The Dividend Cafe

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The DC Today - Tuesday, March 26, 2024 Mar 26, 2024

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Today's Post - https://bahnsen.co/3TTReFO

Markets traded positively for most of the day, although ended up closing slightly down by 31 points. This is the 10th time since 1950 that the SP500 has been up for 5 months in a row, so it certainly has happened enough before, but interesting that when I looked at those time periods 12 months following, they were also all in positive territory as well. All that said, earnings and fundamentals are going to have to pull their weight for that to happen an 11th time from these valuations (see David’s comments below).

Historically speaking, it’s also rare to see markets top when there is such broad participation in new 52-week highs. Typically, that internal breadth starts to show cracks before the overall market reaches its cycle peak and turns lower, and that is not what we are seeing today. Energy, by the way, has reaccelerated, with now 80% of the sector at 3-month highs, as that market rotation and broadening of sector returns continues.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Monday, March 25, 2024 Mar 25, 2024

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Today's Post - https://bahnsen.co/49cizrs

Greetings from Dallas, Texas where I am the next two days before then getting to Houston on Wednesday and then to the TBG offices in Austin and doing three events there for a couple of days before returning to NYC on Friday. Today’s DCT is housing-heavy with plenty else in the mix to make it worth your time.

Dividend Cafe looked further into the time-tested wisdom of dividend growth investing, the historical factors that involved over the past few decades, and the lay of the land in the years ahead.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Dividend Logic vs. Speculative Madness Mar 22, 2024

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Today's Post - https://bahnsen.co/4924jl3

Predictions are fun. They are not, though, at the heart of the investment business. They can be very important in the methodology and process of some speculators, and they can even be marginally additive for some investors. But “predictions” are not quite the same as “calculations,” and they are categorically different from “belief systems.” At the core of all good investors lies a philosophy. I find it an unimprovable joy in life to study the investing philosophies of great investors. I never, ever, ever find one who relies on “feel” or “just has that Midas touch.” That very thinking is for simpletons and know-nothings. Great investors execute well off of a cogent philosophy. Bad investors either fail to execute or have an improperly formed philosophy (or, worst of all, options; they have no discernable philosophy at all).

The Bahnsen Group embraces being defined by our investment philosophy, and we embrace being known by the role dividend growth plays within that philosophy. Dividend growth is not new. In fact, what is [relatively] new is NOT viewing the receipt of cash flow from the risk investments you make as a key objective in your investing and a significant part of your anticipated return. In today’s Dividend Cafe, we address the history of investor distraction from dividend monetization and the reorientation that we believe is about to shift the focus back to where it belongs. We are not talking a “new normal” but rather a “return to normal normal.”

So jump on in to a very normal Dividend Cafe …

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Thursday, March 21, 2024 Mar 21, 2024

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Today's Post - https://bahnsen.co/3vpQejx

Markets built on yesterdays rally today closing higher for a third straight session. For the markets, the porridge-is-just-right narrative around the balance of strong economic and employment backdrop combined with disinflation and a Fed that is now talking about slowing QT and accepting PCE at 2.6% this year (vs 2%) before they would begin cutting interest rates. Today we also had jobless claims and existing home sales both positive and supportive of that narrative as well. Keep in mind please, that markets are a forward looking pricing mechanism, and a lot of soft-landing narrative at this point is fully baked in. The question will be on fundamentals keeping up with those higher valuations names from here, and I still suspect there will be the haves vs. have-nots in that regard and the time for being selective here is very important.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Wednesday, March 20, 2024 Mar 20, 2024

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Today's Post - https://bahnsen.co/43pRAau

Generally, a pretty market-friendly statement from the Fed, with some upgrading on the economy with GDP estimates moving up from 1.4% to 2.0%, they lowered their unemployment rate forecasts from 4.1% to 4% and raised the Core PCE forecasts by two-tenths to 2.6% for the year (and we are already at 2.8% now mind you).

