had a fleet of 13 dry bulk vessels, with an aggregate carrying capacity of 1,077,900 deadweight tons (dwt) and an average age of 3.6 years. The fleet consisted of four Panamax vessels, three Kamsarmax vessels and six Post-Panamax class vessels. The Company’s subsidiaries include Efragel Shipping Corporation, Marindou Shipping Corporation, Avstes Shipping Corporation, Kerasies Shipping Corporation, Marathassa Shipping Corporation, Pemer Shipping Ltd., Petra Shipping Ltd., Pelea Shipping Ltd., Staloudi Shipping Corporation, Marinouki Shipping Corporation, Soffive Shipping Corporation, Eniaprohi Shipping Corporation and Eniadefhi Shipping Corporation.

Shares of Safe Bulkers, Inc. (NYSE: SB) opened at 8.81 on Tuesday. Safe Bulkers, Inc. has a 52 week low of $6.50 and a 52 week high of $9.00. The stock’s 50-day moving average is $8.4 and its 200-day moving average is $7.96. On average, analysts predict that Safe Bulkers, Inc. will post $0.39 EPS next quarter. The company has a market cap of $580.4 million and a price-to-earnings ratio of 5.24.

http://www.americanbankingnews.com/2011/01/18/citigroup-nyse-c-initiates-coverage-on-safe-bulkers-inc-nyse-sb/#

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Safe Bulkers (SB) Basic Financial Metrics.

Safe Bulkers (SB) Basic Financial Metrics

Sales per share.  Safe Bulkers' sales for trailing 12 months were $152,300,000.  At the end of 3Q 2010 there were 65,880,000 shares outstanding.  By dividing $152,300,000 by 65,880,000, we get sales per share of $2.31.

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Earnings per share.   Safe Bulkers' earnings per share of $1.54 for the trailing 12 months were calculated by dividing net income (income statement) by outstanding shares (balance sheet).  They earned $101,680,000 over the last 12 months.

Dividends per share.  By dividing $31,253,500 in dividends paid in the last 12 months by 65,880,000 shares outstanding, we find that Safe Bulkers had dividends per share for the last 12 months of $0.47 cents.

3Q2010: 65,870,000 shares x $0.15 dividend = $9,880,500 in dividends
2Q2010: 65,870,000 shares x $0.15 dividend = $9,880,500 in dividends
1Q2010: 55,440,000 shares x $0.15 dividend = $8,316,000 in dividends
4Q2009: 54,510,000 shares x $0.15 dividend = $8,176,500 in dividends

Cash flow per share.  The cash flow per share of $1.82 for the last 12 months was calculated by taking net income of $101,680,000 and adding back in the depreciation of $18,190,000, which has no impact on cash flow (income statement), and then dividing by the 65,880,000 shares outstanding (balance sheet).

Dividend yield.  Safe Bulkers' stock had a dividend yield on December 31st, 2010, of 6.77 percent.  The dividend yield is calculated by dividing the dividend per share of $0.60 per share at the close of 2010 by the stock price of $8.86.

Now let's begin our analysis of the ability of Safe Bulkers to meet its maturing loan obligations and current cash flow needs by computing its liquidity and debt coverage ratios.

Quick ratio

The quick ratio is an important liquidity ratio that is computed by removing inventory from current assets and then dividing by the remainder by current liabilities.  This information can be found on Safe Bulkers' balance sheet.  Since inventories are typically the least liquid of a company's current assets and are likely to produce a loss if liquidated, it is prudent to look at the firm's ability to cover short-term liabilities without relying on them.  The rule of thumb is that a company with a quick ratio over 1 or better indicates that it could cover all current liabilities with the liquid assets it has on hand, thereby reducing any need to cut its dividend.

Safe Bulkers' quick ratio for the last 12 months is 3.30, more than the standard rule of thumb that you would like to see.  The higher the ratio, the better we like the company.

Calculation: $140,610,000 current assets in 3Q2010 and no inventory divided by $42,630,000 in current liabilities in 3Q2010.

Debt coverage ratio

The short-term debt coverage ratio allows you to quickly see if the company's short-term debt obligations can easily be paid by using the cash that is being generated from company operations.  This ratio is calculated by dividing income from operations by current liabilities or short-term debt (balance sheet).  This ratio should equal at least 2.0.

