#it was just coca cola paid their dividends to investors that day

[finstermond]

people praising ronaldo bc he made coca cola lose value in thr stock market. alright none of ya'll know how this works apparantly and no one cares enough to google it, nice

#it was just coca cola paid their dividends to investors that day #every stock loses value when they pay dividends #no one actually lost any money or value bc it was expected

[violetsystems]

#personal

I promised I would keep things less heady this morning which is always a challenge.  I still wake up every morning at around four or five out of routine.  Most of what I’ve been doing since August has been reorganizing money and untangling things from my previous life.  I had both a severance and a payout on a pension from my previous job.  It was a hard cutoff and probably the most diplomatic time to get rid of me.  I spent a lot of time feeling like a failure.  Then I spent a lot of time trying to figure out what I was going to do.  When Monday rolls around the city fully expects us all to do nothing for another thirty days.  I’m not really one to complain although you hear me grumble every Saturday morning like clockwork.  I save most of my emotional output for this blog.  I can say with good faith nobody talks to me this deeply at all.  I’m not on Facebook or Instagram anymore.  I am on LinkedIn more than I’d care to be but nobody ever reaches out other than Bitcoin scammers trying to get me to divest from Nio.  The last one being Andre Bobby.  They introduced themselves as Bobby Andre.  I greeted Andre and subsequently blocked them.  I’m often invited to the same discussions from the news team.  Always about the future of Higher Education and online learning.  Sometimes to the same thread.  I’ve long since ignored everything except jobs posted I’d be interested in over there in China.  From everything I have had to read into, I’ve learned that March is probably the soonest anyone of worth would be hiring.  This is reinforced by conversations with my dad who is admittedly just as much as a workaholic as myself.  I spent twenty years working for something I thought I was part of.  And it just seems like my work was never valued at all.  And the less depressed I got about it, the more I started to explore the reasons why.  I had a thick ass book delivered to me annotating the various financial holdings of what consisted of my share of a pension.  A pension these days is like an ancient relic.  One that many companies find too heavy on their books along with other benefits like health insurance or other basic needs for human survival.  When I started at an art school, the benefits were what were lauded the most.  I had over thirty days of paid vacation.  I spent a period of seven years from 2011 travelling by myself to Korea.  Towards the end of my travel, I had been itching to network for something else.  I felt stagnant in my job.  I spent over twelve years in the same job title drowning in the responsibilities of middle management.  My boss often never showed up to work.  Towards the end, they’d never show up to meetings.  They’d be offsite with an employee of mine making music in a garage.  When the news hit me the Thursday before the fourth of July holiday, it felt targeted and mean.  There was a great alibi, a piece of paper to sign absolving all wrongdoing in exchange for a severance and a health insurance extension and a lot of hurt.  A recruiter reached out the day before my health insurance responsibilities switched over.  My payments per month are about as much as my rent.  I had accepted the highest level insurance through open enrollment about a month before I was let go.  It’s all been pretty heady ever since.  Mostly because somehow I still managed to act like it didn’t even affect me.  Although nobody ever reached out an acknowledged how bad it looks in retrospect.  Nobody reaches out at all other than to punk me into selling stocks while I walk to the grocery store.  I did own a car once.  Now I’m just a target by activist investors and their Qanon buddies.  A step up from the Proud Boys I guess.  But who am I really after all of this?  

Nobody can tell for sure.  I’ve shared everything I could ever possibly feel in my writing week after week.  I’ve had bits and pieces of it lifted and used as actionable intelligence to bully me in public.  Everybody seems to know my business and sometimes I wonder if it really fucking matters.  You can bare your soul to people and they’ll stare right through the gaping hole and laugh.  Mostly because they see how empty they are themselves.  It’s an uncanny valley effect to look in my eyes these days.  People can talk all the shit they want about what theories they have but they’re afraid to face the truth.  That I’ve never really been anything other than genuine.  And America is so desperate to prove you wrong.  To prove how much better it is at everything.  I noticed this a lot with gaming particularly when I would play magic in public with people.  I always build decks at my kitchen table alone for fun.  I love the logic.  I will try unorthodox strategies just to learn through failure.  And I would fail year after year playing against people who literally would define their decks by a monetary value other than a strategic one.  I used to read the Tarot.  I love the idea of randomness.  You buy a pack and you have to work with what you have.  If you’ve ever gone to a prerelease, you know the feeling.  You get a box and you have thirty minutes to draft a deck on the fly with what you have.  You learn the economy of the cards and the existence of rules.  When you win, it’s a special feeling of accomplishment.  You did it yourself and the playing field was level and fair.  And then you sit around with a bunch of loud mouth know it all’s who crush you and laugh about it.  All the while the game’s fun fades into a lecture of mansplaining.  Nowhere does this tendency reel it’s ugly head than in the pundits and the stock markets.  Men telling you what’s best to do with your money.  Men with agendas so blatant it bleeds through the semi annual reports I sift through looking at investment ecosystems of days gone by.  Real estate is a pretty funny one to look at in COVID-19 times.  Nobody feels safe in the office.  Deutschbank recently turned heads saying that people working from home making a paltry sum of 55,000 should pay a tax.  The same week Ken Grfifin spent millions of dollars assaulting a fair tax amendment which died a quiet death.  Real estate sits empty in large droves downtown these days.  Chicago enters another stay at home order Monday which is somewhat of a relief for me.  It’s basically thirty days of respite from people wondering what I’m doing with my time.  Meanwhile we are lectured that we are supposed to save the economy by spending our money eating out instead of enjoying cooking your own meal in the kitchen.  This is incidentally why I like going to to grocery store.  Nobody ever asked but I was anorexic in high school.  I loved coca cola when i was little.  I used to drink too much of it and got a small belly.  When I was twelve American kids used to make fun of my weight.  I was a harsh critic.  I still am.  And I tried to fix it by starving myself.  I promised I wouldn’t get heavy.  I never promised I wouldn’t stay real.  No one would ever know these intimate secrets about me if they didn’t read.  And yet there’s people out there who will lift those very words to figure out a new attack on me.  You’ve got to wonder if I’m so transparent what other people are hiding under the surface if they’re so much more successful than I.

The truth is that I stay down here and write because I’ve found friends to connect with.  It may have not always been the most obvious or personal way to maintain contact.  But nowadays what else do we really have?  A bunch of people who speak through money instead of emotion.  People who assign value and compare each other based on speculation rather than connection.  I often feel like nobody knows what I’m worth.  This is perverse to watch as my bank reports my net worth rising when I spent so many years in debt.  And yet every day I go out in society people follow me around and talk so much about me but never to my face.  Are they scared to find out who I really am?  Are they trying to figure out what makes me so special?  Do they ever succeed?  No.  Things just end up sucking even more.  When the rules change and cheating doesn’t pan out anymore, they figure out more ways to be corrupt.  New ways to target you and intimidate.  New ways to control who you think you are.  All the while advertising this country as the freest place on Earth.  I don’t feel free.  I feel trapped, isolated and caged.  Mostly now for my protection granted.  Which is important to note that the only one keeping me safe is myself.  Nobody really has done me any favors.  It’s been a fucking insult to live out since the summer.  And yet, I still have to keep my shit together.  I have to be there for myself emotionally.  I need to feed ecosystems that I feel a part of.  And we all do this in varying ways seeking connection.  When I come to Tumblr, there isn’t some huge expectation that any of this does anything other than share my feelings.  Are my feelings valued?  Here, yes they are.  Sometimes they are valued in ways that I cannot betray or explain.  And there’s a sort of sacred intimacy to that I have never experienced in my life.  I wonder sometimes how people think they’ll ever fall in love if they can’t feel it.  Love is much more complex than the sum of it’s parts we’ve melted it down to to market back and sell at a cut rate.  Love is supposed to transcend, renew and replenish the soul to keep on existing.  Love isn’t a dividend in your stock portfolio or a cadre of late night trysts that haunt you and demand attention.  Love is a lingering spirit in the dark leading you towards a light.  Sometimes you fear being hurt again.  Sometimes you fear the change.  Sometimes you are excited and afraid.  But love never rushes.  Love never is easy.  Love is never right out there in front of your face demanding affirmation every moment of the day without anything in return.  Love doesn’t forget you and leave you alone in the dark crying for some sort of purpose.  Love isn’t a waste of fucking time.  Patience isn’t either.  And you will never feel the depth of love if you force it.  Love will come to you when it’s time for it to blossom.  Love is part of an ecosystem of connections and kindness you nurture with nothing in return.  But love doesn’t come for free.  There is a cost to love beyond dollars, yen, yuan, won or bitcoin.  You can’t speculate on something you don’t control.  And love is free, chaotic, and most of all nurturing.  Love isn’t a competition.  It’s not something you can quantify and bottle up.  Love is about as heavy as it gets for Saturday morning.  So if anything just remember I love you all.  One person more than most as always.  That’s about as free as I can be.  And if you fuck with my love I will leave you cold in the shadows where you belong not I.  It’s nothing personal.  It’s all love. <3 Tim

[preciousmetals0]

This Canadian Dividend Stock Is on Sale for the First Time in 12 Years

This Canadian Dividend Stock Is on Sale for the First Time in 12 Years:

Great stocks rarely go on sale. When they do, the bargain prices don’t last for long. If you want to profit, be prepared to act.

ONEX Corporation (TSX:ONEX) is arguably one of the greatest stocks in Canadian history. Since 1995, shares have increased in value by more than 2,300%. Coca-Cola Co stock, by comparison, rose by just 230% over the same period.

Note that the numbers above don’t even factor in dividends, which ONEX has dutifully paid every quarter for more than 30 years. When it comes to reliable stocks that can compound your capital for decades, this company leads the pack.

Since mid-2018, however, shares have sputtered, losing 20% of their value. It’s rare for ONEX to experience such a sudden slide. Throughout history, any pullback has turned into a clear buying opportunity. The latest dip looks no different. Let’s dive into how you can profit.

Invest in private equity

Brookfield Asset Management Inc (TSX:BAM.A)(NYSE:BAM) is an incredible stock. The company manages more than $500 billion on behalf of clients.

It chooses specific themes and sectors in which to invest, betting both investor capital and its own internal money and aligning incentives across the board. Since 2013, shares have risen by 230%.

ONEX runs a similar strategy, investing and managing capital alongside its shareholders, institutional investors, and high net worth clients. Since 2013, shares have more than doubled.

ONEX is a bit different than Brookfield in that it focuses on private equity. As the name suggests, these investments aren’t available to the general public, which has an impact on valuations. If you have a strong deal pipeline, you can invest in high-quality businesses at bargain prices.

In total, ONEX manages around $38 billion, of which $7.2 billion is shareholder capital. This size makes them one of the largest private equity investors in Canada, giving them first-row access to deal flow.

At one-tenth the size of Brookfield, however, ONEX is still nimble enough to invest in high-growth opportunities that are too small for most institutions.

Investing in ONEX stock is one of the only ways that everyday investors can gain exposure to private equity returns.

Capitalize on lumpiness

ONEX’s private equity portfolio has generated a gross multiple of capital invested of 2.5 times, resulting in annual returns of 27%. That’s an amazing performance. If you invest $10,000 at a 27% annual rate of return, you’ll wind up with $13 million after 30 years!

