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BruceM
Participant ○○○

Re: VGR halves it’s dividend for 1Q2020 to $.20

"MO, paying 7.4%, is a 49 year divey aristrocrat with a 10 year divey growth rate of 9.6%."

Unlike VGR, MO's current dividend to CFFO payout ratio is 84%, which is the same average percent it has been over the past 24 quarters, which means it can cover its dividend growth with increasing cash flows, primarily due to added sales from other product lines.  But an inteesting question here is if due to the nature of tobacco, nicotine addiction and future demand, will MO continue to grow the dividend as VGR did even when they can't generate enough net operational cash to cover it.....or is this uniquely VGR? We're not at the point yet with MO, but it will be interesting to see what the market thinks if we do get closer to that point, particularly with the JUUL vaping issue.

BruceM

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Intruder
Participant ○○○

Re: VGR halves it’s dividend for 1Q2020 to $.20


@ElLobo wrote:

"I don’t believe in the optimism for MO because it will be weighed down by its investment in Juul which will continue to be written off and take MO down with it. I don’t need to invest in stocks with poor outlooks just to get an above average dividend over the short term. If I want to buy a risky stock which has better future prospects and high dividend yield I can increase my stake in RDSB with a 6.2% qualified dividend."

That's what Bruce was saying about VGR 6 years ago!  Since then, Cliff has booked $9.60 per share in distributions, not counting his reinvestment of distributions OR his annual 5% stock dividend that VGR paid.  At today's $11/share VGR share price, VGR is a penny stock, as far as Cliff is concerened!


As a great actor asked in an iconic movie “ Do you feel lucky today? “ I think investors will know the future of MO dividends in a lot fewer than 6 years

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cliff
Explorer ○○

Re: Vector (VGR): Nothing is Forever


@BruceM wrote:

"As I said from my first CF analysis of this stock, its not a question of IF but of WHEN. For some, the CF reality of VGR was not unlike spinning the cylinder of a 10 shooter and continuing each quarter to put it to their head, pull the trigger, hear a 'click' and assume that because it didn't go off that quarter, they're in good shape and have made the right decision. In the meantime, my money is with boring names like KMB, MCD, O and WEC and other such dividend payers where CFs are positive and the growing dividend is well covered and barring some unknown cataclysm, there is virtually no chance the dividend will be cut or eliminated, I'll collect these dividends and continue to let the pistol roulette investors enjoy their style of investing.

No individual or personal attacks here.....just an explanation of a difference in how income stocks can be interpreted and used."

BruceM


 

Bruce, I would have assumed that your FIRST cash flow analysis of this stock would have been when you actually invested in it, some number of years before you said you sold it in late 2013.  At the time you invested, VGR's cash flow did not cover its dividend.  In fact, I don't think it ever has since 2005 when I first invested in this odd duck.  But, whatever.

Assuming I had bought 100 of the shares you actually did own and sold back in 2013, for something around $16 per share, and then I sold them for around $12 per share about the time I suggested the warning in my original post here, here's the results . . . . . 

> My original 100 shares costing $1600 bought from you when you sold out would have become 134 shares (and that's without reinvesting cash dividends along the way)

> Selling those shares when I suggested we'd been warned of a dividend cut several months ago would have garnered me $1608 ($12 x 134), give or take . . . . . so no blood or joy.  No capital appreciation.

> HOWEVER, I would have put $1048 cash from VGR dividends in my Mason jar out back or maybe reinvested that cash in some boring dividend-paying company (this number is higher than El Lobo's estimate because I accounted for the increased number of shares each year)

> Just using a Finance 101 simple arithmetic calculation, that's a 66% return over a bit less than 6 years.  Not shabby.  Not roulette, either.  Just paying a little attention to some details.

 

No individual or personal attack here, either, . . . . . . . just some facts.

Since the stock is down only 12% as I write after a greater than 50% dividend haircut, it's obvious that the market anticipated this move quite some time ago.  (After all, all we had to do was listen to what management was telling us.)  At around a 7% current yield now, apparently the efficient market views this as a safer investment than it did a week ago.

We just may be able to continue to have fun kicking this investment going forward.  After all, if they could pay out $1.60 for umpteen years without the cash flow to cover it, they should be able to pay out a measly $.80.

 

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ElLobo
Participant ○○○

Re: VGR halves it’s dividend for 1Q2020 to $.20

"I think investors will know the future of MO dividends in a lot fewer than 6 years."

Yup, probably increasing at 10%/year!  Lorillard, a tobacco company that, eventually, wound up part of BTI, British American Tobacco, was the first company to pay a dividend in the US, in 1760.  DuPont in 1802, Valspar, in 1806, Another is the answer to "What stock has the longest uninterrupted dividend streak?" York Water, YORW, has paid a dividend without interruption since 1816.

