That ought to be a chant coming from low paid workers (both in the US and abroad), but before we get bogged down in the economic dilemma of too much capital wealth and not enough consumer spending power, let’s think about income seeking investors.

As a recent Barron’s article by Darrin Strauss points out, dividend yields on S&P 500 stocks have declined markedly in recent decades, to the point where it seems like an average payout rate of 2% is normal. In fact, it’s well below historical averages.

Strauss notes that companies have devoted more funds to buybacks than dividends lately, perhaps because they don’t want investors to get accustomed to higher rates of dividend income.

I’m with author Daniel Peris, who advocates that companies pay more of their income out to shareholders in the form of dividends. Peris, a fund manager, has authored a couple of books on dividend investing. Peris is quoted in the Barron’s article saying this:

“Too many corporate managers have simply looked at the interest rate structure and come to the conclusion that their low payout and low yield were sufficient, regardless of how unattractive such a yield might be in absolute terms.”

In other words:

What do we want? More Money! When do we want it? Now!

 

Actually, Gannett is in a governance war with a hedge fund that owns a rival newspaper chain right now, not with Kimco. Knowing that MNG has a well-earned reputation for slashing newsroom costs and diminishing the quality of the publications it owns, I voted against the proposed takeover, even though it proposed to pay a premium of more than 20% above Gannett’s most recent share price. (I’m still a newspaperman at heart, having spent decades as a reporter and editor, mostly for trade publications covering the financial services industry.)

So I voted with my heart, but I think my head is playing for the same team on this one. Gannett’s dividend — which I hope is sustainable — currently exceeds a 6% annual payout rate, and that persuaded me to up my stake a bit this week, taking advantage of Tuesday’s widespread sell off to buy on the dip. In the end, I’m not sure the MNG bid for Gannett is real. There’s been some speculation that the newspaper chain’s hedge fund owners hoped the bid would spark Gannett to counter with a bid of its own to buy the MNG newspaper chain. It will interesting to see how shareholders vote — both sides have been lobbying hard to influence the upcoming board election.

Proxy advisory firm Glass-Lewis had this to say about the proposed merger, via Gannett’s website:

“MNG appears to have conflicting priorities and its behavior both before and after submitting its bid suggests that MNG does not have a sincere interest in acquiring the Company, despite many statements to that specific intent.”

I’m betting that Gannett remains independent, and I wouldn’t be surprised if that’s good for shareholder value in the long run.

Kimco, on the other hand, still looks attractive to me as well. And while shares rose in the wake of its recent earnings report, the current price remains an attractive entry point. Psychologically, I guess I wanted to see a bigger dip in the share price before buying. But Kimco is still high up on the list of company’s I’d like to add to my portfolio.

 

 

Once again, I’m in mea culpa mode. When I recommended Senior Housing Properties Trust last July, the share price was about twice as high as it now is and the dividend was more than twice as high as the recently announced payout rate.

Long story short: the concerns about major tenant Five Star Senior Living proved accurate. The company had to be restructuring. In a deal struck between SNH and Five Star, SNH will acquire an ownership stake in Five Star Senior Living and Five Star will pay reduced rent. Also, SNH announced it plans to cut is dividend payment to about 60 cents per share per annum, down from $156 before.

The stock plummeted on the news. The restructuring, I think, only added to concern about SNH’s relationship with its external manager. Concerns have been raised in the past that a REIT that’s managed by an external property management company has a built in conflict of interest, because the external manager will always want SNH to buy more properties at any price in order to grow its portfolio of managed properties.

SNH executives and board members say they have put in place systems to safeguard shareholders, including incentives that punish RMR if SNH’s share price declines (I’d like to see the details of how that is playing out now, with SNH down substantially.)

Moody’s placed the company’s credit ratings on review for a downgrade in April after the company announced the restructuring of its relationship with Five Star, a likely dividend cut, and the need for property dispositions to reduce debt. (Have rating agencies every been ahead of the curve?)

Sure, I wish I’d gotten out of SNH before the proverbial you know what hit the proverbial wall. Once again, I hung on too long when storm clouds starting rolling in from the horizon. But at this point, I’m ambivalent. The dividend will get slashed, but not eliminated (and still will look like an attractive yield given how far share prices have fallen). I’m generally on board with the company’s move to reduce its reliance on senior living properties and invest more in medical office facilities.

The company’s next earnings call is scheduled for May 9. I plan to wait and see how much clarity management provides at that time about the company’s future prospects and strategic direction before making any buy, sell or hold decision. According to Zacks (which has a “strong sell” rating on SNH), Wall Street expects the company to report EPS of $0.38 per share, down nearly 16% from the prior-year quarter. That’s not good, but in my opinion it doesn’t justify the extent of the sell off we’ve seen.

 

 

Barron’s has a nice article featuring 10 stocks that pay dividends that exceed a 3% annual payout rate and are more likely to raise than cut the payout rate.

Barron’s used data from RealityShares, which has a system for ranking the safety of dividend payouts, to come up with the list. The stock with the highest payout rate, AbbVie, which currently yields 5.8%, is the only one on the list in which I have a stake.

Other firms on the list include Broadcom, SL Green Realty, and JPMorgan Chase. I’m not making a formal dividend pick this week, but if I were adding a name to my portfolio I think I’d go with JPM. But that’s largely because my portfolio is light on financial service firms.

The list is a little concentrated by sector, featuring 5 financial service sector names and two energy sector companies. But it seems like a fairly good selection.

I don’t mean to sound like a marketing agent for Barron’s, but I do find that it’s my favorite news source for personal investing ideas. Here’s a link to the Barron’s article.

Another article that caught my eye from Barron’s this week had the headline, “Don’t Panic But Half of Smart Investors See the End of the Bull Market Next Year.” I don’t think it requires a link, since the headline says it all.