Here’s the thing: the returns can be lumpy. As with public securities, private equity markets go through boom and bust cycles. Due to market inefficiencies, the volatility can actually be much worse.

From 2002 to 2006, ONEX stock generated a total return of 0%. During the financial crisis, ONEX stock lost nearly two-thirds of its value.

Despite these challenging periods, however, ONEX has proven itself a long-term winner, willing to take on risk at opportune times. In 2009, as global markets were crashing, management positioned the company for a decade-long run that would see the stock double in price three times.

The past 24 months have been another dry period, with shares down by 20%. If we’ve learned anything from history, now is the time to buy.

As a private equity investor, ONEX can benefit from market downturns. Private companies can trade at substantial discounts during a recession. While the rest of ONEX’s portfolio will be impacted, bear markets are a great place to be if you’re looking to buy. That’s exactly what happened in 2009, just as the company began its incredible run of performance.

As coronavirus fears send economic shocks throughout the market, ONEX will be there to buy low and position the company for another decade of success.

Amazon CEO Shocks Bay Street Investors By Predicting Company “Will Go Bankrupt”

Amazon CEO Jeff Bezos recently warned investors that “Amazon will be disrupted one day” and eventually “will go bankrupt.”

What might be even more alarming is that Bezos has been dumping roughly $1 billion worth of Amazon stock every year…

But Bezos isn’t just cashing out, he’s reinvesting his money into a company utilizing a fast-emerging technology that he believes will “improve every business.”

In fact, this tech opportunity could be bigger than bigger than Amazon, Tesla, and Berkshire Hathaway combined.

Get the full scoop on this opportunity that has billionaire investors like Bezos convinced – before it’s too late…

Click here to learn more!

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

[goldira01]

Great stocks rarely go on sale. When they do, the bargain prices don’t last for long. If you want to profit, be prepared to act.

ONEX Corporation (TSX:ONEX) is arguably one of the greatest stocks in Canadian history. Since 1995, shares have increased in value by more than 2,300%. Coca-Cola Co stock, by comparison, rose by just 230% over the same period.

Note that the numbers above don’t even factor in dividends, which ONEX has dutifully paid every quarter for more than 30 years. When it comes to reliable stocks that can compound your capital for decades, this company leads the pack.

Since mid-2018, however, shares have sputtered, losing 20% of their value. It’s rare for ONEX to experience such a sudden slide. Throughout history, any pullback has turned into a clear buying opportunity. The latest dip looks no different. Let’s dive into how you can profit.

Invest in private equity

Brookfield Asset Management Inc (TSX:BAM.A)(NYSE:BAM) is an incredible stock. The company manages more than $500 billion on behalf of clients.

It chooses specific themes and sectors in which to invest, betting both investor capital and its own internal money and aligning incentives across the board. Since 2013, shares have risen by 230%.

ONEX runs a similar strategy, investing and managing capital alongside its shareholders, institutional investors, and high net worth clients. Since 2013, shares have more than doubled.

ONEX is a bit different than Brookfield in that it focuses on private equity. As the name suggests, these investments aren’t available to the general public, which has an impact on valuations. If you have a strong deal pipeline, you can invest in high-quality businesses at bargain prices.

In total, ONEX manages around $38 billion, of which $7.2 billion is shareholder capital. This size makes them one of the largest private equity investors in Canada, giving them first-row access to deal flow.

At one-tenth the size of Brookfield, however, ONEX is still nimble enough to invest in high-growth opportunities that are too small for most institutions.

Investing in ONEX stock is one of the only ways that everyday investors can gain exposure to private equity returns.

Capitalize on lumpiness

ONEX’s private equity portfolio has generated a gross multiple of capital invested of 2.5 times, resulting in annual returns of 27%. That’s an amazing performance. If you invest $10,000 at a 27% annual rate of return, you’ll wind up with $13 million after 30 years!

Here’s the thing: the returns can be lumpy. As with public securities, private equity markets go through boom and bust cycles. Due to market inefficiencies, the volatility can actually be much worse.

From 2002 to 2006, ONEX stock generated a total return of 0%. During the financial crisis, ONEX stock lost nearly two-thirds of its value.

Despite these challenging periods, however, ONEX has proven itself a long-term winner, willing to take on risk at opportune times. In 2009, as global markets were crashing, management positioned the company for a decade-long run that would see the stock double in price three times.

The past 24 months have been another dry period, with shares down by 20%. If we’ve learned anything from history, now is the time to buy.

As a private equity investor, ONEX can benefit from market downturns. Private companies can trade at substantial discounts during a recession. While the rest of ONEX’s portfolio will be impacted, bear markets are a great place to be if you’re looking to buy. That’s exactly what happened in 2009, just as the company began its incredible run of performance.

As coronavirus fears send economic shocks throughout the market, ONEX will be there to buy low and position the company for another decade of success.

Amazon CEO Shocks Bay Street Investors By Predicting Company “Will Go Bankrupt”

Amazon CEO Jeff Bezos recently warned investors that “Amazon will be disrupted one day” and eventually “will go bankrupt.”

What might be even more alarming is that Bezos has been dumping roughly $1 billion worth of Amazon stock every year…

But Bezos isn’t just cashing out, he’s reinvesting his money into a company utilizing a fast-emerging technology that he believes will “improve every business.”

In fact, this tech opportunity could be bigger than bigger than Amazon, Tesla, and Berkshire Hathaway combined.

Get the full scoop on this opportunity that has billionaire investors like Bezos convinced – before it’s too late…

Click here to learn more!

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

#Timor Invest

[valuentumbrian]

Coca-Cola, Visa, and More from Valuentum

Hi everyone,

Hope you're doing great. 

Just yesterday, we closed out six more ideas in the Exclusive, four capital appreciation ideas and two short-idea considerations, for solid "gains." The success rates in the Exclusive publication continue to be fantastic. I encourage members to upgrade, to give the Exclusive a chance, to see if the ideas may be of interest. Subscribe to the Exclusive publication here.

Facebook's Meteoric Rise

Image: The market doesn't offer opportunities like this every day. I'd say we might see something so obvious, so opportunistic, maybe once every couple years. That was Facebook in late 2018. It's now up 60%+ from its 52-week low.

We have a lot of dividend and income members, but please bear with me for a moment while I talk Facebook (FB). If you recall, Facebook issued a terrible outlook in mid-2018 that sent the stock tumbling. Many of our members cancelled their membership during 2018 on this decline. But we stuck with our conviction in the name.

But why? How could we possibly stick with a company like Facebook all the way down and ditch entities like Kinder Morgan (KMI) and General Electric (GE), seemingly iron-clad companies, right at their tops. The answer, my dear members, is a focus on the financial statements and forward-looking analysis. 

Where Facebook generates tremendous free cash flow and has a massive net cash position on the books and is growing fast, the opposite was true with Kinder Morgan and GE. The energy complex was crumbling around Kinder Morgan, and GE's free cash flow was deteriorating while it wasted boatloads of money on buybacks.

There are going to be a lot of people out there that are going to tell you that you cannot separate winning stocks from losing stocks and that the market is random. What I'm saying is that you can do it, but it takes a strong understanding of free cash flow and balance-sheet health coupled with competitive advantage analysis and growth prospects. Many of our favorite ideas fit this theme. 

For example, Visa (V), the top-weighted idea in the Best Ideas Newsletter portfolio, is trading at over $180 per share. Visa has been our top-weighted idea for some time, for as long as I can remember. The stock is up nearly 50% from its 52-week low, and while Visa's balance sheet isn't as strong as others', the company is growing fast, has solid free cash flow generation, benefits from considerable competitive advantages and puts up mid-60% operating margins.

Stocks like Facebook and Visa are hiding in plain sight, putting up huge gains, and we've had them top-weighted for some time. If you look at what's popular though, you might see click bait titles such as, "Buy This Stock Now for a 20% Safe Yield," or "Sleep Well at Night with This Fully-Covered 15% Dividend Payer." Look -- there's nothing safe in the stock market, and if something has such a high yield, it usually means a high risk of a cut. I can't believe this stuff is out there, and people are actually paying for it.

The market is not perfectly efficient, but it is not that inefficient where it is not going to risk-adjust the price of a "20% safe yielding stock," if it is truly "safe," in an environment where the 10-year US Treasury, a riskless asset, is trading with a low-single-digit yield. Use common sense. Stay away from the click bait. Focus on free cash flow, net cash on the balance sheet, future top-line growth expectations, competitive advantage theory and business-model risk. 

Remember -- the specialist adjusts the price of the stock down by the dividend on the ex-dividend date. With dividends, you are getting paid something you already own. That's why intrinsic value methods are so important to combine with dividend growth investing. You want to have the best of both worlds. Just focusing on the dividend is a lot like getting paid with your own money. What matters is whether the company can replace that cash disbursement to you by generating economic value.

So many investors get in so much trouble because all they do is focus on the dividend payment. You can't forget to ask the question: what is a company worth? If you don't know what companies in your portfolio are worth, you could get caught holding the next Kinder Morgan or GE. That's the value we seek to provide to you. Not one company has cut its dividend in the Dividend Growth Newsletter portfolio, and after adjusting for currency, not one income idea has lowered its payout in the High Yield Dividend Newsletter.

Don't forget to give the Exclusive a try! Register here.

Thank you,

The Valuentum Team

The Latest Research You May Have Missed  

Coca-Cola's Valuation Is Stretched, July 24 (image source: Broderick)

While the market clearly liked Coca-Cola's earnings report, we believe investors are getting ahead of themselves. We aren't interested in shares of KO at these levels, and we caution readers on the stretched valuation of consumer staples companies in general.

Best Ideas Holding Visa Posts a Great Quarter, We Continue to Like the Name, July 24 (image source: Visa Corp )

Visa does not issue credit cards, so it doesn't take on any credit risk, and instead makes its money from offering payment processing solutions. The virtuous cycle of increased debit/credit card use worldwide is an integral part to our thesis.

Hasbro Posts a Great Quarter, Shares Fully Valued, July 24 (image source: Hasbro)

Hasbro posted a great quarter with top-line growth and margin expansion highlighting the powerful pull its brands and properties have with consumers, both in North America and abroad. With several upcoming catalysts in the fourth quarter, Hasbro may be able to follow up a strong first half with a solid second half performance.

-----

Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. Not a member? Subscribe today. The first 14 days are free.

Brian Nelson does not own shares in any of the securities mentioned above. Some of the companies written about in this article may be included in Valuentum's simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.

#ko #fb #$v #has

[rickhorrow]

10 To Watch : 12219

10 To Watch FOR THE WEEK OF JANUARY 21 : Mayor’s Edition

More brands are "tangling with political and social issues in their advertising campaigns.” However, most Americans “would rather they don't try the same thing during the Super Bowl," according to the Wall Street Journal. Viewers are "likely to get what they want." The WSJ poll shows two-thirds of consumers "call the Super Bowl an inappropriate place for advertisers to make political statements." Baby boomers in the poll "disapproved of political Super Bowl advertisements more, at 77%, than younger cohorts such as millennials (55%) and Generation Z (43%)." Only 35% of Generation Z respondents "called political Super Bowl ads 'very' or 'somewhat' appropriate." The Super Bowl has "featured political ads before, most notably" in Super Bowl LI, which "took place soon after President Trump's inauguration." A year later, Super Bowl LII was "less overtly political, but still included” a Coca-Cola ad promoting unity, a T-Mobile USA Inc. diversity theme, and a Dodge Ram Trucks spot using audio of a Martin Luther King Jr. speech in an ad that promoted public service. Marketers have not "shown any inclination to charge into hard-core politics or social controversies" during Super Bowl LIII. However, with the country as divided as it is, themes imploring diversity, unity, and inclusion will no doubt make their way into the February 3 broadcast.

