Six Significant Dividend Increases

Six Significant Dividend Increases

By: Dividend Growth Investor   Monday, March 01, 2010 9:50 AM

Any company could afford to boost distributions in a single year. Any type of business could also have a high yield, especially if it distributes all of its cash flows to shareholders. It takes a special kind of a business model to afford a proper balance between investing back into the business and distributing excess profits to shareholders. It is even more exciting when those distributions have been increased regularly for over ten consecutive years. I have highlighted six dividend stocks each of which has consistently raised distributions for over two decades. Altria Group, Inc. (MO: 20.4, 0.06), through its subsidiaries, engages in the manufacture and sale of cigarettes, wine, and other tobacco products in the United States and internationally. The company's board of directors raised its quarterly dividend by 2.90% to 35 cents/share. This is the 43rd consecutive dividend increase for Altria Group. The only reason why the company is not on the dividend aristocrat list is because its dividend payment is lower due to the spin-off of Phillip Morris International (PM: 50.65, 0.68) in 2008 and Kraft Foods (KFT: 29.06, 0.07) in 2007. The company does have a policy to return approximately 75% of earnings to shareholders in the form of cash distributions. Stock currently yields 7%. (analysis)

Kimberly-Clark Corporation, (KMB: 60.01, 0.02) together with its subsidiaries, engages in the manufacture and marketing of various health care products worldwide. The company's board of directors raised distributions by 10% to 66 cents/share. This is the 38th consecutive annual dividend increase for this dividend aristocrat. The stock yields 4.40%.


The Chubb Corporation (CB: 51.21, 0.09), through its subsidiaries, provides property and casualty insurance to businesses and individuals. The company raised its quarterly dividend by 5.7% to 37 cents/share. This was the 45th consecutive annual dividend increase for this dividend aristocrat. The stock currently yields 2.90%.

CenturyTel, Inc. (CTL: 34.13, -0.44), together with its subsidiaries, operates as an integrated communications company. The company raised its quarterly distributions by 3.60% to 72.50 cents/share. This increase would represent the 37th consecutive year where this dividend aristocrat has boosted annual distributions to shareholders. The stock currently yields 8.50%.

Piedmont Natural Gas Company, Inc. (PNY: 26.38, -0.12), an energy services company, distributes natural gas to residential, commercial, industrial, and power generation customers in portions of North Carolina, South Carolina, and Tennessee. The company boosted distributions by 3.70% to 28 cent/share, marking the 32nd consecutive annual dividend increase. This high yield dividend aristocrat yields 4.30%.

Donaldson Company, Inc. (DCI: 42.37, 0.1), together with its subsidiaries, engages in the manufacture and sale of filtration systems and replacement parts worldwide. The company's board of directors raised distributions by 4% to 12cents/share marking the 24th consecutive year of dividend increases. This dividend achiever currently yields 1.20%.

I view Kimberly-Clark (KMB: 60.01, 0.02) and Chubb (CB: 51.21, 0.09) as attractively valued stocks. I plan adding to my position in Chubb (CB) this month. Piedmont Natural Gas Company (PNY) looks like an interesting company for further research. Altria (MO: 20.4, 0.06) and CenturyLink (CTL: 34.13, -0.44) are two high yielding dividend growth stocks, which also spot high dividend payout ratios. I would choose tobacco over telecom however, because once you are addicted to it is difficult to stop using the product. With telecom you could easily cancel your telephone and get a cell phone or simply use Skype instead. Donaldson (DCI) does seem like a company that could be included in the dividend aristocrat list over the next one or two years. The problem is the low current yield, the anemic dividend growth rate and the high price/earnings multiple of 27.

http://www.istockanalyst.com/article/viewarticle/articleid/3904657

Malaysia Increases Interest Rate as Recession Ends

Malaysia Increases Interest Rate as Recession Ends
March 04, 2010, 6:33 AM EST


By Shamim Adam

March 4 (Bloomberg) -- Malaysia’s central bank raised its benchmark interest rate for the first time in almost four years, saying record-low borrowing costs were no longer warranted as the economy emerges from recession and inflation accelerates.

The ringgit rose as economists predicted central bank Governor Zeti Akhtar Aziz will continue to raise rates. Asia is leading the global recovery from the worst recession since World War II and Australia, China, India and Vietnam have tightened monetary policy to fight inflation and avert asset bubbles.

“We should expect a few more upward adjustments,” Suhaimi Ilias, chief economist at Maybank Investment Bank Bhd. in Kuala Lumpur, said after the decision. “The central bank has the luxury of time to raise rates gradually. Other central banks will look at domestic conditions before making their moves.”

Indonesia’s central bank left its reference rate at a record-low 6.5 percent today. Australia this week raised its benchmark for the fourth time in five meetings, by 0.25 percentage point to 4 percent.

“The overnight policy rate was reduced to historic lows in early 2009 as a key measure to avert a severe and fundamental economic downturn,” the central bank said in a statement today. “These conditions no longer prevail. The domestic economy has since improved significantly and is now on a path of recovery.”

Ringgit Rises

Malaysia’s ringgit rose to 3.3585 a dollar after the rate decision, the strongest level in six weeks. The currency has gained 1.5 percent this year, making it the best performer after the Thai baht in Asia outside Japan.