Safe Bulker's short-term debt coverage ratio equals 2.82 for the last 12 months.  This means that the company is generating more than twice the cash flow it needs from operations to pay off all of its short-term obligations.  Taken by itself, this ratio would indicate that the dividend is pretty secure and would also indicate that there is sufficient operating income to offset a slightly lower liquidity position if that were indicated by the company's quick ratio.

Valuation ratios

There are two important ratios that can help you identify companies with good value characteristics.

Price-to-sales ratio.  We rank companies with low price-to-sales ratios higher than those companies whose stock is pricey relative to the sales being generated.  You can calculate the ratio by dividing the stock price at the end of 3Q2010 ($7.91) by sales per share ($2.31).  Safe Bulkers' price-to-sales ratio for the last twelve months is 3.42, which is not better than our 2.00 rule of thumb ratio that we use to indicate good value.

Price-to-earnings ratio (P/E).  Also known as the price-to-earnings multiple, this ratio tells you how expensive the stock is from a price standpoint given earnings that the stock is generating.  Historically, stocks are a good value when the ratio or multiple is below 10, but we consider stocks that have a P/E of less than 12 - the lower the ratio the better.  You can calculate the ratio by dividing the stock's price by the earnings per share being generated.  Safe Bulkers' price-to-earnings ratio for the last 12 months was is 5.14 ($7.91 stock price divided by $1.54 per share).  It is about the same today.

Dividend ratios

Dividend coverage ratio.  This ratio shows how secure the dividend is based on the cash flow being generated by the company.  Instead of applying the cash flow to analyze whether the company can meet its debt obligations, we analyze this ratio to assess how easily the company can keep making its dividend payments.  To calculate this ratio, you divide cash flow per share by dividend per share.  The higher the dividend coverage from cash flow, the better we like it.

Safe Bulkers has a dividend coverage ratio of 387 percent.

Dividend payout ratio.
  This ratio tells you how much profit the company is paying out to shareholders in dividends.  Once again, the higher the better, so long as the ratio does not exceed 100 percent.  Since a company can only pay dividends from current or retained earnings, it is a warning sign if a company is paying dividends that exceed current earnings.

Safe Bulkers' dividend payout ratio is 30.5 percent and is calculated by dividing its dividend per share ($0.47) by earnings per share ($1.54).  We tend to look for companies that have payout ratios of at least 50 percent, which to us indicates that company is committed to rewarding shareholders through dividend payouts.  However, Safe Bulkers is a very new company (less than 5 years old), so that is a nice dividend payout for such a young company.

Growth ratios

I'm not going to calculate the growth ratios until Safe Bulker's releases 4Q2010 earnings.

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Don't Buy Government Bonds

Don't buy government bonds.  That was Frank Chodorov's advice in 1962 and it is still good advice.  Frank's article will explain why it is immoral, but they are also going to pop in the bond bubble.  The Federal Reserve have more than doubled the monetary base since late 2008.  First it bought toxic mortgage backed securities from the too big to fail banks.  Next it has been buying government bonds with its "QE2" in a desperate effort to keep interest rates low.  The opposite of Ben Bernanke's wishes is happening.  Interest rates are rising.  When they rise high enough the bond fund managers will run for the exits and the loely bond investor who was told that bonds are safer than stocks will get ruined.
 
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You will be much better off owning a portfolio of high dividend stocks with earning power and strong balance sheets.  Government bonds: federal, state, and municipal bonds are all facing a huge bubble.  Dont' buy them.

Don't Buy Government Bonds

by Frank Chodorov

 

   

Chapter 17, Out of Step (1962). An MP3 audio file of this article, read by Steven Ng, is available for download. The reader might consider the further merits of Chodorov's argument, given the existing federal debt of $12 trillion.

In 1800, the United States Treasury owed $83 million. The population was then three million. Every baby born that year was loaded down with a debt burden of about $28; if the interest rate was 6 percent, the newborn citizen could look forward to paying a service charge on the national debt of $1.68 per year. Today the debt load of the nation comes to well over $290 billion, and the population is, in round figures, 180 million. Thus, while the population has increased by 60 times, the national debt has increased by 3,600 times; and figuring the interest rate at 4 percent, the cost of handling this debt is, roughly, $68 per citizen per year. The child is now loaded down at birth with a debt load of $1,700. These figures might be adjusted to the increased production per citizen, and to the decreased value of the dollar. Even so, the fact sticks out that posterity does not pay off anything of the national debt, that each administration adds to the debt left to it, and that the promise of liquidation implied in every bond issue is a false promise.