In its eighth consecutive installment, The POWER 100, Horrow Sports Ventures’ proprietary annual ranking of the most powerful athletes in sports, uses a complex statistical model to accurately compare performance and influence through on-field (50%) and off-field (50%) attributes. Athletes are then ranked based on POWER to find the TOP 100. Among interesting results: Serena Williams is not ranked for the first time ever. Her performance slowed after taking some time to start a family, and some controversial moments may have hurt her brand. Expect a strong bounce back once she’s back on schedule. Tom Brady (14), in the cusp of playing in yet another Super Bowl, has hit his highest ranking in recent memory, a nearly 54 place increase since last year. And the stellar play of NBA’er Giannis Antetokounmpo continued on the court and has paid dividends off the court as well, as he placed 8th. Top endorsement earners were Roger Federer (12) taking home $58 million in off court sponsorships and LeBron James (10) with $56 million. The highest place rookie from any sport is quarterback Patrick Mahomes, who finished 20th in the rankings and came within minutes of reaching the Super Bowl on Sunday.

Golf also got some encouraging news this week from the market research firm NPD Group, which reported that the golf market “has not only recuperated but experienced a significant uptick in sales” in the past 12 months, resulting in an 8% year-over-year increase up to $2.6 billion. “The macro environment for golf has been in a turbulent state, fueled by Golfsmith’s bankruptcy, major brands cutting back on their golf business, and courses closing. But today, we’re starting to see normalization in the market as those deep holes are now being filled,” said Matt Powell, vice president and senior industry advisor of the NPD Group. The industry saw increases across every product category. Clubs, which make up 50% of the category, grew by 7%, while equipment accessories such as balls (6% increase), gloves (7% increase), accessories (21% increase), and training aids (13%) also made positive strides in 2018. Callaway, Titleist, and Wilson were the fastest-growing brands among the top-10, joining TaylorMade and PING as the other two members of the top-5. With Baby Boomers retiring every day, great opportunity exists to introduce thousands of new retirees to golf. Combine that with a good economy, Tiger’s resurgence, and thrilling up and comers in the game and you have the makings of a stable industry.

It’s official: Austin will be the 27th MLS franchise. Last week, MLS Commissioner Don Garber recognized Austin FC as the league's 27th team, with the expansion franchise "set to begin play" in the spring of 2021 at a privately-financed, 20,000-seat stadium at McKalla Place in North Austin,  according to the Austin American-Statesman. While the team will be majority owned by Austin FC Chair and CEO Anthony Precourt, he also "plans to announce local investors soon." Austin FC is the first pro franchise for the Texas capital in any of the Big Five major American sports leagues. Team officials "hope to break ground at the stadium site by September and are finalizing plans that would allow construction to begin on a training facility at a yet-to-be-named private site." Last year, Precourt made his intentions known to purchase the Columbus Crew with a clause that would eventually let him move to Austin. But that deal was basically scuttled by passionate Crew fans. Precourt’s biggest challenge in Austin: competing with rabid University of Texas fans, especially now that UT’s football team is once again on the rise.

The University of Texas athletic department had more than $219 million in "annual operating revenue and total operating expenses" of just over $206.5 million during FY 2018, according to USA Today. This is the second consecutive year in which UT has had more than $200 million in both "operating revenues and expenses," as UT was at nearly $215 million in revenue and $207 million in expenses for FY 2017. Comparatively, the University of Michigan reported spending $175.4 million in 2017, and the University of Alabama's "total athletics revenue" for FY 2018 was $177.5 million -- up from FY 2017's $174.3 million that was "then a school record," according to the Birmingham News. Texas A&M also reported more than $200 million in revenue in 2017, but that amount was boosted by almost $93 million in "contributions received and spent by the department during that year, as the school continued a facilities-spending boom." UT attributed this impressive revenue to the school's football program at $144.5 million, a total that was "more than the total athletics operating revenue reported" for FY 2017 by all but 12 NCAA D-I public schools.

New Jersey’s total 2018 sports betting handle reached $1.24 billion at casinos, racetracks, or through online or mobile betting platforms. However, the numbers "flattened out during December after a record-setting November in sports books around the state and online," according to the Asbury Park Press. The "total handle in the state fell" from $330.7 million in November to $319.2 million in December, a 3.5% decline. Gross revenues also "fell" from $21.2 million to $20.8 million. The Press of Atlantic City notes the opening of two "new casino properties, the introduction of legalized sports betting and the continuous growth of internet wagering all contributed to a total gaming revenue increase of nearly" 8% in New Jersey from 2017-2018. In December, the gaming industry generated $247.4 million in revenue, a nearly 20% increase from the same month in 2017. In December alone, more than $319 million was "bet on sports" in the state. The end of year downtick means there is even more scrutiny on producing big numbers off Super Bowl LIII next month.

CBS Sports HQ plans to livestream 30 hours of content for Super Bowl week.CBS Sports’ free sports streaming network will air more than 30 hours of live, original programming during the week of Super Bowl LIII, including daily shows from Radio Row starting January 28, on-site daily reports, ten hours of original pregame coverage on game day, post-game analysis, and highlights. According to Marketing Dive, programming will include "Off The Bench with Kanell and Bell," Pick 6 Rundown, Reiter's Block and CBS Sports HQ Extravaganza which is a Super Bowl pregame show featuring a competition between CBS Sports Digital crew and a mix of current and former NFL players every hour before kickoff. This year's Super Bowl will be streamed across more platforms than ever before including online, through the CBS app for connected TV devices, tablets, and mobile phones, and via the CBS All Access subscription service. This highlights the shift from TV networks investing more in their digital offerings to give fans more control of what and how they watch

Barstool Sports has rolled out a premium “Gold” Memberships that has racked up 10,000 paying subscribers in just three days. Out of the 10,000 + subscribers, the sports and pop culture blog claims that 81% signed up for the $100 annual subscription. According to Digiday, Barstool Gold is a tiered membership product that offers everything from exclusive content and merchandise, early access to events and office tours, and meet-ups with Barstool personalities. The lower tier costs roughly $1 per week and higher membership tier costs roughly $2 per week and comes with a few extra perks for diehard fans. The launch of Barstool Gold comes at a time when the company has grown to more than 130 employees. Today, commerce accounts for half of Barstool’s revenue, roughly 35%-40% coming from advertising, and the rest draws from emerging business areas including the Rough N’ Rowdy pay-per-views and other live events, as well as a growing licensing business based on Barstool-owned intellectual property. Although controversial, Barstool Gold is a way to insulate the publisher from external sports media giants who find the content too reckless and provide a platform for Barstool to make itself into a major player in the sports entertainment industry

Esports speedrun marathon Awesome Games Done Quick (AGDQ) 2019 raised over $2.39 million for charity. AGDQ is one of two speedrun marathons hosted by GamesDoneQuick every year that bring in thousands of viewers to watch all types of speedruns in the name of charity. This year the speedrun, which is completing part or all of a video as fast as possible, raised funds for the Prevent Cancer Foundation and more than 46,000 donations. To date, Awesome Games Done Quick and its companion event, Summer Games Done Quick, have raised more than $19 million for their respective charities while peak viewership of their most recent event reached 219,240 concurrent streams on Twitch. The next event by GDQ will be the Summer Games Done Quick (SGDQ) which runs June 23-30 in Bloomington, Minnesota. After the 131 games were speedrun, it is safe to say that both the viewership and donations from the world of esports continue to grow and GamesDoneQuick is at the forefront of the esport charity sector

Detroit Lions owner Martha Ford joins forces with her team’s players to pledge $600,000 to community efforts. According to the Detroit Free Press, Ford and Lions’ players pledged a combined $600,000 to help launch the new "Detroit Lions Inspire Change" initiative around the city. The money will help fund three causes chosen by players in a process that was set in motion after eight Lions players took a knee during the singing of the national anthem in a 2017 game against the Falcons. A'Shawn Robinson, Jalen Reeves-Maybin, and Steve Longa are the three players who remain with the team after protesting social injustices. Their donations will help fund scholarships for three groups including families who've lost service members through the Tragedy Assistance Program for Survivors (TAPS); a youth development arm of the Detroit Police Department called the Detroit Youth Violence Prevention Initiative (DYVPI); and students at Detroit Lions Academy. Additionally the funds will be used to provide clean drinking water in Detroit public schools, help the CATCH charity for children, and aid Mariners Inn for homeless men. Under "Detroit Lions Inspire Change," players will be able to directly take action for social justice initiatives. 

#10 #10towatch

[whatimconsuming]

The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

In 2007, Jeff Bezos, then a multibillionaire and now the world’s richest man, did not pay a penny in federal income taxes. He achieved the feat again in 2011. In 2018, Tesla founder Elon Musk, the second-richest person in the world, also paid no federal income taxes. Michael Bloomberg managed to do the same in recent years. Billionaire investor Carl Icahn did it twice. George Soros paid no federal income tax three years in a row. The IRS records show that the wealthiest can — perfectly legally — pay income taxes that are only a tiny fraction of the hundreds of millions, if not billions, their fortunes grow each year. Many Americans live paycheck to paycheck, amassing little wealth and paying the federal government a percentage of their income that rises if they earn more. In recent years, the median American household earned about $70,000 annually and paid 14% in federal taxes. The highest income tax rate, 37%, kicked in this year, for couples, on earnings above $628,300.

The confidential tax records obtained by ProPublica show that the ultrarich effectively sidestep this system.

America’s billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people. Their wealth derives from the skyrocketing value of their assets, like stock and property. Those gains are not defined by U.S. laws as taxable income unless and until the billionaires sell. According to Forbes, 25 richest people in America saw their worth rise a collective $401 billion from 2014 to 2018. They paid a total of $13.6 billion in federal income taxes in those five years, the IRS data shows. That’s a staggering sum, but it amounts to a true tax rate of only 3.4%. It’s a completely different picture for middle-class Americans, for example, wage earners in their early 40s who have amassed a typical amount of wealth for people their age. From 2014 to 2018, such households saw their net worth expand by about $65,000 after taxes on average, mostly due to the rise in value of their homes. But because the vast bulk of their earnings were salaries, their tax bills were almost as much, nearly $62,000, over that five-year period.

No one among the 25 wealthiest avoided as much tax as Buffett, the grandfatherly centibillionaire. That’s perhaps surprising, given his public stance as an advocate of higher taxes for the rich. According to Forbes, his riches rose $24.3 billion between 2014 and 2018. Over those years, the data shows, Buffett reported paying $23.7 million in taxes.