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Tuesday, March 19, 2024 Mar 19, 2024

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Today's Post - https://bahnsen.co/3ViQThg

Markets built on gains quite nicely throughout the day today, with the Dow up 320 points, on an uncharacteristically consistent trading day heading into tomorrow’s FOMC decision and statement. The back up in rates we have seen the past two weeks eased a little today as well, with 10s down three basis points, which also supported our generally positive day. We are still in the range I mentioned on the 10-year, just at the higher end of it with 4.35%, the high watermark on the year so far.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Monday, March 18, 2024 Mar 18, 2024

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Today's Post - https://bahnsen.co/3x6BWVi

Ask David “Are tech stocks likely not going to be good dividend growth stocks for the foreseeable future? Given their reliance on good and expensive R&D to keep market share? Seems to be a no-brainer to me. Dividends and more meaningful dividend growth is seemingly better in other sectors. Or am I just underestimating the time it takes for dividends to grow?

What will happen to tech stocks if they have poor dividends and stock price growth flattens out? Where would the value for shareholders come from? Or am I missing something or am I just worrying unnecessarily?”

~ Nathan

Some tech companies will not pay a dividend, some will, some will grow it, and some will not. Technology is way too broad of a sector to answer in the context of monolithic treatment of dividends. What is constant where there are technology companies that pay consistent and growing dividends is that the company is mature, has recurring cash flows, and management that has exited the ego phase of corporate oversight. Value does not come from dividends – it comes from profits. The value of those profits is realized in dividends. If profits are not returned to shareholders but used to create more profits, that is where value creation could come from. Or, that is where value could be destroyed.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The Dividend Dilemma Mar 15, 2024

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Today's Post - https://bahnsen.co/3IEE4WR

Dividend growth investing is counter-cultural. It goes against the grain of “hot dots” and “shiny objects.” It functions outside the fads and fashions of the moment. And it insists that ancient ideas like “cash flow matters” are still relevant today (amongst many other ideas). It seeks performance and productivity but not popularity. It flows from a belief system and not a crowd. It is, indeed, counter-cultural.

It also is not always understood correctly. Several misnomers persist that, if better understood, could jeopardize its counter-cultural status. One of my great fears in life is that dividend growth investing recaptures its status as “the known best way to do equity investing.” All things being equal, if dividend growth investing became a consensus understanding of the masses, I still wouldn’t change my belief system one iota, but I prefer running a portfolio at 15.2x forward earnings when the market is trading at 21x … the “non-shininess” of the strategy adds value.

Nevertheless, when it comes to the Dividend Cafe, it is my sworn duty to inform, educate, equip, and edify, so clearing up misnomers is not just allowed but required. If enough people read and adopt the truth, I may have to sacrifice the counter-cultural status of dividend growth, but I’ll know I did the world some good. So today, we shall clear up a couple of things and even dig into some recent history.

And as is always the case with financial markets, the more you understand the past, the better prepared you will be for the future! Jump on into the Dividend Cafe …

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Thursday, March 14, 2024 Mar 14, 2024

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Today's Post - https://bahnsen.co/4cjgL2o

Markets were lower on the day with some higher than expected Producer Price Index numbers for the month of February that were up .6% versus .3% expected. Keep in mind, the year over year number on that same headline gauge is only at 1.6%, albeit up from the 1% read the month prior. If we annualize the last three months that included some of the higher figures, we get to around 3% year over year. This may not be exactly where we want to be at this point, but as I have mentioned, the path towards our target was just never going to happen in a straight line either.

Commercial real estate values have begun to show some recovery in the past few months. The chart below shows both the decline in values we just went through and the beginning of recovery, but more importantly, the 20%+ run up that preceded it. The protective equity during the recent decline in values was hugely inflated leading into it, so when we hear about a looming crisis in something like commercial office loans, from an LTV perspective there was already a larger cushion, and borrows make payments when there is equity. I am not saying there isn’t stress in non class-A office, but if prices are leveling I am not sure it will materialize into more at this point.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com