Recent happenings in income land

I’m finally back from my exile in the woods. I would recommend the Gila National Forest in Southwestern New Mexico to anyone who wants a bit of peace and quiet. Now back to the business of income investing. There has been a lot going on in income investor land recently. Here are some of the items that caught my eye and what I think of them.

  1. Intel Q1 2011 earnings. Intel blew away earnings estimates in Q1. The corporate. server, and cloud computing markets are just going gangbusters, offsetting weak developed market PC demand. Although emerging market PC is doing great for the company. The stock was trading close to my $19 buy price before earnings and has since bounded up above $23! Dam! I’m happy with my option trades on the stock but definitely missed out by not being long the common stock. Intel has an analyst day coming up in late May where they will reveal details on their coming 22nm and 14nm process technologies. The stock is still cheap although not as cheap as before for sure. Need to think about my valuation and if it merits adjusting upwards.
  2. Microsoft Q1 2011 earnings. After Intel earnings people were expecting more from Microsoft. Like Intel, the corporate side of the business was very strong, so was XBOX and Kinnect. Windows was softer then expected. Tablet cannibalization is still the big concern here. Cost control is a big positive at Microsoft and should lead to higher margins next year. The stock is still very cheap at. Looking at selling more puts into June.
  3. JNJ Q1 2011 earnings, acquisition, and dividend announcement. Lots of happenings at JNJ in the last month. JNJ beat earnings estimates slightly but growth was slow year over year. Not a big deal. Later on they announced the acquisition of Synthes, a Swiss orthepedics mfg, for about $21B, mostly in stock. And then at the board meeting JNJ announced an increase to their dividend of 5.6%. Before all this news the stock was trading at slightly below $60. After all this news its trading above $66, a very nice move. Color me disappointed especially in the dividend increase which was way below their historical track record and way below what they could afford. Also, the acquisition, especially funded primary with under valued stock, smacks of desperation to me. Chasing growth for growth’s sake and not for building shareholder value. The stock would be a good trade if it gets close to $60 again but for long term investors there are better investments.
  4. Altria Q1 2011 earnings. Decent numbers out of Altria for Q1 despite tougher comps to last year. They reaffirmed guidance for the year of 6-9& earning growth for the year which the dividend should match as they have stated. So, here you get a 5.6% yield, plus 6-9% dividend growth from a management team that always talks about shareholder value as on of their top agenda items. Compare that to JNJ’s management team. I’d rather be in Altria, although I wish shares were cheaper before adding to my position.
  5. Fairfax Q1 2011 earnings. Fairfax had a tough Q1, reporting a loss for the quarter and a drop in book value. Most of the loss was from the Japan quake and from mark to market losses in their investment portfolio. I’ll be following up with a more detailed post on Fairfax Q1 earnings. Nothing to worry about here, these guys don’t manage for quarterly results and are making the right longer term moves. They also recently had their annual shareholders meeting. Its worth looking at the presentation from the meeting.
  6. Energy Transfer Partners (ETP) dividend reinvestment plan announcement. This was pretty significant to me. ETP basically announced a new dividend reinvestment plan wherein shareholders can reinvest their dividends at a 5% discount. This is almost the exact same plan the EPD has had in place for years but gets little notice from most investors. I don’t think its a coincidence that EPD is a large shareholder of ETP’s general partner ETE. Think they had something to do with this? I do. This just makes ETP more attractive to own. Now I’m just waiting for them to resume distribution increases.

These were the pieces of news in income investor land that caught my eye over the last week. Now time to work on the May Income Investor Dashboard. Should have that out tomorrow.

Full Disclaimer - Nothing on this site should ever be considered advice, research or the invitation to buy or sell securities. These are my personal opinions only.

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3 Responses to Recent happenings in income land

  1. Erik says:


    Thanks for your update. Fairfax was OK excluding extraordinary items.

    JNJ made a terrible deal to but Synthes with their own depressed shares… With their big cash balance they off course should pay with cash. The dividend was lower than my expectations but probably its due to the Synthes deal so its OK.

    Why the hell do they pay with shares??? I simply cant understand it!!!

    Best regards

    • libertatemamo says:

      Hi Erik. I totally agree. Fairfax was just fine. JNJ drives me nuts. What bothers me the most with JNJ is the seeming lack of focus on shareholder value by the current management. I compare their shareholder attitude to a company like Altria and it doesn’t even come close. I can’t get behind the JNJ management long term. If JNJ trades back close to $60 I’ll be in them for a trade but that is about it.


  2. Erik says:


    My favorite stock in US are Philip Morris. Fantastic shareholder attitude! I dont understand JNJ management at the moment. I think the deal with Synthes is OK. But I took for granted that they would pay with cash. There management have a lot to prove and right now the seem to everything wrong! Iam, like you, a buyer around 60 USD.

    I bought Roche lately and having my eyes on Microsoft and Intel. Unilever looks promising to.


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