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Intruder
Participant ○○○

Re: VGR halves it’s dividend for 1Q2020 to $.20


@ElLobo wrote:

"I think investors will know the future of MO dividends in a lot fewer than 6 years."

Yup, probably increasing at 10%/year!  Lorillard, a tobacco company that, eventually, wound up part of BTI, British American Tobacco, was the first company to pay a dividend in the US, in 1760.  DuPont in 1802, Valspar, in 1806, Another is the answer to "What stock has the longest uninterrupted dividend streak?" York Water, YORW, has paid a dividend without interruption since 1816.


I doubt that MOs dividend will be sustainable because the metrics won’t support an increasing dividend as cigarette sales decline, taxes increase, productivity gains evaporate and govt regulations increase. Eventually govt will prohibit vaping.  I can find better investments than a sector which has no redeeming value and whose only purpose is to cause death and serious illness to its customers which run up health care costs. I don’t want my grandchildren or anyone else’s vaping.

 

ElLobo
Participant ○○○

Re: VGR halves it’s dividend for 1Q2020 to $.20


@Intruder wrote:

@ElLobo wrote:

"I think investors will know the future of MO dividends in a lot fewer than 6 years."

Yup, probably increasing at 10%/year!  Lorillard, a tobacco company that, eventually, wound up part of BTI, British American Tobacco, was the first company to pay a dividend in the US, in 1760.  DuPont in 1802, Valspar, in 1806, Another is the answer to "What stock has the longest uninterrupted dividend streak?" York Water, YORW, has paid a dividend without interruption since 1816.


I doubt that MOs dividend will be sustainable because the metrics won’t support an increasing dividend as cigarette sales decline, taxes increase, productivity gains evaporate and govt regulations increase. Eventually govt will prohibit vaping.  I can find better investments than a sector which has no redeeming value and whose only purpose is to cause death and serious illness to its customers which run up health care costs. I don’t want my grandchildren or anyone else’s vaping.

 


Obviously your call!  Whether your grandchildren, or anyone else, vapes or not won't depend on whether or not you hold their stock!  I don't know for sure but my guess would be that T has a better chance to cut their divey than MO.  8-))

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chang
Valued Contributor

Re: VGR halves it’s dividend for 1Q2020 to $.20

Intruder: cigarette smoking is, ahem, very healthy in other parts of the world. Asia and the Middle East. Especially among young men and women. There are, what, six billion people out here where I am? Cigarettes aren’t going away anytime soon.
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Intruder
Participant ○○○

Re: VGR halves it’s dividend for 1Q2020 to $.20


@ElLobo wrote:

@Intruder wrote:

@ElLobo wrote:

"I think investors will know the future of MO dividends in a lot fewer than 6 years."

Yup, probably increasing at 10%/year!  Lorillard, a tobacco company that, eventually, wound up part of BTI, British American Tobacco, was the first company to pay a dividend in the US, in 1760.  DuPont in 1802, Valspar, in 1806, Another is the answer to "What stock has the longest uninterrupted dividend streak?" York Water, YORW, has paid a dividend without interruption since 1816.


I doubt that MOs dividend will be sustainable because the metrics won’t support an increasing dividend as cigarette sales decline, taxes increase, productivity gains evaporate and govt regulations increase. Eventually govt will prohibit vaping.  I can find better investments than a sector which has no redeeming value and whose only purpose is to cause death and serious illness to its customers which run up health care costs. I don’t want my grandchildren or anyone else’s vaping.

 


Obviously your call!  Whether your grandchildren, or anyone else, vapes or not won't depend on whether or not you hold their stock!  I don't know for sure but my guess would be that T has a better chance to cut their divey than MO.  8-))


In the next 2 -3 years congress/states will restrict /prohibit vaping because of excessive vaping by minors which causes damage to lungs will be the end of the cigarette cos. MO, PM, BTI have no future and will fade away.

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BruceM
Participant ○○○

Re: VGR halves it’s dividend for 1Q2020 to $.20

"That's what Bruce was saying about VGR 6 years ago! Since then, Cliff has booked $9.60 per share in distributions, not counting his reinvestment of distributions OR his annual 5% stock dividend that VGR paid. At today's $11/share VGR share price, VGR is a penny stock, as far as Cliff is concerened!"