The bulk of the rise in the national debt has occurred since 1933, when Franklin D. Roosevelt abolished the gold standard and thus made money redeemable in – money. When money was redeemable in gold, the inherent profligacy of government was somewhat restrained; for, if the citizen lost faith in his money, or his bond, he could demand gold in exchange, and since the government did not have enough gold on hand to meet the demand, it had to curtail its spending proclivity accordingly. But, Mr. Roosevelt removed this shackle and thus opened the floodgates. The only limit to the inclination of every politician to spend money, in order to acquire power, is the refusal of the public to lend its money to the government. Of course, the government can then resort to printing money, to make money out of nothing, but at least the people will not be compounding the swindle. Therefore, I offer the following gratuitous advice:

Don't buy bonds.

The advice is based on purely moral, not fiscal, grounds. I could point out that when the government issues a bond it is diluting the value of all the money in existence. Every bond is, in effect, money: the fact that the indenture bears the seal and imprint of the government makes it so, even though it may not enter the market place as money; it does not become monetized for some time. That is, every bond issued by the government is inflationary, and thus robs the savers of the value of their savings. That, of course, is a swindle and is immoral. But, the immorality of bonds runs much deeper.

In the first place, when the State spends more money than it receives in taxes – a fact indelibly written into the bond – it is deliberately committing an act of bankruptcy. If your neighbor should do that you would promptly put him down as a dishonest person. Is the dishonesty transmuted into its opposite when committed by a legal entity? By what multiplier can robbery be made a virtue? The act of borrowing against imaginary income is a fraud, no matter who does it, and when you make a loan to that borrower you aid and abet a fraud.

The State's excuse for borrowing is that it invests the proceeds of its bonds for the benefit of posterity. Instead of putting the entire burden of meeting the cost of its beneficial acts on the living, it proposes to demand of unborn children their share of the cost. Quite plausible! But is this not the impossible doctrine of control of the living by the dead? What would you think of a prospective father who deliberately put a debt load on his expected offspring? That is exactly what you do when you cooperate with the State's borrowing program. You are loading on your children and your children's children an obligation to pay for something they had no voice in, and for which they may not care at all. Your "investment for posterity" may earn you nothing but the curses of posterity.

The use of the word investment in connection with a bond issued by the State is a treacherous euphemism. When you buy an industrial bond you lend your money to a corporation so that it can buy a machine with which to increase its output of things wanted by the market. The interest paid you is part of the increased production made possible by your loan. That is an investment. The State, however, does not put your money into production. The State spends it – that is all the State is capable of doing – and your savings disappear. The interest you get comes out of the tax fund, to which you contribute your share, and your share is increased by the cost of servicing your bond. In effect, you are paying yourself. Is that an investment?

When you depart from this earth you pass on to your heirs both the tax-collecting bond and the tax-paying obligation it represents. Or, as is usually the case – for the history of bonds is that ownership tends to concentrate in a few hands – if you sold your bond, the new owner in due time passes on to his heirs a claim on the production of your offspring. Your great-grandchildren are called upon to labor for his great-grandchildren. The bond thus becomes a legacy of slavery.

The fact is that posterity never pays off its ancestral debts – or not in the way you are led to believe by the bond-selling State. The present generation is posterity to all the generations that have gone before. Are we paying off any of the debts incurred by our forebears? Hardly. We have spending of our own to do and must leave to our posterity some new debts as well as those we inherited. They, in truth, will do likewise.

Whether or not there is any obligation on the living to liquidate the debt left by an arbitrary ancestry, the political machine prevents its being done. Actual liquidation would necessitate increased taxation, on the one hand, and a curtailment of State spending on the other. Increased taxation the State always welcomes, for any increase in taxes means an increase in State power, and the politicians are always for that; it can never spare a sou for the reduction of the national debt. No State – absolutist or constitutional – has ever put aside its ambitions to make good on its promissory notes. The "posterity should pay" argument, in the light of this historic fact, becomes the equipment of a confidence game.