“The Monetary Policy Committee decided to adjust the overnight policy rate towards normalizing monetary conditions and preventing the risk of financial imbalances that could undermine the economic recovery process,” the central bank said. “The stance of monetary policy continues to remain accommodative and supportive of economic growth.”

Asian policy makers risk creating asset bubbles and fueling inflation by keeping interest rates “too low for too long” in their attempts to boost domestic demand, Standard & Poor’s said in a report yesterday.

Malaysia’s Zeti has said in the past month that any increase in rates should be viewed as a “normalization” and not a “tightening.”

Exports Climb

Southeast Asia’s third-largest economy emerged from its first recession in a decade last quarter, and Prime Minister Najib Razak has said he expects this year’s expansion to beat the official growth forecast of as much as 3 percent.

Malaysia’s exports may climb this year at twice the 3.5 percent pace predicted earlier as the global recovery revives overseas sales of Sime Darby Bhd.’s palm oil and Intel Corp.’s computer chips, International Trade and Industry Minister Mustapa Mohamed said this week.

Before today, the benchmark rate was at its lowest level since it was introduced in April 2004, and had been unchanged since February last year. Malaysia’s borrowing costs are among the lowest in Asia, below the Philippines’ 4 percent benchmark.

The benchmark FTSE Bursa Malaysia KLCI Index fell 0.2 percent at the close today.

Attract Capital

“A rate increase may be good to attract some capital inflows,” Geoffrey Ng, who manages $1.2 billion of assets as chief executive officer at HLG Asset Management Sdn. in Kuala Lumpur, said before the decision. “The foreign-exchange reserves have been rather flattish in recent months and the country has been facing quite a bit of capital outflows. On the flipside, the risk is that the equity market will take it in a wrong way.”

Malaysia’s consumer prices rose for a second month in January, climbing 1.3 percent from a year earlier.

Inflation may accelerate later this year as the government studies a revamp of its fuel subsidy. Malaysia aims to come up with a new fuel-subsidy system before presenting the nation’s annual budget in October, Domestic Trade and Consumer Affairs Minister Ismail Sabri Yaakob said today.

Prices will increase “gradually” this year and inflation should remain “moderate,” the central bank said. It’s forecast for inflation takes into account possible adjustments in “administered prices” and rising global commodity and food prices, it said.

Bank Negara policy makers next meet to review interest rates on May 13. The central bank kept the statutory reserve requirement unchanged today. The measure determines the amount of money lenders need to set aside as reserves.

--With assistance from Michael Munoz in Hong Kong and David Yong in Singapore. Editors: Stephanie Phang, Lily Nonomiya

http://www.businessweek.com/news/2010-03-04/malaysia-increases-interest-rate-as-recession-ends-update1-.html

• MARCH 4, 2010, 10:35 A.M. ET

Malaysia Raises Rates 

By ALEX FRANGOS

In a sign of the rapidly improving economic fortunes across Asia, Malaysia's central bank raised its benchmark interest rate Thursday and noted the "economic recovery is firmly established."

Malaysia is the first of the medium-sized, export-oriented economies in Asia to raise its target interest rate. Its move will be closely watched in the region, where policymakers have moved gingerly away from the extraordinary policy stimulus put in place during the global financial crisis.

Similar macroeconomic conditions in Taiwan, South Korea, Thailand, Singapore are likely to lead to rate hikes in coming months. All have benefited from their exposure to China and the restocking of inventory in the U.S. and Europe, especially for technology-related goods. Indonesia's central bank kept its interest rate steady on Thursday, saying that inflation remains under control.

"Now that Malaysia has moved, other central banks in the region may feel more comfortable doing so as well," said Matt Hildebrandt, economist with J.P. Morgan in Singapore. He added, though, that tightening would happen only gradually amid concern about the global economic outlook.

Malaysia's rate increase comes after China and India tightened credit through raising bank reserve requirements. Australia, whose economy is heavily reliant on Asian demand, has raised its benchmark rate four times since October, most recently on Tuesday. Vietnam raised rates in December to fight off speculation on its weakening currency.

In recent weeks, Malaysia and other area economies including China, Taiwan and Thailand, announced stronger than expected fourth quarter growth, surprising government economists and hastening the need to return interest rates to more normal levels. Prices have begun to rise across Asia. That combined with the ultra-low interest rates, could spark a dangerous bout of inflation.

"Growth is expected to strengthen further," Bank Negara Malaysia said in its statement accompanying the quarter percentage point hike in the benchmark overnight policy rate, to 2.25%. "Prices will gradually increase during the year," it said, while predicting that "inflation is expected to remain moderate." The bank noted the risks of "rising global commodity and food prices."

Thursday's hike was the first move by Malaysia's central bank since it dropped rates for the final time in February 2009. It was the first rate increase since 2006.

The tightening of monetary policy in the region highlights the gap between recoveries in emerging economies, especially in Asia, and the developed world, where interest rates are expected to remain at rock bottom levels for several more months if not longer. That dichotomy could lead to investors to shift money into the higher interest rates of Asian currencies and away from the U.S. dollar, the euro and the yen.