That works out to a true tax rate of 0.1%, or less than 10 cents for every $100 he added to his wealth. Consider Bezos’ 2007, one of the years he paid zero in federal income taxes. Amazon’s stock more than doubled. Bezos’ fortune leapt $3.8 billion, according to Forbes, whose wealth estimates are widely cited. How did a person enjoying that sort of wealth explosion end up paying no income tax? In that year, Bezos, who filed his taxes jointly with his then-wife, MacKenzie Scott, reported a paltry (for him) $46 million in income, largely from interest and dividend payments on outside investments. He was able to offset every penny he earned with losses from side investments and various deductions, like interest expenses on debts and the vague catchall category of “other expenses.” In 2011, a year in which his wealth held roughly steady at $18 billion, Bezos filed a tax return reporting he lost money — his income that year was more than offset by investment losses. What’s more, because, according to the tax law, he made so little, he even claimed and received a $4,000 tax credit for his children. His tax avoidance is even more striking if you examine 2006 to 2018, a period for which ProPublica has complete data. Bezos’ wealth increased by $127 billion, according to Forbes, but he reported a total of $6.5 billion in income. The $1.4 billion he paid in personal federal taxes is a massive number — yet it amounts to a 1.1% true tax rate on the rise in his fortune. Our analysis of tax data for the 25 richest Americans quantifies just how unfair the system has become.

By the end of 2018, the 25 were worth $1.1 trillion.

For comparison, it would take 14.3 million ordinary American wage earners put together to equal that same amount of wealth.

The personal federal tax bill for the top 25 in 2018: $1.9 billion.

The bill for the wage earners: $143 billion. The top 25 wealthiest Americans reported $158 million in wages in 2018, according to the IRS data. That’s a mere 1.1% of what they listed on their tax forms as their total reported income. The rest mostly came from dividends and the sale of stock, bonds or other investments, which are taxed at lower rates than wages. Buffett has famously held onto his stock in the company he founded, Berkshire Hathaway, the conglomerate that owns Geico, Duracell and significant stakes in American Express and Coca-Cola. That has allowed Buffett to largely avoid transforming his wealth into income. From 2015 through 2018, he reported annual income ranging from $11.6 million to $25 million. That may seem like a lot, but Buffett ranks as roughly the world’s sixth-richest person — he’s worth $110 billion as of Forbes’ estimate in May 2021. At least 14,000 U.S. taxpayers in 2015 reported higher income than him, according to IRS data.

There’s also a second strategy Buffett relies on that minimizes income, and therefore, taxes. Berkshire does not pay a dividend, the sum (a piece of the profits, in theory) that many companies pay each quarter to those who own their stock. Buffett has always argued that it is better to use that money to find investments for Berkshire that will further boost the value of shares held by him and other investors. If Berkshire had offered anywhere close to the average dividend in recent years, Buffett would have received over $1 billion in dividend income and owed hundreds of millions in taxes each year. Many Silicon Valley and infotech companies have emulated Buffett’s model, eschewing stock dividends, at least for a time. In the 1980s and 1990s, companies like Microsoft and Oracle offered shareholders rocketing growth and profits but did not pay dividends. Google, Facebook, Amazon and Tesla do not pay dividends. So how do megabillionaires pay their megabills while opting for $1 salaries and hanging onto their stock? According to public documents and experts, the answer for some is borrowing money — lots of it.

For regular people, borrowing money is often something done out of necessity, say for a car or a home. But for the ultrawealthy, it can be a way to access billions without producing income, and thus, income tax. The tax math provides a clear incentive for this. If you own a company and take a huge salary, you’ll pay 37% in income tax on the bulk of it. Sell stock and you’ll pay 20% in capital gains tax — and lose some control over your company. But take out a loan, and these days you’ll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn’t consider them income. Banks typically require collateral, but the wealthy have plenty of that. In 2014, for example, Oracle revealed that its CEO, Ellison, had a credit line secured by about $10 billion of his shares. Last year Tesla reported that Musk had pledged some 92 million shares, which were worth about $57.7 billion as of May 29, 2021, as collateral for personal loans. With the exception of one year when he exercised more than a billion dollars in stock options, Musk’s tax bills in no way reflect the fortune he has at his disposal. In 2015, he paid $68,000 in federal income tax. In 2017, it was $65,000, and in 2018 he paid no federal income tax. Between 2014 and 2018, he had a true tax rate of 3.27%.

The IRS records provide glimpses of other massive loans. In both 2016 and 2017, investor Carl Icahn, who ranks as the 40th-wealthiest American on the Forbes list, paid no federal income taxes despite reporting a total of $544 million in adjusted gross income (which the IRS defines as earnings minus items like student loan interest payments or alimony). Icahn had an outstanding loan of $1.2 billion with Bank of America among other loans, according to the IRS data. It was technically a mortgage because it was secured, at least in part, by Manhattan penthouse apartments and other properties. He said adjusted gross income was a misleading figure for him. After taking hundreds of millions in deductions for the interest on his loans, he registered tax losses for both years, he said. “I didn’t make money because, unfortunately for me, my interest was higher than my whole adjusted income.” Michael Bloomberg, the 13th-richest American on the Forbes list, often reports high income because the profits of the private company he controls flow mainly to him. In 2018, he reported income of $1.9 billion. When it came to his taxes, Bloomberg managed to slash his bill by using deductions made possible by tax cuts passed during the Trump administration, charitable donations of $968.3 million and credits for having paid foreign taxes. The end result was that he paid $70.7 million in income tax on that almost $2 billion in income. That amounts to just a 3.7% conventional income tax rate. Between 2014 and 2018, Bloomberg had a true tax rate of 1.30%.

#tax #income tax

[bondevalue]

Nomura, BDO, Sunac & Shimao Launch $ Bonds; Fitch Expects More Sovereign Downgrades

Markets are opening higher this morning despite a lack of any major news. The US was on holiday on Friday for Independence Day and US index futures are recovering Friday’s losses this morning and then some. July 3rd saw the record for daily cases globally but investors still find comfort from recent economic data that economies are picking up. Asian shares are at their four month peak as cheap liquidity and stimulus measures outweigh coronavirus fears. Asian dollar bond spreads were lower for the tenth straight week.

We have introduced new dates to our Bond Traders’ Masterclass in August. Sign up now.

New Bond Issues

•             BDO Unibank $ 5.5yr @ T+235bp area

•             Shinhan Financial $ 5.5yr Covid-19 bond @ T+145bp

•             Nomura $ 5/10yr @ T+180/230bp area

•             Sunac China $ 3NC2/5NC3 @ 7.30/7.85% area

•             Shanghai International Port $ 5/10yr @ T+185/225bp area

•             Shimao Group $ 10NC5 @ 5.1% area

•             Modern Land (China) $ 2yr4m @ 12.75% area

New bond issues - 6-Jul-20

Rating Changes

Nissan Downgraded To ‘BBB-/A-3’ On Growing Impact Of COVID-19; Outlook Negative

Fitch Downgrades Rolls-Royce & Partners Finance IDR to ‘BBB-‘/Negative; Senior Secured Debt to ‘BBB’

Fitch Upgrades TAQA to ‘AA-‘; Outlook Stable

Fitch Upgrades Coca-Cola Icecek’s Long-Term Foreign-Currency IDR to ‘BBB-‘; Outlook Stable

Sunshine 100 Downgraded To ‘CCC-‘ On Uncertain Repayment Sources; Ratings Remain On CreditWatch Negative

GameStop Corp. Ratings Placed On CreditWatch Negative On Lower Exchange Participation and Potential Shareholder Activism

Moody’s places the B2 ratings of 4Finance on review for downgrade

Fitch Expects More Sovereign Downgrades to Come

In a video interview with CNBC last Friday, James McCormack, Fitch’s global head of sovereign ratings said that he expects the rating agency to downgrade more sovereigns in the near term on the back of the hit to the economies due to the pandemic. Of the 119 countries rated by Fitch Ratings, it has downgraded a record 33 sovereigns in the first half of this year and has placed the ratings of 40 sovereigns on a negative outlook, indicating further room for downgrades. McCormack explained that many governments have ramped up their spending to support their economies amid the pandemic, which is expected to deteriorate the governments’ financial position. “Our concern really is what happens after we get to the other side of the coronavirus crisis period,” he said. “I think that’s the focus that we have and that will really be the factor that determines where the ratings go.”

Peoples Bank of China Advises Distressed Corporates to Seek Out of Court Debt Restructuring

Nearly $51.1bn of bonds issued by Chinese corporates are due in the second half of this year. There are strong indicators that the default rates are likely to increase as businesses have taken a hit due to the ongoing pandemic. The growing concern of rising defaults have led the Chinese central bank, the People’s Bank of China to advise struggling issuers to seek an out of court settlement with bondholders to avoid default. The announcement comes just a week after the Chinese regulators including the China Securities and Regulatory Commission and National Development and Reforms Commissions, issued a new set of rules to enforce the investor’s protection just last week to reduce the uncertainties faced by bondholders in redeeming their money. “The encouragement of debt restructuring using market mechanisms may give companies more time to avoid outright defaults,” according to Jenny Huang, Director for China at Fitch Ratings. While restructuring via bond swaps and maturity extensions could shorten the time needed by issuers to manage their financial position, it does not guarantee repayment to bondholders. These efforts to restructure further distort the real picture of corporate defaults in China. China’s bond market currently ranks second in the world with a balance of 108tn yuan ($15.29tn) as per an announcement by the People’s Bank of China on Friday.

In related news, XinhuaNet reported a significant increase in foreign investors’ holdings of Chinese bonds. As of June end, the total amount of yuan denominated bonds owned by foreign investors rose to about 2.2tn yuan, an increase of 33.48% YoY and 3.93% MoM. Foreign investment has risen continuously for 19 months and is indicative of the strong investor appetite for the local Chinese bonds. However, most onshore government bonds bought by foreigners only include investment grade bonds.

Argentina Amends Proposed Debt Restructuring Once Again; YPF Proposes $1bn Swap Deal to Delay 2021 Bonds

As Argentina continues to reel under recession since the last two years, the Argentinian government is looking to restructure ~$65bn of bonds. The government announced an amendment to its proposed restructuring with a deadline of Aug 4 as it looks to engage with the bondholders. “The government has made a substantial improvement relative to the first offer introduced by mid-April,” said Ramiro Blazquez, head of research and strategy at BancTrust & Co. The proposals in the past have faced stiff resistance from investors on the fear of losing out. The fresh proposal, which is aimed at reducing creditor losses, increasing coupons and shortening bond maturities, looks at making capital payments in March 2025 and set semi-annual coupons. It also offers step-up coupons beginning at 0.125% next year taking the payment amount to 5% annually for some bonds. The offer also proposes a swap for existing dollar and euro bonds maturing between 2030-2046. The country’s sovereign bonds have traded stable since the announcement. The government is likely to present its new offer to the US Securities and Exchange Commission in the coming days. Meanwhile, AlJazeera reported that according to the Argentina Creditor Committee (ACC), a new counter offer by bondholders could provide the country a cash flow of $39bn over the next 8 years.

In an announcement on July 2, Argentina’s state-owned energy giant YPF proposed a swap to extend the maturity on its $1bn bond due March 2021. The proposal comes with a sweetener of cash payments and a new series of Negotiable Obligations with a final maturity in 2025. This would result in investors receiving a cash of $100 and the new series worth $950 for every $1000 face value of Class XLVII. The coupon for the new bonds rated CCC/RR4 by Fitch would be 8.5% with amortizing payments starting in 2022. The bonds of the company have been largely stable since Friday.