What, then, becomes of the national debt? It grows and grows until, like a balloon, it bursts. But, though this is inevitable, thanks to the money-making monopoly of the State, it takes a long time before the balloon does burst, and certain conditions must prevail to cause the explosion.

When the promissory paper of a small nation is held by a powerful one, some semblance of financial rectitude is maintained by means of the marines; the economy of the defaulting State is impounded until the debt is liquidated, and sometimes for a longer period. Internal debts, on the other hand, are never liquidated. When the burden of meeting the service charges becomes economically unbearable, and the State's credit is gone, repudiation or inflation is resorted to.

Of these two methods, repudiation is by far the more honest. It is a straightforward statement of fact: the State declares its inability to pay. The wiping out of the debt, furthermore, can have a salutary effect on the economy of the country, since the lessening of the tax burden leaves the citizenry more to do with. The market place becomes to that extent healthier and more vigorous. The losers in this operation are the few who hold the bonds, but since they too are members of society they must in the long run benefit by the improvement of the general economy; they lose as tax collectors, they gain as producers.

Repudiation commends itself also because it weakens faith in the State. Until the act is forgotten by subsequent generations, the State's promises find few believers; its credit is shattered. Never since the Russian repudiation of 1917 has the regime attempted to float a bond issue abroad, while its import operations have been largely on a cash basis. Internally, Russia does its "borrowing" from its own nationals as a highwayman does.

Anyhow, since honesty and politics are contradictory terms, the State's standard method of meeting its debt obligations is inflation. It pays off with engraved paper. To be sure, even as it issues its new IOUs to pay off its defaulted ones, the inflationary process is on, for every bond is in fact money; like money, it is a claim on production. The bond you buy increases the circulatory medium, thus depressing its value, and you are really exchanging good money for bad. You are cheating yourself. That is demonstrable by comparing the purchasing power of the dollar at the time you bought the bond with its purchasing power at maturity.

As Germany did in the 1920s, the State can make inflation and repudiation synonymous; it can inflate for the purpose of repudiation. This is what is called "uncontrolled" inflation, another impostor term. There is really no such thing as "uncontrolled" or "runaway" inflation, because the printing presses do not run themselves; somebody must start and keep them going until the desired end, the wiping out of the national debt, is accomplished. The disadvantage of this process, as against outright repudiations, is that in wiping out the debt it also wipes out the values which the citizenry have laboriously built up; it wipes out savings. However, no nation has ever resorted to "uncontrolled" inflation until its economy has been destroyed by war, until production was unable to meet the expenses of the political establishment, to say nothing of the debt piled up by its predecessors.

But, how about the natural pull of patriotism? In the face of national danger, is it not right that we put our all into the common defense? Of course it is right; and people being what they are, the pooling of interests is spontaneous when community life is threatened, as in the case of a flood, an earthquake or a conflagration, or when the Indians attacked the stockade. In such catastrophes we give; we do not lend. Patriotism weighted with profit is of a dubious kind. Bonds do not fight wars. The instruments and materials of war are forged by living labor using the existing stock of capital; the expense must be met with current production. The bonds are issued because laborers and capitalists are reluctant to give their output for the common cause; they put a greater value on their property than on victory. Were confiscatory taxation the only means of carrying on the war its popularity might wane; the war would have to be called off.

This specious resort to spurious patriotism reaches its ultimate in the textbook justification for the public debt. It runs something like this: citizens who have a financial stake in the State, by way of bonds, take a livelier interest in its doings. Thus, love of country is made contingent on the probability of returns, both as to capital and to booty. This smacks of the kind of patriotism that motivated the money brokers of the Middle Ages; once they invested in their king's ventures they could not afford to become lukewarm in their fealty.

It is not patriotism that is engendered by the borrowing State. It is subservience. With its portfolio chock-full of bonds, the financial institution becomes in effect a junior partner whose self-interest compels compliance. An allotment of bonds to a bank carries force because its current large holdings might lose value if doubt were thrown on the credit of the State. A precipitate drop in the prices of federal issues would shake Wall Street out of its boots; hence new issues must be taken up to protect old issues. The concern of heavily endowed universities in their holdings of bonds is such that professorial doubt of their moral content could hardly be tolerated. Even the pacifist minister of a rich church would have to be circumspect in voicing his opinion of the public debt. That is, the self-interest of the tax-collecting bondholders, not patriotism, impels support of the State.