In the policy statement, the Malaysian central bank cited the "continued improvement" in exports, "particularly from the regional economies," an allusion to the strength of trade within Asia. Traditionally, Asia's export-led economies have relied substantially on demand from the U.S. and Europe. Malaysia's economy grew 4.5% in the last quarter of 2009 compared to the year earlier, helped along by strong consumer spending and trade.
While that relationship between the consumer in the developed world and the producers in the emerging world remains intact, there are signs that growing demand from consumers and businesses within the emerging markets, especially in China, has the potential to fill in for the sluggish buying power among Western consumers.

"A higher proportion of our trade is now with the region," said Malaysia's central bank governor, Zeti Akhtar Aziz, in an interview last week. She said more and more of the products Malaysia ships to China are for Chinese consumers, rather than components that will be assembled into goods for Americans and Europeans. "That's a new development and it has intensified," she said.

Write to Alex Frangos at Alex.Frangos@wsj.com

http://online.wsj.com/article/SB10001424052748704187204575101031978300278.html?mod=googlenews_wsj  

What BNM's normalisation of policy means
http://tauke-saham.blogspot.com/2010/03/what-bnms-normalisation-of-policy-means.html

Buffett's tips for new investors

3/2/2010 12:01 PM ET
Buffett's tips for new investors

The world's most famous investor lays out his basic principles in this year's annual letter to Berkshire Hathaway shareholders.

By The Wall Street Journal

Every few years, critics say Warren Buffett has lost his touch. He's too old and too old-fashioned, they claim. He doesn't get it anymore. This time he's wrong.

Quiz: How much risk can you tolerate?
It happened during the dot-com bubble, when Buffett was mocked for refusing to join the party. And it happened again last year. As the Dow Jones Industrial Average ($INDU) tumbled below 7,000, Buffett came under fire for having jumped into the crisis too early and too boldly, making big bets on Goldman Sachs (GS, news, msgs) and General Electric (GE, news, msgs) during the fall of 2008, and urging the public to plunge into shares.

Now it's time for those critics to sit down for their traditional three-course meal: humble pie, their own words and crow.

On Saturday, Buffett's Berkshire Hathaway (BRK.A, news, msgs) reported that net earnings rocketed 61% last year to $5,193 per share, while book value jumped 20% to a record high. Berkshire's Class A shares, which slumped to nearly $70,000 last year, have rebounded to $120,000.

Those bets on GE and Goldman? They've made billions so far. And anyone who took Buffett's advice and invested in the stock market in October 2008, even through a simple index fund, is up about 25%.

This is nothing new, of course. Anyone who held a $10,000 stake in Berkshire Hathaway at the start of 1965 has about $80 million today.

How does he do it? Buffett explained his beliefs to new investors in his letter to stockholders Saturday:

Inside the Berkshire Empire


Stay liquid. "We will never become dependent on the kindness of strangers," he wrote. "We will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity. Moreover, that liquidity will be constantly refreshed by a gusher of earnings from our many and diverse businesses."

Buy when everyone else is selling. "We've put a lot of money to work during the chaos of the last two years. It's been an ideal period for investors: A climate of fear is their best friend. . . . Big opportunities come infrequently. When it's raining gold, reach for a bucket, not a thimble."

Don't buy when everyone else is buying. "Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance," Buffett wrote. The obvious corollary is to be patient. You can only buy when everyone else is selling if you have held your fire when everyone was buying.

Value, value, value. "In the end, what counts in investing is what you pay for a business -- through the purchase of a small piece of it in the stock market -- and what that business earns in the succeeding decade or two."

Don't get suckered by big growth stories. Buffett reminded investors that he and Berkshire Vice Chairman Charlie Munger "avoid businesses whose futures we can't evaluate, no matter how exciting their products may be."


Diversify your portfolio
Most investors who bet on the auto industry in 1910, planes in 1930 or TV makers in 1950 ended up losing their shirts, even though the products really did change the world. "Dramatic growth" doesn't always lead to high profit margins and returns on capital. China, anyone?

Understand what you own. "Investors who buy and sell based upon media or analyst commentary are not for us," Buffett wrote.

"We want partners who join us at Berkshire because they wish to make a long-term investment in a business they themselves understand and because it's one that follows policies with which they concur."

Defense beats offense. "Though we have lagged the S&P in some years that were positive for the market, we have consistently done better than the S&P in the 11 years during which it delivered negative results. In other words, our defense has been better than our offense, and that's likely to continue."

Timely advice from Buffett for turbulent times.

This article was reported by Brett Arends for The Wall Street Journal.


http://articles.moneycentral.msn.com/learn-how-to-invest/buffetts-tips-for-new-investors.aspx

icapital.biz is 'unpopular' and 'unloved' during this bull run!

29.7.2009:  NAV per share of icapital.biz was RM1.87; icapital.biz share price was around RM1.80.


3.3.2010:  NAV per share of icapital.biz was RM2.08; icapital.biz share price closed at RM1.72.  This price was a 17.3% discount to its NAV.

.  
Also read: Closed-ended funds: Why a discount, anyway?

Learn to be long-term greedy when others are short-term fearful.

The bullish lesson?
Learn to be long-term greedy when others are short-term fearful. Going against the herd is never easy, but if you truly believe in a company's long-run demand story, major downturns can offer the very best buying opportunities. 