Term of the Day

Accrued Interest

Accrued interest for a bond refers to the interest or coupon that has accrued since the last coupon payment date but not yet paid. When a bond is traded between coupon payment dates, accrued interest is paid by the bond buyer to the bond seller. The final price paid by the buyer is called dirty price and is calculated by adding the accrued interest to the price of the bond (clean price). The reason buyers have to pay accrued interest is because they stand to receive the full coupon on the next payment date, even though they are only entitled to the coupon that has accrued since the date the bond was purchased.

Accrued interest is calculated as per follows:

AI = P x C/F x D/T

P: Par value of the bond C: Annual coupon stated as a decimal F: Coupon payment frequency. For a semi-annual payment bond, F = 2 D: Number of days since the last coupon payment T: Total number of days in the payment period. For a semi-annual payment bond, T = 180

It is possible for accrued interest to be negative, if a bond has an ex-coupon date (similar to ex-dividend date for stocks). If a bond is traded between the ex-coupon date and the next coupon date, accrued interest has to be paid by the bond seller to the bond buyer, resulting in a negative accrued interest. This is because the full coupon will be received by the seller even though they are entitled to the coupon from the previous coupon date till the transaction date only. In such cases, accrued interest is deducted from the clean price to calculate the dirty price of the bond.

Talking Heads

On the Challenges of Negative Interest Rates – Andrew Bailey, Bank of England (BoE) Governor

Andrew Bailey has written a letter to lenders warning them that negative rates were “one of the potential tools under active review” if the monetary policy committee decided that “more stimulus” was needed to hit the BoE’s 2% inflation target. A report said that Bailey held a meeting with heads of banks at the end of June where negative rates were discussed, and the governor said “every tool they have is on the table”. Bailey has previously said that negative rates were an option for the BoE, but that the issue was complex and taking borrowing costs below zero was not in any way imminent.

He added that many banks would need 12 months to change computer systems, update financial contracts designed for a world of positive interest rates and work out how to communicate with clients.

On Disinflation Hitting the Eurozone – Christine Lagarde, European Central Bank President

Lagarde said the euro zone faces about two years of downward pressure on prices but could see a turnaround after that because the coronavirus crisis will accelerate the transformation of the economy through greater digitization and automation, shorter supply chains, and greener industries.

“The transition to new economic models will be disruptive — they will probably be more disruptive in the first two years, obviously hitting employment and production — and then we can hope it improves productivity,” Lagarde said. “So the inflation dynamic will necessarily be impacted, probably with a disinflationary, deflationary aspect at first, and then an inflation dynamic.”

“I am determined to have the same debate with governors at the ECB to ensure that in all areas, climate risk and biodiversity is taken into account,” she said. “We won’t do it in one day, but we must question in every domain, stress test by stress test.”

On India’s Road to Recovery – Henry McKinnell, Moody’s Chairman

Henry McKinnell said the surge in Covid-19 cases in India meant that reviving Asia’s third-biggest economy would remain a “major challenge”. “The only tool we have right now [to fight coronavirus] is social distancing and that’s exceptionally hard to do in India,” said Mr McKinnell. Moody’s expects India’s economy to contract 3.1% in 2020. In June, Moody’s downgraded India to Baa3, the lowest grade investment rating.

Yet Mr McKinnell said that once India was able to control the spread of the disease, it was well placed to attract more manufacturers looking to diversify their supply chains from China in areas such as chemicals, pharmaceuticals, or electronics. “Everybody now is looking for alternative sources of supply…The opportunity in India is to move up the supply chain.”

On the Demise of the 60/40 Portfolio – Jan Loeys and Shiny Kundu, strategists at JP Morgan

JP Morgan is joining the list of Wall Street banks that are calling for the demise of the 60/40 portfolio in the coming years. “In the zero-yield world, which we think will be with us for years, bonds offer neither much return nor protection against equity falls,” said Jan Loeys and Shiny Kundu.

On UK’s Massive Debt Pile – former government advisers including Mats Persson, former adviser to Cameron, and Raoul Ruparel, a former adviser to May

The British government should be wary of the fact that its mammoth debt pile will always be so cheap or that inflation is dead, said six former government advisers. “The volatile history of interest rates should make us wary of thinking low real interest rates are here forever. The possibility of surprise inflation still exists,” they said. “In the 1970s, inflation peaked at over 25% in the UK, a level few had predicted only a few years earlier.” The advisers said reform of the UK’s tax system was essential, including a digital tax. “This should be prioritised regardless of concerns from partners such as the U.S. over a digital services tax,” they said.

On Canada’s Journey Ahead – Craig Wright, chief economist at Royal Bank of Canada

Canada should focus on boosting economic growth post the COVID-19 crisis, analysts say, even as concerns about its debt are growing, with Fitch downgrading the nation’s rating just over a week ago. “The only solution to these large deficits is growth, so we need a transition to a pro-growth agenda,” said Craig Wright. He added, “We have to make sure that government spending is calibrated to the economy of the future rather than the economy of the past.”

[victorparker1-blog]

Coca-Cola (KO): Are the Best Days Behind This Buffett-Owned Dividend King?

When it comes to high-quality dividend growth stocks, investors naturally gravitate to blue chips like dividend aristocrats and dividend kings. After all, no company can increase its dividend for at least 25 or 50 years in a row without a certain combination of highly admirable characteristics.

These traits tend to include stable and predictable cash flows, strong competitive advantages, good profitability, modest amounts of debt, and of course a very shareholder-friendly corporate culture.

In addition, Warren Buffett, history’s greatest value investor, has made his fortune buying “wonderful companies at a fair price.” So naturally, any company that Berkshire Hathaway (BRK.B) owns a large position in (Coke is 9.5% of Berkshire’s portfolio) is seen as a defacto high-quality blue chip.

Investors can review analysis on all of Warren Buffett’s dividend stocks here.

While Coca-Cola (KO) does indeed possess many admirable qualities, including 55 consecutive years of rising dividends, that doesn’t necessarily mean that this popular dividend growth stock is a good fit for most income portfolios right now.

Let’s take a look at the pros and cons of Coke to see if its best days are behind it, and more importantly if today’s valuations means investors could be better off not adding the company to a diversified dividend portfolio at this time.

Business Overview

Founded in 1886 in Atlanta, Georgia, Coca-Cola has grown to become the world’s largest drink purveyor and the fifth most valuable brand in the world. It markets over 3,900 products through over 500 brands in more than 200 countries.

In fact, Coca-Cola is so geographically diversified that the US market accounts for less than 20% of its overall sales volumes.

Source: Coca-Cola

The vast majority of the company’s sales and profits come from a strong core of $1 billion+ brands that the company produces in about 900 plants around the world and markets through 24 million global retail outlets.

Source: Coca-Cola

Business Analysis

Coca-Cola is the epitome of a wide moat company, meaning it has numerous competitive advantages that allow it to command strong pricing power. The two biggest advantages are its leading global scale and unbeatable brand strength.

Coke generally spends about 8% of its revenues on advertising around the world, in order to make its products universally known and loved in almost every nation on earth. However, the true power behind Coke’s global beverage empire is owning the largest distribution network on earth.

In the consumer food and beverage market, distribution is everything. Having the best product in the world is meaningless if you can’t get it on the shelf and into the hands of consumers. Coke has spent 132 years and an absolute fortune to build the largest distribution and logistics chain in the industry.

This, combined with its very strong brand loyalty, means that Coke has dominant shelf positions in over 24 million retail outlets around the world. This giant reach also allows the company to achieve impressive economies of scale, which lead to above average margins and impressive free cash flow to consistently pay higher dividends.

Coca-Cola Trailing 12-Month Profitability 

Source: Morningstar, Gurufocus, CSImarketing

Of course, long time Coke shareholders know that the past few years have not been easy for the beverage giant. Sales and earnings have actually been in decline because of several factors, including declining soda volumes, negative currency effects (more on this later), and the company’s major strategic shift.

Source: Simply Safe Dividends

Specifically, Coca-Cola plans to become a much more profitable company by refranchising its bottling operations around the world.

Source: Coca-Cola Investor Presentation

Coke’s plan is to sell its bottling operations (other than the super high-margin concentrate business) to its current global partners. The logic behind this is that it will make the company much less capital intensive and send margins and returns on capital soaring.

Coca-Cola North American Bottling Refranchising Plan

Source: Coca-Cola Investor Presentation

Management expects that, starting in 2019 when the global bottling refranchising plan is complete and it finishes its $3.8 billion cost cutting initiative (from 2016 to 2019), the company’s operating margins will rise from 22% to 35%.

Of course, cost cutting and financial engineering may boost profitability substantially, but ultimately Coke needs to grow its sales, earnings, and free cash flow if its dividend is to continue growing as it has every year since 1962. Fortunately, Coke also has a plan for how to not only maintain its market share but even grow it, just like it has for many decades.

Source: Coca-Cola Investor Presentation

The first step is the continued transition from Coke’s namesake soda brands into trendier alternatives, such a: bottled water, juices, milk, energy drinks, and teas. Coke plans to devote about 50% of its resources to growing this side of its business.

Source: Coca-Cola Investor Presentation

Specifically, Coke has been very good at making bolt-on acquisitions of fast-growing non-soda brands, such as its recent acquisitions of:

A 16.7% stake in Monster Beverage (MNST), which posted 15.4% revenue growth in Q3 2017

Fuse

Vitamin Water

Honest Tea

A large stake in Keurig Green Mountain which was later bought out by a private company for $13.9 billion

At its most recent investor day, management outlined a potential plan to enter the craft beer market

Going forward, Coke says it plans to scale back its buybacks in order to focus more on these investments and bolt-on acquisitions. That makes sense since Coke’s marketing and distribution machine are so strong that its number of billion-dollar brands has more than doubled since 2007.

Coke is also planning on being more efficient with its advertising and brand marketing campaigns in the future. Specifically, management wants to focus less on traditional 30 and 60-second TV commercials and instead use more online advertising (currently generates 1% of sales) to try more efficient and targeted campaigns.

The company also wants to transform itself into a more powerful local market of all major beverages. This means using advanced data analytics (machine learning and AI) to determine which products are most in demand in any given city, state, or region.

The end goal, according to management, is to help Coke continue to use its massive financial, marketing, distribution networks to gain market share in the $110 billion global beverage market, which is expected to grow 4% annually through at least 2019.

Source: Coca-Cola Investor Presentation

In fact, management believes the company can achieve long-term 4% to 6% revenue growth and 6% to 8% earnings growth, thanks to its tried and true model of acquiring up-and-coming brands and then accelerating their growth rates by plugging them into its global distribution system.

While Coke is indeed making many smart strategic moves to finally return to sustainable top and bottom line growth, that doesn’t necessarily mean the company’s rosy projections will come to fruition.

Key Risks

Coca-Cola is likely to remain a low-risk dividend stock for the foreseeable future, but that doesn’t mean there aren’t several risks to be aware of.

First, because Coca-Cola derives the vast majority of its sales and earnings from overseas, the company has a lot of currency risk. For example, in 2017 the company estimates that negative currency effects will be a 3% to 4% headwind. That’s despite the US dollar depreciating against numerous other currencies such as the Euro, British Pound, Japanese Yen and Canadian dollar.