Taken all in all, the bond is a thoroughly immoral institution. I would not be caught dead with one of these papers on me.

Reprinted from Mises.org.

Frank Chodorov (1887–1966), one of the great libertarians of the Old Right, was the founder of the Intercollegiate Society of Individualists and author of such books as The Income Tax: Root of All Evil. Here he is on "Taxation Is Robbery." And here is Rothbard's obituary of Chodorov.
 
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Algorithms Have Take Over Wall Street. Are You Protected From Them?

Wired magazine published an excellent article on how algorithms have taken over Wall Street.  You must have a solid high dividend stock strategy to defend against the new volatility introduced by high frequency trading and market choking government regulations.
 
 
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You can defend your high dividend stock portfolio by keeping at least a 25% cash reserve to purchase more shares when a series of HFT causes a drastic drop in your stock's price.  You must enter some good-until-cancelled purchase orders to do this.  You can also do the same for a stock you don't own.
 
I'm going to examine how several high dividend stocks performed during the May 6th, 2010 flash crash in the near future.  Look for those posts by subscribing to www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

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Warning - AGNC dividend payout ratio might exceed 115%

Warning - AGNC dividend payout ratio might exceed 115% for 4Q2010.

AGNC’s last quarterly dividend was $1.40 per share.  They announced in December that they would pay a $1.40 dividend for 4Q2010.  They have paid $1.40 per share since 3Q2009.  However, AGNC disclosed on January 12th, 2011 that it expects to earn at least $1.20 in 4Q2010.  That isn’t enough to cover the dividend.  I wrote about this on December 17th, 2010.

http://bit.ly/how-much-longer

Their dividend payout ratio will rise above 100%.  That is a warning to high dividend stock investors that a cut to the dividend in coming in future quarters unless something changes that course.  A $1.40 divided by $1.20 equals a dividend payout ratio of 116%.  Yikes!  If the unnamed analysts are correct, then the payout ratio will be 108.5% for 4Q2010.  Factor this into your investment plans if you own AGNC.

Disclosure: I don’t own AGNC shares.

American Capital Agency Corp. Issues Q4 2010 EPS Guidance In Line With Analysts' Estimates
Wednesday, 12 Jan 2011 04:08pm EST 

American Capital Agency Corp. announced that for the fourth quarter of 2010, it expects earnings per share (EPS) to exceed $1.20, including an anticipated benefit from slower projected prepayment speeds. According to Reuters Estimates, analysts are expecting the Company to report EPS of $1.29 for the fourth quarter of 2010. 

http://www.reuters.com/finance/stocks/keyDevelopments?rpc=66&symbol=AGNC.O&timestamp=20110113225400

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Austrian Economics Aids the High Dividend Stock Investor Through the Market Minefield.

Investors accept the past record of companies as a basis for judging the future.  The stock analyst must be on the lookout for indicators to the contrary.  Most economists, stock analysts, mutual fund managers, hedge fund managers, and pension chief investment officers are schooled in Keynesian economics.  They can’t see the stock and bond market troubles ahead.  This is why they didn’t forecast the housing bubble and the subsequent stock market crash of late 2008.

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The ability to see what is coming is of inestimable value, but it cannot be expected to be part of the analyst’s innate abilities.  You should expect him to show a moderate degree of foresight which springs from logic and experience intelligently pondered.  Do not expect this from a Keynesian or Chicago school (supply-side) trained analyst.  Those economic theories are full of contradictions and will lead investors astray in the central bank induced boom-bust cycles.

Analysis of the future should be penetrating rather than prophetic.  Austrian economics is penetrating; Keynesian and Chicago school economics are prophetic.

There are many high dividend stocks that speculators overlook due to irregular or a downward earnings trend.  A penetrating analyst can pick out a company that will remain in business and can be counted on to earn about as much as before in good times (boom) and bad (bust).  A company in a prominent position in its industry with a strong balance sheet and selling at a deep discount can be bought with a very small chance of ultimate loss.  And it might very likely double during the next central bank engineered boom.