As Warren Buffett reminds us, "Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."

The bearish takeaway? 

There's just no substitute for knowing a business model cold.  The only way to reasonably predict a company's fortunes is to know exactly what sort of strategies management is pursuing, and questioning if they can actually create value by doing so.

As Buffett once wrote, "Equity Investment Strategy = Evaluate the Business in Its Entirety."

The final Foolish move
Investors often focus strictly on stock price movements, without realizing that developing a proper stock-picking process counts most.

http://www.fool.com/investing/general/2010/03/03/tuesdays-hottest-stocks.aspx

Buying and holding can be very profitabe until the facts change

Buy and Hold Isn't Extinct, But It Needs to Evolve

By Kristin Graham Mar 03, 2010 1:10 pm

It can be very profitable if investors execute it with the mindset of buying and holding until the facts change.

At a recent CFA market outlook dinner, the guest speakers concurred that long-term buy and hold will under-perform in 2010 and will continue be a difficult strategy to employ in the future.

This is by no means revolutionary. Buy-and-hold naysayers emerged immediately following the financial crisis and housing bubble crash that caused disarray throughout capital markets.

But it was a shocking message coming from a panel at a CFA affair. As a candidate in the program, I am familiar with the CFA Institute’s intense focus on fundamental analysis.

On the one hand, there is some value to this proposition. Throughout the decade, technology has changed the playing field of the market and allowed short-term strategies to succeed. The ability for new news to be almost instantaneously priced into the market upon announcement can cause stock prices to fluctuate irrationally, sometimes based on just numbers or speculation alone rather than the actual analysis of a company.

Further, more frequent and intense bubbles and collapses have caused drastic market-wide swings that cause mass divergence between a company’s intrinsic value and its stock price. The 2008 global financial crisis is a solid case in point.

However, suggesting that buy and hold is dead essentially means that the fundamentals of a company are worthless. The thought of that notion is ludicrous.

(See also,  Five Investing Myths Debunked)

In many cases,  investors are extremists. One group believes in solely analyzing fundamentals and buys a stock to hold forever. Another group covers up the name of the company andtrades only on quantitative factors.

But extremism tends to fail. I witnessed it first-hand in the  investment industry during employment at my last firm. Die-hard buy-and-hold-forever investors refused to let go of overvalued companies they believed in for the long run and snubbed macro event market movement only to eventually end up deep in the red.

Like anything, investment strategies need to change. And they need to be modernized to remain relevant. Finding great  stocks to hold for a long time combined with trading on macro news and changing valuations seems more realistic than holding a stock forever.

This is precisely why Warren Buffett and his  Berkshire Hathaway (BRK.A) holding company have remained so successful. As one of the greatest buy-and-hold investors of all times, Buffett’s philosophy has been studied and talked about extensively. Interestingly enough though, his strategy is widely misunderstood.

(See also,  What Buffett Got Wrong)

Buffett undoubtedly focuses on fundamental values of a company and purchases stocks with a buy-and-hold mindset. He looks for companies with strong brand names, like  Coca-Cola(KO), Kraft (KFT), Goldman Sachs (GS), and General Electric (GE). But he still trades on macro news and sells when investments become overvalued. In the past, he soldMcDonald's (MCD) and Disney (DIS) when he no longer felt they were worth his capital.

In other words, buy and hold can be a very profitable investment strategy provided investors execute it with the mindset of buying and holding  until the facts change.

Purchasing a fundamentally strong company when its price is attractive works. Loading up on more of that stock if the price slips on short-term news works. When either a company becomes overvalued or its business model begins to negatively change, selling works.

Exact market timing isn’t necessary. The strategy is simply picking solid stocks and using common sense.

The bottom line is that the buy-and-hold portfolio is not extinct. It just needs to evolve.


http://www.minyanville.com/businessmarkets/articles/buy-hold-sell-strategies-warren-buffett/3/3/2010/id/27112

Basic Steps on How to Find Profitable High Performance Stocks

Basic Steps on How to Find Profitable High Performance Stocks
March 2, 2010

Stock picking can be a extremely perplexing procedure and investors have very different ideas on how to achieve the desired outcome. Nevertheless, it may be very wise to follow some basic steps which will assist you to minimize the risk of the investments that you end up choosing.

This article will outline some basic steps for picking those high performance stocks that we all aspire to find.

You must have firmly placed in your mind exactly the time frame and the general strategy of the stock. This step is very important because it will influence as to the type of stocks you buy.

We shall presume that you have decided to be a long term investor. Therefore you would then be wanting to locate stocks that possess sustainable,good competitive advantages along with stable or increasing growth for the future.

The way to locating these High Performance stocks is by considering the historical performance of each stock over the past couple of years.Once you have found a likely stock you would then need to do a simple business S.W.O.T.analysis on the company. Swot basically means: Strength-Weakness-Opportunity-Threat.)

If you have decided instead to become a short term investor, it might be a good idea to a stick to one of the following couple of strategies:

1. Momentum Trading.

This useful strategy is to keep an eye open for stocks that have increased in both price and volume over the recent days trading or two. You would most likely find that momentum fluctuates rapidly to begin with and tends to lessen off as traders lose interest. Mind you nothing is guaranteed particularly in today’s market place

Usually most technical analysis will support this trading strategy. But my advice on this strategy is to look only for stocks that have exhibited stable and consistent rises in their share price. We are presuming that the idea is that when the stocks are not so volatile, we can merely ride the up-trend until the trend breaks.