This is a challenge for two reasons. First, usually when the dollar weakens it actually helps boost a multi-national’s bottom line because the value of foreign sales and profits ends up translating into more US dollars when it comes to reporting earnings and paying dividends.

However, Coca-Cola’s specific currency mix is very complex because they operate in virtually all currency markets. So whereas most global corporations enjoyed a profit boost in 2017, Coke was one of the few to actually suffer.

What’s worse is that accelerating economic growth in the US means there is a stronger probability that US interest rates could rise faster than rates around the world. If that happens, the US dollar could reverse course in the coming years and potentially appreciate relative to other currencies, which would result in even greater currency headwinds.

That in turn means that Coke’s planned sales and profit growth of about 5% and 7%, respectively, might not be so achievable, creating a problem for dividend investors because the company’s restructuring plan means that Coke will be a much more profitable but smaller business going forward.

Source: Coca-Cola Investor Presentation

In the short-term Coke is facing growth headwinds thanks to the now international expansion of refranchising of bottling operations. In fact, Coke expects revenues to shrink by 18.5% in 2017, followed by another 16.5% in 2018. While cost cutting is helping to offset most of that decline, the company is still forecasting a 3.5% decline in 2017 EPS and a 1.5% decline in 2018. And that’s assuming that negative currency effects don’t get worse.

In other words, dividends aren’t paid out of high margins, but overall free cash flow (FCF), which is currently in decline for Coke. In other words, Coke’s ability to continue rewarding long-term investors with the kind of dividend growth that has served shareholders so well in the past could be in question.

This is especially true given that the declining size of its cash flows have raised Coke’s FCF payout ratio to nearly 70% through the first nine months of 2017. Meanwhile buybacks have consumed another 64% of FCF during this period.

As a result, Coke is planning on less aggressive buybacks in the future, earmarking that cash for bolt-on acquisitions. This basically means that Coke needs its long-term growth plans to work in order to continue growing its payout like shareholders have come to expect over the years.

However, while the company’s larger focus on non-sparkling beverages is a good potential growth driver (one of many), the fact remains that soda margins are very high for the company and more lucrative than growing product lines such as Simply Juices.

The issue for Coke is that soda sales in developed nations have been in a steady decline for years, a trend that isn’t expected to reverse anytime soon (if ever). That’s partially due to shifting consumer trends towards healthier products, as well as governments starting to consider instituting soda taxes as means of raising revenue and fighting obesity rates.

Even more troubling for Coke? The secular decline in soda has also started to spread to developing markets, which have seen falling volumes as well.

Source: Coca-Cola Investor Presentation

In fact, global soda volumes decreased in 2016 and only emerging markets posted positive volume growth. Only strong price increases and improved product mix allowed the industry to grow its revenues. If current trends hold, the risk is that as fast-growing emerging markets become wealthier, their overall consumption of soda could follow the global trend and reverse.

That would likely create a large headwind that could counteract Coke’s efforts to grow into healthier, non-soda beverages. And speaking of product diversification, Coke’s plans to potentially enter the craft beer industry are not necessarily a good thing.

This is because the alcohol industry in general, and craft brewers in particular, have seen their prices appreciate at impressive rates in the past few years due to massive industry consolidation and M&A activity. In other words, Coca-Cola is potentially looking to enter an entirely new industry in which it has no experience at a potential market top (and overpay).

While Coke’s track record of buying up-and-coming non soda brands, plugging them into its marketing and distribution channels, and turning them into billion-dollar success stories is impressive, there is no guarantee that this could be repeated in alcohol. That’s due to the very different and largely artisanal nature of craft beers, which generally sell in low volumes and are unlikely to become a large growth catalyst for a company of Coke’s size.

Coca-Cola has been an amazing dividend growth success in the past, but it’s future looks far less rosy. Yes, management is making smart strategic moves to adapt to long-term global consumer trends. And the current strategy of shifting from a highly capital intensive manufacturer of drinks to mostly a brand manager is likely to generate far higher margins, returns on capital, and free cash flow in the future.

However, investors need to be aware that even if the turnaround proves successful, the company’s days of impressive sales, earnings, and dividend growth are almost certainly behind it. In other words, while Coke is likely to remain a decent low-risk dividend growth story, it holds much less appeal compared to many other proven dividend growers.

Coca Cola’s Dividend Safety

We analyze 25+ years of dividend data and 10+ years of fundamental data to understand the safety and growth prospects of a dividend.

Our Dividend Safety Score answers the question, “Is the current dividend payment safe?” We look at some of the most important financial factors such as current and historical EPS and FCF payout ratios, debt levels, free cash flow generation, industry cyclicality, ROIC trends, and more.

Dividend Safety Scores range from 0 to 100, and conservative dividend investors should stick with firms that score at least 60. Since tracking the data, companies cutting their dividends had an average Dividend Safety Score below 20 at the time of their dividend reduction announcements.

We wrote a detailed analysis reviewing how Dividend Safety Scores are calculated, what their real-time track record has been, and how to use them for your portfolio here.

Coca-Cola has a Dividend Safety Score of 88, indicating a very safe and dependable dividend compared to most other companies in the market. That’s not surprising given Coke’s impressive status as a dividend king, with 55 straight years of payout increases.

Source: Simply Safe Dividends

Coke’s high safety and consistent dividend growth have historically been driven by several factors. One of these was its modest payout ratios, which remained near 50% throughout most of the past decade to provide strong safety buffers for the payout, even in times when its earnings and cash flow declined.

Of course, Coke’s payout ratio has substantially risen in recent years owing to the refranchising of its bottling operations, which resulted in substantial declines in overall earnings and free cash flows.

Fortunately, recently passed tax reform will lower Coke’s corporate tax rate from 26% to 21% and result in a double-digit boost to its bottom line. This should help stabilize the company’s payout ratio and ensure the safety of its payout until Coke completes its restructuring and hopefully returns to stronger earnings and free cash flow growth

Source: Simply Safe Dividends

Another important safety factor is the company’s strong balance sheet because company’s will always meet their debt obligations before paying dividends.

Source: Simply Safe Dividends

While Coke has a large absolute amount of debt on its balance sheet, it’s important to keep in mind that until recently it was a highly capital intensive business. In fact, when we compare its debt levels to those of its peers, we see that Coke’s financial position is very strong, thanks to its large cash position, strong free cash flow generation, and high current ratio (short-term assets/short-term liabilities).

Sources: Morningstar, Fastgraphs, CSImarketing

As a result, Coke has very little trouble servicing its debts and other liabilities. This is why the company has such a strong investment grade credit rating and is able to borrow at an incredibly low average interest rate of just 2.5%.

Even better, now that Coke is selling off its less profitable and more capital intensive bottling operations, the company should be able to deleverage over time while still investing in growth and maintaining its secure dividend.

However, the downside is that, due to the timing of the restructuring, and the large short-term declines in sales, and earnings, Coke’s dividend growth rate is likely to be rather lackluster.

Coca-Cola’s Dividend Growth

Due to its struggles with top and bottom line growth in recent years, Coke’s dividend growth rate has slowed substantially. While management seems to have the company on a better track now, Coke’s elevated payout ratio means that investors need to expect the company’s dividend growth to be even slower in the coming years.

Source: Simply Safe Dividends

A slower rate of payout growth is to be expected because even if management achieves strong EPS and FCF per share growth of 6% to 8% a year (analysts expect only 5% to 6%), the company’s dividend will need to grow slower than the bottom line for at least several years in order to let the payout ratios return to safer, historical norms.

As a result, Coke’s dividend will probably only grow between 3% to 5% a year, which is about three times slower than its 14.5% average annual growth since 1962. While this isn’t necessarily a terrible figure, it does mean that investors interested in Coke need to make sure to buy the stock when shares are especially attractively priced. Unfortunately, that doesn’t appear to be the case today.

Valuation

Over the past year, Coke has underperformed the S&P 500 by close to 10%. However, that doesn’t necessarily mean its shares are a bargain.

For example, KO’s forward P/E ratio is 22.8, much higher than the S&P 500’s already frothy 18.5 and slightly above the stock’s historical 21.2. However, keep in mind that Coke’s slower growth rate than in the past means that it probably should be trading at a discount, not a premium, to its historical P/E.

It is true that Coca-Cola’s dividend yield of 3.2% is higher than the S&P 500’s 1.8% and the stock’s historical norm of 2.9%. In fact, over the past 22 years the yield has only been higher around 10% of the time. This might make it seem like now is a perfect time to consider buying this notable dividend growth stock.

But again, it’s worth repeating that Coke’s growth rate is now much slower than it was in the past. This means we might be better off comparing its current yield to a period of slower growth, which is likely to better represent the future, such as the last five years.

As seen below, Coke’s current dividend yield is not that much higher than its five-year average yield of 3.1%, indicating that the stock is unlikely to be more than fairly valued at best for income-focused investors.

Source: Simply Safe Dividends

Going forward, the stock has potential to generate about 7.2% to 9.2% total returns going forward (3.2% yield + 4% to 6% annual earnings growth). That’s not necessarily a bad return for a low risk, wide moat dividend king. However, it’s less than some other blue chip dividend growth stocks are offering today, thanks to their faster long-term growth prospects and better valuations in some cases.

Conclusion

Coca-Cola remains the world’s largest and most dominant beverage company. Coke’s wide moat, courtesy of its global supply chain, huge economies of scale, and substantial marketing spending, means that it is likely to remain a reliable income growth stock for the foreseeable future.

Even despite the company’s declining earnings and free cash flow in recent years, Coca-Cola’s dividend health looks solid. The company has plans in place to boost cash flow over the next few years (cost cutting and refranchising to earn much higher margins), its balance sheet is pristine, and continued bolt-on acquisitions should further diversify and strengthen Coke’s long-term profits.

That being said, Coke faces numerous short and medium-term headwinds in its turnaround plan and long-term growth strategy. The company’s relatively high payout ratios and need for increased investment in new beverage brands seem likely to force management to grow the payout at a much slower pace, making Coca-Cola look less attractive compared to many of the best high dividend stocks here.

This article was originally featured on Simply Safe Dividends.

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Weekend roundup: How Trump’s tax plan may affect you Stocks

MarketWatch rounded up 10 of its most thrilling topics over the past week.

1. Trump’s tax idea and also you

President Trump has unveiled a one-web page blueprint to reduce the company income-tax price, wipe maximum deductions for people, put off the property tax and the Opportunity Minimum Tax that hits wealthier taxpayers, and throw in some sweeteners for the center elegance. Here’s the total text of the thought.

There are few specifics (starting with the stages wherein the brand new tax costs might kick in), and of course, this nevertheless has to get via Congress.

Quentin Fottrell lists tax deductions you may lose the plan. And what approximately your 401(k)? Steve Goldstein considers how much the proposed enterprise tax reduce is already baked into inventory expenses, and Nigam Agora believes earnings increase springing from Trump’s tax plan could improve the Dow Jones Business Common DJIA, -0.19% to 30,000.

2. Tax reform and shares

Even if Congress concurs to a miles smaller company tax cut than the one proposed by the Trump management, Erick Ormsby of Alcosta Capital Control expects a massive increase in these stocks.

