The Conservative Income Investor

Intel $INTC stock has been valued between $19 and $140 since last year. “AI dreams” have meddled with rationality in valuing businesses to an extreme degree by fostering extreme binary outcome mindsets.

I have always been critical of stop-loss orders. New example: Someone has Intel $INTC stop loss order at $90. Stock was at $92 yesterday. They wake up, find they automatically sold at $68. The bigger and quicker the adverse event you are trying to guard against, the higher the probability you lock in a more extreme loss.

Obviously, it is intriguing when companies with lengthy records of 12% (or higher) annual growth experience a noticeable pullback in stock price even while still growing at a double-digit rate. The "easiest" path to above-average compounding.

We are starting to reach the point where the Spring 2020 Covid stock market decline only appears as a tiny blip in the historical data. An important lesson to contextualize the day’s volatility as almost nothing amid long-term compounding.

Walmart $WMT has now delivered 40x returns since Warren Buffett mentioned being too late for the stock at an early 1990s Berkshire Hathaway meeting. Another example to add to the canon that great megacap stocks do not have an inherent finish line. The supercompounders you know now have many great decades ahead of them still.

Berkshire $BRK.B up 17%, S&P 500 up 7% over the past six months. Nice to see things returning to form. Maybe even some of the critics will pipe down about the hundreds of billions in cash as Berkshire gobbles up more interest while many nouveau growth stocks have to borrow at higher rates.

Both Apple $AAPL and American Express $AXP are paying out tiny portions of their free cash flow as dividends. As an ongoing benefit to shareholders including Berkshire Hathaway $BRK.B, there is a lot of room ahead for substantial dividend hikes. They could almost triple their dividends today if they wanted (while scaling back repurchases), and the dividend payout would still be "safe".

Interesting to see several Public Storage $PSA preferred stock offerings, such as the F series $PSA.PRF, now yield over 7%. Comes with 38% payoff if/when redeemed. Highest credit rating in REIT land.

Since 1995, Fastenal $FAST has paid out a shocking $131,000 in total dividends on every $10,000 invested in the stock. It has been a wildly successful time of strong growth in fastener and MRO sales, a maturing dividend payout ratio, and special dividends on top. Very lucrative total return and income compounder.

Recency bias is always here to cloud judgment. At $352 in June, most $MSFT commentary was negative. Now, at $531, so much glowing praise. An example in the AI era of how human contrarian thinking can still create significant performance. The immediate past is always overweighted.

Costco $COST has the best dividend record since it initiated a dividend in 2004. The dividend has grown every year, with 21 of the 22 increases being by more than 10%, and five additional special dividends totaling $44 per share. A $10,000 investment in 2004 has now paid out $98,800 in total dividends since then.

I am buying a dividend growth stock that currently has a higher dividend today than it did during the financial crisis. Fair possibility of meaningful double-digit returns. Patreon post access here: patreon.com/theconservativei…

Much about Nike $NKE is bad right now. Cost of production rising, athlete contract costs forever escalating, competition strengthening and poaching athletes who previously would have signed with Nike, declining sales, and alienation of retailers and some customers. All that said, the price of the stock is down 80% from all time highs to $32. Any moderation of the bad news will drive significant returns. The riddle that is value investing.

Talking about dividends in the context of Big Tech often feels like an afterthought. What is the point of mentioning a 0.3% dividend yield? Well, when it relates to high growth, the figures are staggering. For an example, $AAPL has paid out $270,000 in total cash dividends on every $10,000 invested 30 years ago. The Big Tech stocks of today are set up to have very interesting cumulative dividend stories in 2056.

In Snowball, Schroeder mentioned that Warren Buffett had all these investments personally and through Berkshire made in the 1960s and 1970s that were still spitting out cash. I was hooked on the long-termism of never-ending benefits from intelligent decision-making. I also admired that Buffett faced and withstood scrutiny and arbitrary high standards unlike any other corporate executive. And of course the business-to-life analogies and clear-headed explanations in letters and interviews were also great. What a run as chairman. Wish we could all have a 61-year run at what we enjoy.

Sometimes I like to check in on little 'ole York Water $YORW, a tiny Pennsylvania water utility that has been paying out dividends continuously since its founding in 1816. Naturally, it has been a ten-bagger since 1999 with all dividends reinvested.

A new post on a blue-chip dividend stock I am buying now, which has an excellent track record of 13% annual returns. To subscribe, click here: "Worth a Buy 380 Dividends Later": patreon.com/theconservativei…

Realty Income $O has paid out $7300 in total dividends for every $1000 invested thirty years ago. Historically, when the dividend yield got high, the reinvestment racked up the accumulation of additional shares that dramatically turbocharged returns. As interest rates rise, the stock gets interesting when/if the starting dividend yield is 6% or higher.