2. Contrarian Strategy.

This second useful strategy is to be on the look for over-reactions that occur in the stock market from time to time. Past research has shown that the stock market is not always efficient as we are led to believe. This basically means that share prices do not always accurately reflect the true value of the stocks. This can be used very much to our advantage.

Take for example when a company has just recently announced bad news,like a predicted downturn in future profit.This is exactly is what is happening here and now. All you have to do is follow the daily stock market news to see this occurring.

Trades who trade with their emotions become disillusioned, become fearful, then panic and sell. As so often happens the share price often drops below the stocks actual fair value.

But before you decide whether to purchase the stock which has over-reacted to a bad news announcement, you should always take into consideration the possibility of recovery from the impact of the bad news.

For example, if the stock price had dropped by 20% after the company had just lost a legal case, but no permanent damage to the either the business’s reputation or the product had occurred, you can then be realistically confident that the market over-reacted. And given time the share price would no doubt rise again to its former level thereby rewarding you with a comfortable profit.

It would be prudent on using this strategy to find a list of stocks that have suffered a recent drop in share prices You could then analyze the potentiality of a reversal occurring by utilizing the well known technical indicator of candlestick analysis).

If the charts did confirm candlestick reversal patterns in the stocks in question, It would then be advisable to look through the recent news to analyze the exact causes of the recent price drops to ascertain that the over-sold opportunities actually existence.

Always do researches that will give you a choice of stocks that fits into to your own personal investment time frames and strategies. It is pointless trading in something you are not happy with or unsure of.

Once you have compiled a list of stocks to possibly purchase in the future, you would then need to diversify them in such a way that gives you the greatest reward/risk ratio. One way of achieving this is to employ a Markowitz analysis for your portfolio. This analysis will give you the exact proportions of money you should then apportion to each stock.

Hopefully these basic steps will get you started in your continuous quest to consistently make good profits in the stock market. Plus they will also broaden your knowledge about how the financial markets perform and react. Ultimately it will provide you with a sense of confidence that will enable you to make better trading decisions and therefore greater profits.

I wish happy profitable trading.

Author: Chris Strudwick
Source: ezinearticles.com
http://sellingstock.getherb.com/tag/stock-picking/

Stock prices are easy to monitor; let's reflect on the long term stock prices.

Here is a theoretical analysis of the behaviour of prices of stocks over a 5 or 10 year period.

Stock prices are easy to monitor.  Over a long period, these stock prices in general reflects the value of the underlying business of the stocks.

These stocks can be grouped according to the behaviour of their prices in these broad groups.

1.  Some stocks performed very well.  Their prices climbed consistently and those who have these stocks enjoy good returns from capital appreciations.

2.  Many stocks performed so-so.  Their stock prices stayed within certain ranges, either broad or narrow.  These stocks did not reward their owners well in returns from capital appreciations.  Those who bought these stocks at low prices might have a small gain, but over many years, these translated to very poor compound annual returns.  Those who bought these stocks at high prices might have irrecoverable losses.  Owning these stocks carried with them opportunity costs, provided the dividends were substantial to overcome these.

3.  Many stocks performed terribly.  Their stock prices declined and continued to decline further over many years.  These stocks caused massive losses to those who own them.  The dividends they provided, if any, were poor compensation to these severe losses.

4.  Many stocks performed very well for a few or many years and then declined when they no longer were able to protect their businesses against competitors or for various other reasons.  Some rose again from the ashes, many faltered into obscurity or permanent demise.

5.  Many stocks performed poorly for many years eroding the patience of their owners.  Some might perform intermittently, though many remained in such states for many more years.

The best stocks to have are those in Group 1.   To capture all the returns from such stocks over a long period, buy and hold is the right strategy.  These stocks are few in number in any bourses and often trade at high valuations.  The ability to pick and buy these stocks at fair or bargain prices will be very rewarding.

Buy and hold strategy is definitely not ideal for the stocks in the other groups.  At best, it provides a meagre or average return in one's investment.   However, holding non-performers or losers over a long period of time compounds the losses further due to opportunity costs.

How to pay for long-term care

Dementia costs the British economy twice as much as cancer at £23bn. But both diseases require care that can prove expensive.

 

By Emma Wall
Published: 6:45AM GMT 04 Feb 2010

How to pay for long-term care Photo: GETTY

Proposals for the state to provide free social care for vulnerable older people survived a challenge in the House of Lords this week – but thousands of family homes continue to be sold to pay for long-term care fees.
Many families do not know what help is available from local authorities and others fall victim to means tests that critics claim punish thrift.