3. Trump’s a hundred days Saturday might be President Trump’s one-hundredth day in office. Robert Schroeder critiques what Trump promised and what he has accomplished Plus:

• Paul Brandus compares Trump’s first a hundred days to Jimmy Carter’s.

• Jeremy Olshan says maybe it’s fine for a president no longer to accomplish very a good deal even as learning the job.

Round Up the Guys for a “Mancation

Need a damage, time away from the office or an excuse to get away for a few days? Whether or not it’s time bonding along with your son(s), university friends, or office friends, a notable men’ “mancation” is just a brief force northwest from La to VenturaCountyWest.

With miles of VenturaCountyWest shoreline, water sports are a herbal draw. Kayaking is huge here. Beginners can hire kayaks for a leisurely time out in Ventura Harbor, or the adventurous can sign up for a kayak cave excursion around Santa Cruz Island thru Channel Island Outfitters and Channel Islands Kayak Center.hma weekly roundup

Extra experienced kayakers or folks that need to revel in the ocean on a wave runner can release from Ventura Harbor and Channel Islands Harbor. Touch Channel Island Kayak Middle for kayak rentals and Ventura Boat rentals for wave runners.

men can also plan to spend a half of day sports fishing with Hook’s Sportfishing and the Channel Islands sport Fishing out of Channel Islands Harbor in Oxnard or Ventura sports Fishing leaving from Ventura Harbor. Fishing boats depart before sunrise.

Relying on the season, even newbie anglers can snag catches like white sea bass, lingcod, yellowtail and pink snapper. Deck hands are satisfied to smooth and fillet fish that are stuck (for tips).

VenturaCountyWest land activities can be just as exhilarating.

Jim Hall Kart Racing is in which students healthy up and learn how to force ultra-condensed, 160-pound method karts. You may quickly find out why Motor Fashion mag chose Jim Hall Kart Racing as one of the “49 coolest automobile activities earlier than you die.”

If that doesn’t get the adrenaline pumping, have your crew take turns as co-pilot in a vintage World War II P-51 Mustang. Veteran pilots from the Commemorative Air Pressure Museum in Camarillo take guests on breathtaking rides they may in no way forget about.

For golfing fanatics, VenturaCountyWest offers some of the great public golf publications within u. S . A . all with ocean or mountain perspectives. In Ventura, soak up a morning spherical of golfing at Olivas Hyperlinks, an 18-hole championship golfing facility designed via Forrest Richardson or play in the adjacent direction, Buenaventura. In Oxnard, tee up at one among two publications at River Ridge, while in Camarillo, Sterling Hills and Camarillo Springs offer hard to play in natural settings.

While the sun goes down, the night heats up. Downtown Ventura is the area to be. Make stops at the Ventura Improv Corporation for comedy, the Majestic Ventura Theater for a combination of song or nightclub and restaurant hop along Main Street. If your institution feels fortunate, head over to Gamers Online casino for lively games and tournaments of Texas Holdem, big-O and Panguingue or hang out at traditional poker tables or the Casino’s blackjack living room.world news roundup

via the end of your mancation, they’ll be lots of reminiscences and lots of opportunity for bragging rights.

Factors That Affect Your Alcohol Tolerance

All of us has distinctive ranges of alcohol tolerance or the amount of alcohol that you may take care of without it affecting your body. There are a number of various factors that have an effect on your alcohol tolerance that let you expect the quantity of alcohol that you could drink. Keep in thoughts, however, that alcohol can get into your bloodstream without you showing signs of intoxication.affect vs effect definition

First, whilst you drink alcoholic beverages, the liquid travels via your digestive machine like any other food or drink. In the intestines, the tiny alcohol molecules escape into your bloodstream, where they could then tour to different elements of your frame and affect them, consisting of the mind. Therefore, there are numerous components of your digestive machine that may have an effect on alcohol tolerance. If you have now not had anything else to devour or drink in some time, an alcohol beverage can seep into your bloodstream tons quicker. meals and other drinks assist “cushion” the alcohol.affect and mood

Subsequent, the velocity of your metabolism also performs a function for your tolerance.

Like whatever else you consume, alcohol cycles via your frame before getting eliminated as waste. When you have a faster metabolism, you could method the alcohol and rid it out of your body faster than a person that has a slower metabolism. Because it’s far on your device for a shorter period of time, you could no longer revel in the outcomes of alcohol as a great deal as someone with a slow metabolism.

Moreover, your body kind can have an effect on your alcohol tolerance. If you have extra water to your body, you are extra capable of system alcohol. but, When you have extra frame fat, you normally have less water for your frame and consequently have a decrease tolerance. That is why ladies normally have a decrease tolerance-they frequently have a better body fats percentage than guys.

Even though you could no longer feel as if you are ingesting an awful lot, alcohol nonetheless travels to the bloodstream, where it could growth your blood alcohol content material, or BAC, over prison degrees. When you have been charged with DWI/DUI or other alcohol-related crimes, you need to contact a skilled DWI legal professional from the Regulation Office of Jim Black, these days to discuss your felony alternatives.

Different Types of Stocks and Stock Markets

For a new investor, it’s miles critical to realize the diverse styles of stocks available inside the market and the different markets in which they’re traded or the unique inventory markets.bing stock

There are simple forms of stocks:

1. Not unusual shares 2. Desired shares

A Commonplace inventory is the “simple inventory” of a business enterprise this is immediately tormented by the fluctuation within the profit and loss of the company. These shares are also issued to the employees of the business enterprise. Despite the fact that, high danger is associated with Not unusual shares, they are also a vehicle for making excessive income as there are not any constant dividends attached to them. After the Commonplace stocks, the Favored stocks are disbursed to the chosen stakeholders. Those stocks convey a set dividend associated with them this is paid at everyday intervals to stakeholders. They can further be labeled into a, B, and C classes having distinct expenses, regulations, and dividend amounts.yahoo finance

Desired stockholders are paid their dividends a whole lot before the Common stockholders are paid their profits. If because of a few reason an organization liquidates, its Desired stockholders get lower back their money, whilst Not unusual stockholders might not. However, there’s less profit associated with Favored shares.

inventory splits are issued by way of organizations whilst there may be a massive lower inside the demand for its shares. Here, an investor is able to buy twice the cost of stock for the identical amount of cash. With accelerated demand, there may be a reverse break-up, which is just the opposite of a stock cut up. But, there may be no lack of money for the investor for each Those form of transactions.

The real area wherein the trading of securities takes region is called an inventory exchange. There are again simple types of stock exchanges:

1. Physical alternate: For example, NYSE and AMEX 2. Digital/On line exchange: As an example, NASDAQ

The New york inventory trade (NYSE) has been operational on the grounds that 1792. its miles placed on the Wall Street and has strict guidelines for organizations to get listed. The NYSE lists big companies, consisting of Coca-Cola, Wal-Mart, and Preferred Electric. The NYSE is also referred to as a “public sale market”; that is due to the fact traders bid for shares on the ground as in an public sale and the share goes to the lowest bidder. it’s miles believed, that the shares at the NYSE are less risky and greater strong. The most listing price for the exchange is $250,000 and the maximum persistent yearly listing fee is $50,000.

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Get A Portfolio That Pays You During Retirement with Dividend Investing

If you’re like most people, you’ve spent much of your adult life working and, if you’re smart, saving some of the money you made and investing it.

SEE ALSO: 25 Dividend Stocks You Can Buy and Hold Forever

During this “accumulation phase,” you built wealth and resources to provide an income source for yourself in retirement. You watched your portfolio grow, but you didn’t tap into it.

But now a change is coming. You’re retiring. And while you want your portfolio to keep providing returns, you also want it to give you income to use for your day-to-day expenses and to live the lifestyle you dreamed of.

If you’re working with an adviser, he’s probably talked to you about this “distribution phase” and has been helping you prepare for it.

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Much of that conversation should have been about moving to a safer investment strategy to protect the money you worked so hard to save.

Why dividends are attractive to retirees

If you haven’t already, it’s a good time to think about dividend investing as a part of that plan — building a collection of solid stocks with dividend yields that generate money throughout the year.

If you own stock, you know it goes up and down on a daily basis. The price changes to whatever somebody is willing to pay for it at the time; you hope it will continue to go up, but that’s not always the case.

But if it’s a company that pays dividends, it also will pay you cash that can be deposited into your brokerage or bank account. You get paid for owning that stock.

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At a time when you’re looking for safety and security from your portfolio, dividend-paying stocks can be a good investment. Dividend payers historically outperform other investments over the long haul, with quite a bit less volatility. And it’s nice to know that if you need to take a 4% withdrawal from your portfolio, 3% or 4% will come from dividends, so you don’t have to put all your hope in that ever-changing market.

You know your portfolio is going to pay you for owning it.

What to watch out for

Still, you have to be careful when shopping for dividend-paying stocks. You can’t just pick stocks that pay high dividends. Do a little homework. Is the company healthy? Is it profitable? There are companies out there that pay high dividend rates, but they are losing money. The money they’re using to pay those dividends might be coming from borrowed funds, and when a company isn’t healthy financially and still pays a high dividend, you risk watching that stock go down to a point where it might not recover or, at best, it recovers slowly.

Companies with a history of paying dividends consistently, and increasing their dividends, are usually household names, such as Coca-Cola (KO), Pepsi (PEP ), General Mills (GIS) and Procter & Gamble (PG ). Financial companies often increase their dividends, as do health care companies. If you don’t want to pick individual stocks, you can choose a dividend growth mutual fund or a dividend growth exchange-traded fund (ETF). Your adviser can help you or do it for you.

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Follow a long-term game plan

The idea with dividend investing is to not over manage. Plan to stick with that stock for a long while (unless something really catastrophic happens, or there’s a change of course within the company).

You don’t want 100% of your investments to be dividend payers, but there should be a good portion of your portfolio that pays you for owning it. Even if you’re not in the distribution phase yet, it can make sense to have some dividend payers in your portfolio, because then you have the miracle of compound interest: You can take those dividends and reinvest them.

But especially when you’re in the income phase of the investment life cycle, when it’s all about cash flow, having dividend payers in your portfolio makes it easier to achieve success.

See Also: Double Bubble? Investors Beware of Rising Stocks and Bonds

Any comments regarding safe and secure investments, and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Fixed Insurance and annuity product guarantees are subject to the claims-paying ability of the issuing company and are not offered by Global Financial Private Capital.

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This material is for informational purposes only. It is not intended to provide tax, accounting or legal advice or to serve as the basis for any financial decisions. Individuals are advised to consult with their own accountant and/or attorney regarding all tax, accounting and legal matters.

Investment Advisory Services offered on a fee basis through Global Financial Private Capital, LLC, an SEC Registered Investment Adviser.

Jared M. Elson is a partner at Regent Wealth Management. Jared is a Series 65 licensed Investment Adviser Representative (IAR) as well as a licensed life and health agent. He shares his investing strategies as a frequent contributor to TV news programs, books and magazines, and on the “Retirement Symphony” radio show.

Comments are suppressed in compliance with industry guidelines. Our authors value your feedback. To share your thoughts on this column directly with the author, click here.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Retirees, Maximize Your Income From Dividends

Dividend investing is supposed to be a bit like watching grass grow: steady progress, few surprises. But lately, investors holding dividend-paying stocks have suffered some jarring setbacks.

