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What Is A Dividend Disaster?

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Want to avoid a dividend disaster? Stay away from these Russian stocks. Here’s why today’s high yield is tomorrow’s heartache. – PowerPoint PPT presentation

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Title: What Is A Dividend Disaster?


1
Dividend Stocks Research
What Is A Dividend Disaster?
2
Welcome to Dividend Stocks Research Your premier
site for Rankings and Reviews of the best
dividends stocks around. For more info on
dividend stocks please visit our website
DividendStocksResearch.com
3
  • Get Your Free Report On What You MUST Do to Never
    Run Out of MONEY in Retirement!
  • Well tell you about this
  • Special Offer
  • at the end of the video!

4
  • Hi, My name is Aaron and Im with Dividend Stocks
    Research, today were reviewing our recently
    published article

5
  • What Is A Dividend Disaster?

6
  • I never thought my friend Large Lou Sapino would
    be a credible source of good dividend stocks
    investing wisdom. We get together a few times a
    year when he drags me into Dannys on Orange
    Avenue in Coronado, California.

7
  • Ill nursea beer and hell be drinking vodka
    Actually, hes lecturing me on vodka. Its his
    passion.
  • Lou isnt much of a drinker. Hes more of an
    analyst, and an historian.

8
  • He told me the first Russian vodka was inspired
    by visitors from Genoa. He insists that despite
    Americas current infatuation with Frances Gray
    Goose, only Russian vodka really matters.

9
  • So the last time we got together, Lou asked me
    about Russian stocks. He had just come back from
    a trip to Moscow and wanted to know if he should
    buy any Russian dividend stocks.

10
  • Heres more or less what I told Lou...

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  • The Highest Dividend Yield Stocks To Avoid Come
    From Russia

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  • I told Lou I could see why he was tempted,
    especially with a stock like Mobil'nye
    Telesystemy MBT.
  • It pays a dividend that stretches from St.
    Petersburg to Siberia. The last I checked, it
    was just shy of 11.

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  • And Mobil'nye Telesystemy isnt a fly by night
    outfit, at least not by Russian standards. Its
    the countrys largest cell phone company, with
    100 million mobile subscribers.

14
  • By comparison, Verizon VZ, the largest U.S.
    carrier, has 102 million subscribers. But the
    Mobil'nye Telesystemy stock is a heartbreaker.
    Take a look at whats been happening the past few
    years...

15
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  • Somehow, the stock manages to get recommendations
    from people who should know better. On August
    19th, analysts at CitiGroup announced they were
    smitten with the company, and upgraded it to a
    Buy.

17
  • Lazard Asset Management, JP Morgan Chase, and
    Vanguard each own millions of shares.So why am I
    so sour on a stock that some pretty smart people
    want to own? Why am I down on one of the highest
    dividend stocks?

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  • High yield-stocks are home wreckers. At MBT, the
    balance sheet is a mess. The numbers just dont
    work. Even if you factor out all the chicanery,
    mischief, and shenanigans in the Russian
    financial markets...

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  • Even if you believe in the data the company
    reports, youre looking at...

20
  • The Molotov Cocktail Of Dividend Stocks

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  • Revenue in 2014 went up in flames...6.8 billion
    compared to 12.1 billion in 2013. Net income
    took an even uglier turn for the worse, skidding
    from 2.4 billion to just 8.6 million.

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  • When your revenues arent growing, you cant grow
    the dividend. The math doesnt work any other
    way. Not unless you rob Igor to pay Ivan.

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  • The company is sitting on 4,16 billion in
    long-term debt. And as for long-term prospects,
    I cant find a single reason why we should
    believe business is about to turnaround.

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  • Its not too hard to see Mobile Tele Systems
    following in the footsteps of another Russian
    stock nightmare. Three years ago, VimpelCom VIP
    paid a dividend of 18.87 . Today, the yield is
    1.38.

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  • What went sideways with VimpelCom? In 2014, it
    admitted that sales wouldnt hit its optimistic
    early projections. Then big investors bailed.

26
  • The high-flier peaked in October, 2013at 14.31.
    Earlier this year, it traded at 3.60.
    Shareholders watched their fat dividend virtually
    vanish as the stock price melted down.

27
  • Russia doesnt have a monopoly on stories like
    this. Dividend stocks with big promises that
    turn into big problems are traded on exchanges
    from Mexico City to Mumbai. And definitely in New
    York.

28
  • But it seems you run into your unfair share of
    these high dividend stocks in Russia. One of
    todays dividend darlings from Russia is CTC
    Media, CTCM, which pays a yield of 42. The
    dividend payout ratio is 304.

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  • Talk about living beyond your means...this ratio
    means CTC pays three times as much to pay the
    dividend as it earns in revenue.

30
  • For every dollar the company earns, it needs to
    scrounge up another two just to pay the dividend.
    How long do you think this party lasts? Its just
    a matter of time. Take a look at the change of
    fortune for CTC...

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  • When CTCs stock price started falling in 2014,
    it didnt cut the dividend. In fairness to the
    company, a falling stock price isnt a reason to
    cut the dividend. But falling income is, and the
    income at CTC Media has been skidding.

33
  • When youre sizing up a dividend stock, whether
    its from Moscow or Memphis, get beyond the high
    yield. Look deeper. See whats happening with
    net income, because thats what should pay the
    dividends.

34
  • Ideally, you want to find a company where net
    income is growing, and where the profit margins
    are growing as well.
  • These Russian companies that depend on homegrown
    revenue just dont deliver.

35
  • And dont forget what the strength of the U.S.
    dollar relative to Russias ruble has done. Its
    made Russian companies cheaper to buy. At first
    glance, this looks just as appealing as a high
    yield.

36
  • Russian companies that dont depend on homegrown
    revenue can be a different story. Theres
    recently been an upside when the company exports
    what it sells.

37
  • When you pay for labor and raw materials in
    rubles, then get paid for what you sell in
    dollars, youre sitting in the currency catbird
    seat.

38
  • But no matter where its headquartered or what it
    does, buying a company in trouble - at any price
    - usually doesnt work out too well.

39
  • And stocks with the highest dividends just lure
    you in with a sweet-sounding promise.
  • Youre better off investing in a bottle of
    Russian Standard Vodka.

40
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41
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42
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