This type of reasoning does not lay emphasis on accurately predicting the industry’s future trends, but rather on reaching general conclusions that the company will continue to do business pretty much as before.

This is how private business purchases and investments are made.  This is also a conservative approach that allows for a liberal margin of safety in case of error or disappointment.  It runs considerably less risk of confusion between “confidence in the future” and mere speculative enthusiasm exhibited by most investors.

There were immense buying opportunities for high dividend stocks with earning power and strong balance sheets during late 2008 and the first quarter of 2009.  Don’t worry.  You haven’t missed your opportunity to scoop up great high dividend stocks at bargain prices.

There will be new buying opportunities in the next few years due to the insanity of nation, state, and local government deficit spending along with unprecedented counterfeiting by the central bankers worldwide.  All governments and central bankers are following the delusions of John Maynard Keynes.  Some are more delusional than others (e.g. the Federal Reserve and the US government).  Keynesian actions are characterized by massive money printing, to fund government deficit spending, on any so-called shovel ready projects, to build out the crumbling infrastructure, and to put people back to work digging holes while others fill them in, along with artificially lower interest rates that discourage savings.

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Top 10 Most Profitable Marine Transportation Stocks. Many Are High Dividend Stocks.

The marine transportation sector is filled with high dividend stocks yielding over 6%.  Today's article of the top 10 most profitable marine transportation stocks is from From China Analyst.com (www.cnanalyst.com).  Safe Bulkers is one of my favorites.  This is an awesome high dividend stock that should be bought when the market panics.
 
Safe Bulkers, Inc. (NYSE:SB) is the 1st most profitable stock in this segment of the market. Its net profit margin was 66.76% for the last 12 months. Its operating profit margin was 78.96% for the same period.

How Not to Analyze Earnings Deficits.

Analyzing earnings deficits is a tricky thing.  Many stocks earned deficits in 2009 including some high dividend stocks.  Should you only look at the deficits per share when comparing Company A to Company B, especially when both companies are selling for the same price in the market?  Of course not.

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I have been analyzing American Capital Agency Corp. (AGNC) for the last few months.  AGNC has not experienced a deficit in its short history.  The company went public in 2008 and income has been increasing every year (so far).  So the following does not apply to them.

Below is the appropriate excerpt from Benjamin Graham’s and David Dodd’s excellent book “Security Analysis”.  Apply their wisdom to your high dividend stocks that might have some earnings losses over the last five years.

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Deficits a Qualitative, Not a Quantitative Factor.  When a company reports a deficit for the year, it is customary to calculate the amount in dollars per share or in relation to interest requirements. The statistical manuals will state, for example, that in 1932 United States Steel Corporation earned its bond-interest “deficit 12.40 times” and that it showed a deficit of $11.08 per share on its common stock. It should be recognized that such figures, when taken by themselves, have no quantitative significance and that their value in forming an average may often be open to serious question.

Let us assume that Company A lost $5 per share of common in the last year and Company B lost $7 per share. Both issues sell at 25. Is this an indication of any sort that Company A stock is preferable to Company B stock? Obviously not; for assuming it were so, it would mean that the more shares there were outstanding the more valuable each share would be. If Company B issues 2 shares for 1, the loss would be reduced to $3.50 per share, and on the assumption just made, each new share would then be worth more than an old one. The same reasoning applies to bond interest. Suppose that Company A and Company B each lost $1,000,000 in 1932. Company A has $4,000,000 of 5% bonds and Company B has $10,000,000 of 5% bonds. Company A would then show interest earned “deficit 5 times” and Company B would earn its interest “deficit 2 times.”  These figures should not be construed as an indication of any kind that Company A’s bonds are less secure than Company B’s bonds. For, if so, it would mean that the smaller the bond issue the poorer its position—a manifest absurdity.

When an average is taken over a period that includes a number of deficits, some question must arise as to whether or not the resultant figure is really indicative of the earning power. For the wide variation in the individual figures must detract from the representative character of the average.  This point is of considerable importance in view of the prevalence of deficits during the depression of the 1930’s. In the case of most companies the average of the years since 1933 may now be thought more representative of indicated earning power than, say, a ten-year  average 1930–1939.

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