 

Related Articles

• Elderly care plan unfunded

• The cruel cost of dementia

The Government plan for free personal care for 250,000 people in England was deemed "unaffordable" by Lord Warner, a former health minister who served in Tony Blair's administration, who claimed it would cost more than £1bn to implement.
But the Lords voted against a motion to delay the home care changes, which would affect about half the elderly now receiving care in their own home. Lord Warner said: "Many of us have considerable doubts about our ability to implement this and not let people down after the promises that have been made."
It was revealed this week that dementia costs the British economy twice as much as cancer at £23bn. But both diseases require care, and this figure has highlighted the enormous cost of long-term care. Many individuals' estates will be worn down to nothing to pay for their care – leaving nothing for their children and grandchildren.
If your estate is worth more that £23,000 you are judged by the state to be able to pay for your own care. Care costs fall into four categories.
• Domestic care – the care of your home for those unable to do this themselves, such as cleaning and cooking.
• Personal care is care of an individual, such as washing and feeding.
• Nursing care is performing medical duties, such as administering medication and changing dressings.
• Accommodation costs, such as the residential element of care home fees.
As most people's homes will be worth more than the threshold, you have two options. You can either divest yourself of your assets – subject to self-deprivation rules, discussed below – and rely on state-provided care or pay for care yourself.
While giving your assets away protects them from being drained by care costs, this option leaves you vulnerable to the level of care the state deems appropriate and when and where it is administered.
Irene Borland, of care fees advice providers NHFA, warns that if you are able to pay for care, for the most part you are better off doing so. "Money gives you choices," she said. "You should ask yourself 'Do I want local authority care?' If you take advantage of state care you could struggle at home for longer than you'd wish to, or end up in a home that is not quite as comfortable as you would like."
There are means-tested benefits available to people in England and Wales. Scotland has its own system that provides free nursing care – although not free personal or free domestic care.
Benefits are awarded depending on the level of care that you require rather than your condition, so one person with lung cancer may be entitled to more care than another person with the same disease.

If you do take advantage of local authority care, make sure you, or someone on your behalf, asks for you to be reassessed should your requirements change or condition deteriorates.

This way you can ensure you are getting the right level of care. If a certain home is no longer able to care for an individual – they need continuing care for example – make sure they are reassessed so that funding can meet their care needs.
Benefits include Disability Living Allowance, Attendance Allowance, Employment Support Allowance and Carers Allowance. Further information is available from your local social services department or the Citizens Advice Bureau.
Andrew Ketteringham, from the Alzheimer's Society said that the system is far from simple, however, and individuals often fall through the gaps – especially if they require specialist care.
"Accessing funding for care is complex and complicated by the fact that people with dementia will have both health and social-care needs. People with dementia are hit the hardest by the current care charging system and many are spending their life savings on what is often poor-quality care," he said.
If you do choose to divest yourself of assets there are a number of ways to do so. Placing property and other assets in trust, or signing over the deeds to an offspring, will mean that they no longer are counted as part of your estate.
If you reduce your estate to less than £23,000 you will qualify for state care and be exempt from inheritance tax. However, you may have to prove that your reason for divesting your assets was not to avoid paying for care.
For example, if you are diagnosed with cancer and then promptly set about dividing up your estate you may find that the local authority has a claim on a portion of your assets.
Ms Borland recommends planning. She advised: "When you turn 65 you should get your affairs in order. Signing over your house to your children well in advance of any care needs will protect the property from having to be sold to pay for care fees."
However, this is not a step to be taken lightly. How much do you trust your children – and, if married, their spouses? Be aware that you could lose your house if the spouse to whom you have given your home is divorced by their partner or is made bankrupt or, for example, a daughter proves less loving than you supposed. Before giving your home away to adult children, go and see King Lear.
Placing property in trust means in most cases you cannot draw on the funds in the future. Under a discretionary trust, however, you can have some money back if the right provisions are written in, such as in a loan.
But any money transferred back into your hands will be subject to the financial assessment. Moving money into a trust can also fall foul of the deliberate deprivation rules, which, like anti-avoidance legislation for inheritance tax, is far-reaching and has no time limit.
A number of providers such as Axa (under the name PPP) and Aviva used to offer long-term-care insurance. They have withdrawn their policies, however, and existing customers have seen premiums increase. Axa said it was no longer viable to offer the insurance as claims outpaced estimates.
Danny Cox, of Hargreaves Lansdown, warns that although a good idea in theory, long-term-care insurance can be expensive. Partnership still provides long-term-care insurance.
Life assurance investment bonds are sometimes not counted as part of your estate. But local authorities interpret the value of these bonds in different ways and will not automatically exclude them.
Another option is to buy an immediate-care annuity. Immediate-care annuities, sometimes called point-of-need annuities, can pay a tax-free income to help meet all or part of the costs of long-term care.
Benefits are only tax free if paid to the care provider direct. Income rates can be as high as 30pc because the annuitants' ill health mean they are unlikely to receive many years' payments.
Mr Cox claims this is one of the better options for those facing the costs of long-term care. "Unlike divesting your assets, you can buy a long-term-care annuity after having been diagnosed with an illness or disease.
You are guaranteed a set income for life and there are certain inheritance tax benefits as well as the cost of your annuity will not be included in your estate after you die," he said. Axa PPP and Partnership are the two main providers of immediate care annuities, further details can be found on their websites www.axappphealthcare.co.uk and www.partnership.co.uk
 You should consult an independent financial adviser when planning to fund care fees. NHFA offers an advice line (0800 998 833) and can explain care fees legislation and regulation, associated benefits and rights to assessment by local authority and the National Health Service (NHS).
It can also clarify the difference between social and personal care and the rules governing non-means-tested NHS continuing care. It can also advise on legitimate actions that can be taken to protect assets and the rules regarding potential deprivation of assets. Age Concern/Help the Aged (which are combining to be called Age UK later this year) are also very helpful and can be contacted on 020 7278 1114.