SEE ALSO: 8 Great Dividend Stocks for Retirees

Higher-yielding sectors such as utilities and real estate investment trusts saw valuations soar through much of 2016, then suffered sharp pullbacks later in the year. Analysts see more pain ahead for high-dividend-yielding stocks as interest rates start to rise, diverting income-focused investors from stocks into bonds. A stretch of stagnant earnings growth, meanwhile, put the brakes on the double-digit dividend growth that investors have grown accustomed to since the financial crisis. Standard & Poor’s 500-stock index dividends climbed just 5% in 2016.

“It’s realistic to start thinking that the best might be over in terms of dividend growth,” says Christine Benz, director of personal finance at investment-research firm Morningstar.

Does this mean older investors should scale back dividend holdings? Hardly. The idea of getting income from stocks still “makes a lot of sense, particularly in this low-rate world,” says Tony DeSpirito, co-manager of BlackRock Equity Dividend fund. At roughly 2.5%, the yield on the Russell 1000 Value Index is about the same as the yield on the 10-year Treasury, he notes. But while the Treasury bond offers a fixed coupon, stocks offer potential dividend growth and share-price appreciation.

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The challenge is to pick the right dividend stocks or funds. Rounding up the usual suspects—high dividend-yielding utilities, REITs, consumer staples and telecom stocks—may not be the best approach. One reason: You’d be ignoring some of the biggest dividend-paying sectors, including technology and financials.

The higher-yielding stocks also look expensive, even after their late-2016 sell-off, money managers say. Investors have used them as bond substitutes in a low-rate era, and as rates rise, these bond proxies will suffer more than lower dividend-yielders.

Stocks that can deliver steady dividend growth, rather than the richest yields, offer the most fertile ground for dividend investors. These holdings look cheaper than the high-yielders, they can hold up well in a rising-rate environment, and they can offer a buffer against market volatility.

You can maximize the income you get from these holdings by minimizing fees and taxes. In a dividend-focused mutual fund, a lofty expense ratio can chew through most of your yield. And although the 15% tax rate paid by most investors on qualified dividends seems relatively benign, many holdings favored by dividend investors and dividend funds don’t get this treatment. Most REIT payouts, for example, are taxed as ordinary income.

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Follow these tips to build a dividend portfolio that can deliver reliable income despite rising rates and slowing dividend growth—so you can get back to watching the grass grow.

Go for Growth

Reliable dividend growers have proved resilient during the roughest times in the market. In a recent study, S&P Dow Jones Indices compared the performance of dividend “aristocrats”—S&P Composite 1500 stocks that have raised their dividends every year for at least 20 years—against high-yielding stocks in the S&P 500. During the 15 worst months for the broader stock market from the end of 1999 through September 2016, the aristocrats lost 5.9%, on average, versus an 8.6% loss for the high-yielders and an 8.9% average decline for the S&P 1500.

The aristocrats tend to be more resilient during the worst market downturns in part because raising dividends year after year reflects a certain level of financial health and discipline, S&P notes.

So where can you find dependable dividend growers at a decent price? For old-school dividend investors raised on Ma Bell and Coca-Cola, the answers may be a bit surprising.

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One sector that’s highly favored by value-minded dividend fund managers these days: technology. In 2016, the sector surpassed financials to become the biggest contributor to S&P 500 dividends, accounting for 15.5% of payouts.

SEE ALSO: 25 Dividend Stocks You Can Buy and Hold Forever

Mature tech companies, such as Microsoft (symbol MSFT; recent price, $64), Cisco Systems (CSCO, $32) and Qualcomm (QCOM, $54), generate loads of free cash flow and are finding fewer opportunities to re-invest in their businesses, says Mike Liss, co-manager of the American Century Value fund. That leaves them with an “ability to increase their dividends at a rate better than the average stock,” Liss says.

Microsoft, which yields 2.3%, has nearly doubled its quarterly dividend in the past five years, to 39 cents a share. Money managers see more healthy dividend growth ahead as the company’s leadership in cloud computing improves its earnings-growth prospects.

Cisco, which yields 3.3%, is known for making the switches and routers that move data around computer networks. But Cisco is also expanding into faster-growing areas such as collaboration and security. The company has boosted its dividend every year since initiating its payout in 2011.

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Patient investors should also take a look at Qualcomm, which yields 3.8%, says John Buckingham, chief investment officer at AFAM Capital and manager of the Al Frank fund. The stock has been crushed this year, in part because Apple is suing Qualcomm over its business practices, and it now trades at just 11 times analysts’ estimate of earnings in the coming year. Buckingham believes the litigation will ultimately be settled and “the magnitude of the decline has created opportunity for those who can take a long-term view.”

Look for Healthy Payouts

Health care stocks have looked rather sickly lately. Concerns about repeal of the Affordable Care Act, as well as talk from Washington about negotiating lower drug prices, have weighed on the sector.

But the political noise has created an opportunity for long-term dividend investors, particularly in drug stocks. “If you continue to create drugs that are innovative and meet unmet needs, you’re going to get premium pricing for those products,” Liss says.

Holdings in Liss’s fund include drug giants Pfizer (PFE, $32) and Merck (MRK, $64). Pfizer yields 3.8% and trades at just 13 times analysts’ estimate of its full-year earnings. While the loss of patent protection on several drugs is a headwind, the company maintains an impressive portfolio of patent-protected drugs and is launching several potential best-sellers in cancer, immunology and other areas.

Like Pfizer, Merck has a strong pipeline of new drugs to balance out upcoming patent losses. Cancer drug Keytruda has been a notable success as the company sharpens its focus on unmet medical needs. Merck yields 2.9% and has raised its dividend six years in a row.

Swiss drug giants Roche Holding (RHHBY, $30) and Novartis (NVS, $75) also look like good values, says Matt Burdett, associate portfolio manager at Thornburg Investment Management. Pricey biologics, which tend to have less generic competition, account for a large portion of Roche’s drug sales, and Roche also has a strong diagnostics business. The stock yields 3.4%.

Novartis, which yields 3.6%, is well diversified with pharmaceuticals, eye care and other businesses. The company is launching several drugs in key areas such as cancer and heart failure.

Guard Against Rising Rates

Rising rates generally aren’t disastrous for dividend stocks. Looking at the two-, three- and five-year periods following the initiation of Federal Reserve rate-hiking cycles dating back to 1954, dividend payers have outperformed non-dividend payers, according to AFAM Capital.

But when interest rates rise, some dividend payers do suffer. In recent research, Morningstar looked at rising-rate periods from May 1953 through the end of 2016. The 30% of stocks with the highest yields lost about 1.5%, on average, while the 30% with the lowest yields gained 3.2%.

SEE ALSO: 8 Dow Dividend Stocks You Can Buy and Hold Forever

Many dividend-focused fund managers are favoring a sector that stands to benefit from rising rates: financials. As rates rise, banks may see an improvement in their net interest margins—a measure of lending profitability. What’s more, banks are likely to see looser capital requirements and other deregulation under the new administration, says Sandy Pomeroy, co-manager of the Neuberger Berman Equity Income fund. With capital freed up, banks may have more flexibility to boost their dividends.

Many big bank stocks saw sharp run-ups after the election. One that still looks attractively valued is Bank of America (BAC, $23), says Matt Quinlan, co-manager of the Franklin Income fund. At 1.1%, it doesn’t have the richest yield, but it trades for less than book value. The bank has slowly recovered from its ill-advised 2008 acquisition of mortgage lender Countrywide Financial and has sharply cut costs in recent years.

Rising rates are also “a positive for insurance companies who have substantial dollars in fixed income,” Buckingham says. He likes MetLife (MET, $53), which yields 3% and trades at just 10 times analysts’ estimate of its full-year earnings. The company is spinning off a U.S. retail unit, a move that analysts see as helping MetLife generate more stable cash flow.

Focus on Funds

If you’re shopping for a dividend-focused mutual fund, keep a close eye on fees. A mutual fund’s expense ratio eats into its yield. So “the relationship between expense ratio and income is quite direct,” Benz says.

One high-quality, low-cost fund is Vanguard Dividend Appreciation (VIG), an exchange-traded fund that yields 2.1% and charges just 0.09% annually. It tracks the Nasdaq U.S. Dividend Achievers Select Index, which includes companies that have boosted dividends for at least 10 consecutive years.

Another low-cost option: Schwab U.S. Dividend Equity ETF (SCHD). The fund tracks the Dow Jones U.S. Dividend 100 Index, which includes companies that not only have paid dividends for 10 years in a row but also have strong cash-flow-to-debt ratios, return on equity, dividend yield and dividend growth. The fund yields 2.9% and charges just 0.07% annually.

Investors looking to avoid the highest yielders might also consider iShares Core Dividend Growth ETF (DGRO). It tracks the Morningstar U.S. Dividend Growth Index, which excludes stocks with yields in the top 10% of the broader stock universe. The fund charges 0.08% annually and yields 2.3%.

Whether you’re choosing a dividend-focused fund or picking your own stocks, pay attention to the potential tax hit. Qualified dividends, which include most U.S. stock dividends, get favorable tax treatment. Taxpayers in the 25% to 35% tax brackets pay 15% on qualified dividends. Taxpayers in the 10% and 15% brackets pay zero; those above the 35% bracket pay 20%. If your adjusted gross income is more than $200,000 for singles or $250,000 for married couples, you’ll owe an additional 3.8% on your net investment income, including qualified dividends.

But many holdings favored by dividend investors don’t pay qualified dividends. Payouts from REITs, some foreign stocks and convertibles can be taxed as ordinary income. With master limited partnerships, a large chunk of distributions is typically tax-deferred, but investors may pay a combination of capital-gains and ordinary-income tax rates when they sell their units.

“It’s worth looking under the hood” of dividend-focused funds because many of these funds hold non–qualified dividend payers, Benz says. She points to American Century Equity Income, which is a high-quality fund but tends to hold some non–qualified dividend payers such as convertibles. The fund’s 10-year tax-cost ratio is 1.8, according to Morningstar, meaning that investors have lost an average annual 1.8% of assets to taxes. Investors in Vanguard Dividend Appreciation Index fund, which holds only common stocks, have sacrificed far less to taxes, losing an average annual 0.73% over the period.

Another taxing question for dividend investors is whether to hold foreign dividend-paying stocks—or funds that invest in those stocks—in an IRA. Many countries withhold taxes from dividends that their companies pay to overseas investors. U.S. investors are taxed a second time on those dividends, either when they report dividend income for their taxable accounts or withdraw money from their IRA. You can claim a foreign tax credit on your federal return for the taxes withheld by the foreign country—but only if you hold the stocks in a taxable account. If you hold the investments in an IRA, there’s no way to recoup the foreign taxes paid.

“If you have an IRA and a taxable account, put the foreign stocks or foreign stock funds into the taxable account,” says John Burke, a financial adviser at Burke Financial Strategies, in Iselin, N.J. But there’s a caveat: Companies in countries that don’t have a tax treaty with the U.S. may pay non-qualified dividends, making them a poor fit for a taxable account. Most countries have a tax treaty with the U.S., but there are significant exceptions such as Brazil, Chile and Singapore.

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