Actually, that's not what I said. I said VGR is not generating sufficient operational cash to cover the dividend beginning 2013, assuming the dividend is paid first after all operational expenses. OTOH, MO is adequately covering its dividend with operational cash. But for those who choose to continue to hold a stocks who each year increases the percent of the dividend made up of borrowed dollars, go for it....that way if the company continues this quarter-after-quarter, for reasons that are clear to management, until most of the dividend is borrowed dollars....a sort of ponzi scheme...such a person can congratulate themselves on being such an astute and wise investor. And as one who requires a dividend payer to actually pay the dividend with earnings...well.....I am clearly unwise, illjudged and misguided :-)

BruceM

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ElLobo
Participant ○○○

Re: VGR halves it’s dividend for 1Q2020 to $.20


@BruceM wrote:

"That's what Bruce was saying about VGR 6 years ago! Since then, Cliff has booked $9.60 per share in distributions, not counting his reinvestment of distributions OR his annual 5% stock dividend that VGR paid. At today's $11/share VGR share price, VGR is a penny stock, as far as Cliff is concerened!"

Actually, that's not what I said. I said VGR is not generating sufficient operational cash to cover the dividend beginning 2013, assuming the dividend is paid first after all operational expenses. OTOH, MO is adequately covering its dividend with operational cash. But for those who choose to continue to hold a stocks who each year increases the percent of the dividend made up of borrowed dollars, go for it....that way if the company continues this quarter-after-quarter, for reasons that are clear to management, until most of the dividend is borrowed dollars....a sort of ponzi scheme...such a person can congratulate themselves on being such an astute and wise investor. And as one who requires a dividend payer to actually pay the dividend with earnings...well.....I am clearly unwise, illjudged and misguided :-)

BruceM


Um, I was replying to Intruder with his opinion that now was the time to get out of MO.  I think you were saying to get out of VGR 6 years ago.  Your prediction finally came true!  8-))

At any rate, I've been out of VGR for over a year now.  It was the stock that I held the longest, having first bought it 2004-05.

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MNfish
Explorer ○

Re: Vector (VGR): Nothing is Forever

I can still remember reading the forums back in 2012-13 and both cliff and Bruce had compelling arguments as to whether to or not to own the stock. Too many questions about it for me and I decided to buy APPL instead even though it obviously wasn't in the same category but at the time I owned MO and figured maybe one tobacco stock was enough. Anyways I bought some APPL in Dec 2012 at $525, some more in Jan 2013 at $436 and finally again in Apr 2013 at $416. In 2014 it split 7 for 1 and it's divvy has increased 100% since 2012 even though it's only paying 1.1% now which is half the yield it was paying when I bought it.

I began selling bits of it in 2015 as it became about 15% of my taxable acct and have now sold enough that I have returned all of my original capital plus some and it's still about 15% of my acct. I think I'm just gonna let it ride now. Not too shabby.

Sometimes it's better to be lucky than good?

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ElLobo
Participant ○○○

Re: Vector (VGR): Nothing is Forever

 
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cliff
Explorer ○○

Re: Vector (VGR): Nothing is Forever


@MNfish wrote:

I can still remember reading the forums back in 2012-13 and both cliff and Bruce had compelling arguments as to whether to or not to own the stock.


 

I hope I never actually seriously suggested that anyone else invest in Vector Group back then.  I just sort of enjoyed watching the results of one of my best investments ever drive others nuts.  Finance 101 said this odd duck shouldn’t fly . . . . . but it did, for a long time, blasting out cash and, yes, capital appreciation for long time holders.

There was really nothing compelling or particularly intelligent at all about the best reason to continue to hold VGR.  The reason was so idiot simple it embarrasses me . . . . . ..

> Every quarter for nearly 15 years that I’m aware of the company said they were going to continue to pay out at the rate of $1.60 per year.  EVERY quarter.         And they did.

> Then they stopped saying that, that they were going to maintain their dividend.     And then they didn’t maintain their dividend.

 

I recognized in my original post that one day Bruce was going to be right, after he sold out of his VGR investment.  It took 6 years and a lot of cash flowed during that time to investors, but the day came.

Me?  I just enjoyed the cash and paid attention to the STOP sign several months ago.

 

 

 

 

 

 

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Highlighted
Intruder
Participant ○○○

Re: Vector (VGR): Nothing is Forever

Could one of the VGR investors put together a table demonstrating VGRs performance over last 1,3,5,10 yrs?

According to MStar 10 yr TR for VGR is +10.10%, 5 yr +1.34%, 3 yr -4.40% and 1 yr -1.06%. I don’t know if stock awards are included in TR.

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Bentley
Contributor ○

Re: Vector (VGR): Nothing is Forever

5% bonuses are not included

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ArtieNJ
Follower ○○○

Re: Vector (VGR): Nothing is Forever

Now it's a Strong Buy.

Zack's Investment Research, Inc. upgrades VECTOR GROUP LTD from HOLD to STRONG BUY.

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ElLobo
Participant ○○○

Re: Vector (VGR): Nothing is Forever


@Bentley wrote:

5% bonuses are not included


They are included, treated as a yearly 105 for 100 stock split, which adjusted the share price accordingly, hence returns fully reflect the splits.