George Soros buys gold despite dubbing it 'ultimate bubble'

George Soros doubled his investment in the world's largest gold fund – just weeks before claiming investing in the precious metal is now the "ultimate bubble".

 

By James Quinn, US Business Editor
Published: 10:44PM GMT 17 Feb 2010

George Soros buys gold despite dubbing it 'ultimate bubble'

 

Mr Soros – a legend in investing circles for his $10bn (£6.37bn) bet against the pound in 1992 which forced sterling out of the European exchange rate mechanism – increased his stake in the SPDR Gold Trust in the last quarter of 2009.

Regulatory filings show that his $8.8bn investment vehicle, Soros Fund Management, raised its stake in exchange-traded fund SPDR by 3.7m shares to 6.2m shares in the three months ending December 31, 2009.

 

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The new shares were bought at a price of $421m, taking his total holding in the fund to $663m at the end of December.

In addition, Mr Soros's investment vehicle owns 11,000 call options that will permit it to buy an extra 1.1m shares should gold prices move higher.

Soros Fund Management also increased its stake in Canadian-based gold producer Yamana Gold, buying 60,880 shares to take its total position to 85,880 shares, worth $973,314 at the end of December.
However, the actions of the Mr Soros's investment fund however seem to be at odds with his own viewpoint. During the World Economic Forum in Davos in late January, Mr Soros said: "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold." 

Gold hit a new high of just over $1,225 an ounce in December, having rise 40pc in the prior 12 months, and touched an all-time high in euros of €818 an ounce earlier this week. On Wednesday, gold was trading in New York at $1,115.55 an ounce, having hit a one-month high of $1,126.85 earlier in the day.

Mr Soros is not alone in increasing his stake in the SPDR, with new filings also showing that China Investment Corporation (CIC), Beijing's main overseas investment fund, taking a 0.4pc stake in the fund worth $155.6m.
CIC's investment is equivalent to just 0.4pc of the 33.9m ounces of gold maintained by the Chinese government, but is part of a growing trend of major funds investing in the metal.

The World Gold Council said on Wednesday that pension funds began actively investing in gold last year, viewing the metal as a long-term safe haven. 

Aram Shishmanian, the council's chief executive, told Reuters that although the organisation does not forecast prices, he believes the gold market will be "robust' in 2010 in spite of an 11pc global drop in demand last year because of weaker industrial output.

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7259161/George-Soros-buys-gold-despite-dubbing-it-ultimate-bubble.html

Comment:  Irrational behaviour!  But this is understandable behaviour of a speculator.  Why invest into a "bubble"?

Sterling's slippery slope

Telegraph View: the benign devaluation threatens to become a rout

 

Telegraph View:
Published: 8:39PM GMT 02 Mar 2010

The 25 per cent fall in the value of the pound over the past couple of years has amounted to a bigger depreciation than in any single post-war sterling crisis. Most see this as a healthy correction of an over-valued currency, which has given us a more competitive exchange rate just when we needed it.
This benign devaluation now threatens, however, to turn into a rout. For this week's fall in the pound has been prompted not by worries over Britain's prospects, but by doubts about the economic credibility of the Government. The Tories' diminishing poll lead has raised the spectre of a hung parliament, and of chaos and gridlock in government at the worst possible time. The markets have taken fright: as Kenneth Clarke, the shadow business secretary, observed yesterday, it has only been the prospect of a Conservative victory, and the arrival of a government prepared to tackle the fiscal crisis head on, that has held down interest rates and sustained sterling in recent months. The possibility that this may not happen has alarmed foreign investors, for it is uncertainty that spooks the markets.

 

Given that we have nine weeks before polling day, there is plenty of scope for more damage. The Tories must take some of the blame. The markets have spotted what we have already highlighted: a worrying uncertainty in the Conservative message. But there is a heavier responsibility on the Government. Reports that the Prime Minister is trying to push the Chancellor into a pre-election giveaway are troubling. They reinforce the impression that Labour is not serious about tackling the deficit and that has added to the market jitters. Alistair Darling has an obligation to ignore his next-door neighbour and put country before party, by ensuring a credible deficit reduction plan is at the heart of his Budget.

Looking Into A Company's Financial Health

Looking Into A Company's Financial Health

Posted by lionel319 @ Tue 02 Mar, 10,

After looking at all the reasons for investing in a particular stocks (Step #1 - #4), we now look for reasons for NOT investing in a particular stock.

No matter how good the stock's industry is,
No matter how wide the company's moat is,
No matter how good it's growth and profitability is,
If it is sick .... financially, there is no guarantee that it's gonna survive the next wave of influenza.

Ok. So how do I look at a company's financial health?

 



Basically, I look at a company's financial health the same way as I look at a normal person's balance sheet.
These are the 2 golden questions that you should be asking:-

• Is the company capable of paying of it's Short Term Interest(Installment) obligation?
• Is the company capable of paying back it's Long Term Debt?