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Bentley
Contributor ○

Re: Vector (VGR): Nothing is Forever

https://www.dividendchannel.com/history/?symbol=vgr

                                                        VGR               SPY

Start date:
11/09/2009
End date:11/06/201911/06/2019
Start price/share:$10.94$109.57
End price/share:$11.14$307.10
Starting shares:914.0891.27
Ending shares:2,265.63111.08
Dividends reinvested/share:$13.31$37.94
Total return:152.39%241.14%
Average Annual Total Return:9.70%13.06%
Starting investment:$10,000.00$10,000.00
Ending investment:$25,232.26$34,114.87
Years:10.0010.00
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Bentley
Contributor ○

Re: Vector (VGR): Nothing is Forever

Ten-year growth M* chart.

 

VTI $29,932

VGR $12,595

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ElLobo
Participant ○○○

Re: Vector (VGR): Nothing is Forever


@Intruder wrote:

Could one of the VGR investors put together a table demonstrating VGRs performance over last 1,3,5,10 yrs?

According to MStar 10 yr TR for VGR is +10.10%, 5 yr +1.34%, 3 yr -4.40% and 1 yr -1.06%. I don’t know if stock awards are included in TR.


Sure.  First some history.  Vector has it's roots in the Liggett tobacco company, which was founded in 1873 whenever a guy by the name of George Meyers hooked up with John Liggett and started rolling/selling a Virginia/Turkish blend cigarette.  The L&M company, in turn, was bought out by American Tobacco Co in 1899.  Fast forward to this TV commercial, from 1953, for LSMFT (Lucky Strike Means Fine Tobacco) for that famous tobacco auction on the tube back then (Luckies tastes better, cleaner, fresher, smoother)

The American Tobacco monopoly was dissolved and L&M is reborn 10 years later (1911), morphing into VGR in 1999.  Nevertheless, VGR shows up a divey paying stock since 1988, probably as L&M.  So let's look at the history of VGR and MO, from 1988 to 2000!  For kicks, let's also look at a 50/50 rebalanced APPL/MSFT portfolio, along with the market, VFINX.  Link  

With diveys reinvested, MO and the techs outperformed the market, VGR underperformed.  With diveys taken as cash, again MO and the techs outperformed while VGR underperformed the market on a TR basis.  MO put out much more cash than the market and the techs while the VGR and market cash flows were comparable, until VGR failed to pay a divey in 93 and 94, then the market cash flow was better.  In either case, the tech cash flow was always the lowest of the 4.

By 2000, Rick Ferri hadn't developed the concept of manufactured diveys just yet, so MO was the way to GO, during the Bush I and Clilnton presidencies!  Remember, the tech bubble was starting to froth away from 1988 up until the bursting of the tech bubble in 2000.  Remember also that the market lost 22.6% on Black Monday, October 19, 1987 the previous year.

So, here is the link over the next decade  (2000 to 2010).  Both MO and VGR comfortably outperformed the market and the market outperformed the techs until 2005, at which point, the techs had recovered and outperformed the market.  Nevertheless, the techs never caught up with either tobacco.  This is with diveys reinvested.  Without the reinvested diveys, as an income focused investor or retiree might manage her portfolio, the relative returns are about the same (MO on top, then VGR, then the techs and the market, flipping around 2005.

In terms of cash flow, VGR actually produced more yearly cash flow than MO (both quite handidley beating the techs and the market).  HOWEVER, MO sold their stake in Kraft in 2007 and spun PM off the next year, resulting in two massive special diveys those two years.  VGR paid its first 5% yearly stock divey in 1999.  So, sans the two special diveys, VGR produced more recurring diveys throughout that decade, all diveys taken as cash.

Finally, since 2010, MO, the techs, and VGR all outperformed the market (link) until the summer of last year, whenever the VGR total portfolio return (portfolio value) dropped below the market portfolio, all diveys reinvested.  MO and the techs remained above market.  With diveys taken as cash and not reinvested, both tobacco returns fell below the market while the techs stayed above.  In terms of cash flow, VGR was on top, followed by MO, followed by the techs, with the market on the bottom!

Finally, from a risk adjusted total portfolio basis, optimizing MO, VGR, AAPL, MSFT, and VFINX, a roughly 40/40 MSFT/MO, 10/10 AAPL/VGR, no VFINX portfolio had the greatest risk adjusted return, especially whenever compared to a 5x20 portfolio of these 5, again based on the historical performance starting in 1988, whenever VGR paid its first divey.  That is, it included the bursting of the tech bubble, the subprime mess, and the KMI based MLP meltdown.  It included the POTUS terms of Bush, Clinton, Bushx2, Obamax2, and now Trump.

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