Let's go through the above 2 points with a case study by looking into a balance sheet of a normal person, a working employee, an engineer, PinkPig, with a net saving of $2000 a month after deducting all basic expenses(food, accommodation, rental, etc)  and other loans (study loan etc).

Let's say, PinkPig just bought a new car, which cost $100k.
He puts up 10% as down payment ($10k), and took a $90k loan from the bank.
He needs to pay $1875/= as monthly installment to the bank.

So far, this is the information that we've got:-

PinkPig's annual savings	$24,000 ($2000 salary x 12 months)
PinkPig's annual Installment obligation	$22,500 ($1875 monthly installment x 12 months)
PinkPig's total Long Term Debt	$90,000 (loan from bank)

Now, let's start drilling into PinkPig's financial health by asking the above 2 golden question, using these financial metrics:-

---

1. Long Term Debt Payback Time

Long Term Debt Payback Time = Long Term Debt / EBIT

This is basically a measure so that we get a feel of whether the company is REALLY capable of paying back all it's debt that it is owing the bank.

For PinkPig's case:-
- PinkPig owes the bank Long Term Debt of $90k.
- PinkPig's Annual Savings (EBIT) is $24k.

If PinkPig were to save up all his annual savings, how long will it take pinkpig to repay the total loan?
$90k / $24k, and we get around 3.75 years.
Anything which spans around 5 years or so is still an acceptable (and comfortable) number for me.
The key to this is just to have a feel whether the company is really capable of repaying back the Long Term Debts if they were to use up all it's Net Income into repaying their loans.
If you want to have a feel of what it looks like, take a look into Ford Motor's Financial Health here. 
In year 2009, Ford had a net income of $2 Billion.
You might say "WOW!!!"
Wait till you take a look at it's Long Term Debt .... which is standing at a whooping $133 Billion.
It takes Ford at least 66 freaking years to pay back it's Long Term Debt, by plowing back all it's net earnings into the bank.
And this is by assuming that Ford is capable of earning $2 Billion year in and year out, no matter what.




2. Times Interest Earned (Interest Coverage Ratio)
 (EBIT = Earnings Before Income-Tax)

PinkPig's Times Interest Earned(TIE) is
= PinkPig's Annual Savings / Annual Installment
= $24,000 / $22,500
= 1.067


The golden question number 1:-

• Is PinkPig capable of paying of it's Short Term Interest(Installment) obligation?

Yes. He is capable. Only if nothing unusual happens to him.
If something were to happen to him, and his saving drop by a mere 10% to  $21,600, he will have problem with that.
Either he will have to sell of something to repay the bank installment, or he will have his car confiscated back by the bank.
This is very crucial to companies, especially those that can't meet their short term debt obligation.
The only way for them to meet this short term obligation is to liquidate their assets, which will in turn eat into their core business, and eventually affect their long term business growth.
We definitely do not want to be put into a nasty situation like that.
Look for a TIE ratio which is pretty high.
The higher the better.
A company which has a TIE ratio of 10x means that it is capable of meeting it's short term obligation even if it's earnings were to drop 10x due to any unforeseen disaster (eg:- economy crisis).
Once a company is seriously wounded, it's really hard for them to be able to regain back their previous glory, not to even mention about fending of competitors and defending their once-used-to-be-market-leader status.
 

http://lionel.textmalaysia.com/looking-into-a-company-s-financial-health.html

7 Steps To Long Term Investing

7 Steps To Long Term Investing

 Looking Into A Company's Financial Health

Posted by lionel319

I've been planning to come up with this post for quite some.
It serves as my personal check list, so that I won't miss out anything when I do my company stock evaluation.
Most of the Long Term Investing approach focus closely on fundamental analysis, and I'm no different here.
Most of the stuff here I believe, you've seen it somewhere. It's definitely not from me. I'm just reiterating it here, so that it reminds me and serves as written guideline to me.

---

1.	Avoid Price Competitive Industry (link)
	Do not invest in industries which doesn't have any edge, whereby price is the only sole factor that wins the customers.
2.	Economic Moat (link)
	Does this company have any sort of business edge compared to its competitors from the same sectors?
3.	Growth (link)
	Is this company growing consistently for the past 10 years or so?
4.	Profitability (link)
	Is this company's profitability matrix improving, or at least, staying at good ratio consistently?
5.	Financial Health (link)
	How's the financial health of the company? Can it pay back it's debt and yearly interest on time?
6.	Compare with Competitor (link)
	Compare this company with its direct competitors. How does it fare compared to its peers?
7.	Calculate Intrinsic Value (link)
	Once everything is in place, it does not mean that we'll jump into the stock straight away. We only want to buy it when the stock price is selling at a discounted price to it's intrinsic value.

---

This 7 steps pretty much sums up the process that I use to go through while doing my evaluation on a company's stock.
In the near future posts, I'll fill in the missing (link)s, and explain more in detail about each of the 7 points mentioned above.


http://lionel.textmalaysia.com/long-term-stock-investment-strategy.html

Petdag - anticipating it will deliver a higher dividend soon.

Latexx's earnings continue to improve

HaiO defying gravity!

ra