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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Ilaine who wrote (27135)10/11/2000 10:14:43 PM
From: Oblomov  Read Replies (1) of 436258
 
On RGR: I've only bought a small position. Earnings have been essentially flat for a few years, and recently have taken a dive due entirely to a drop in their golf club head business. Also, the management is entrenched and apparently not very good at marketing their products.

I think that the stock price discounts these issues, however. Again, I only have a small position that I will pull out of if the stock does not behave properly. Non-investment earnings have dropped to the point where dividend coverage (from earnings - there is over $3/share in cash) may be an issue soon. Another concern that I have is the decrease in net cash flow due to an increase in inventories from 1999 to 2000. Regardless of the price action, I will certainly scrutinize the next earnings report to see whether these negative trends continue or abate.

So, in all, a cloudy picture, but one I decided was worth a very small risk. I could back out of my position at any time, but I know that you will do your own DD.

On dividend plays: I bought RJR at 17 1/2 this past March (when it was paying an 18% dividend), and recently sold it for a nice profit. But, in general I'd agree that buying solely because of the dividend is not a good idea.
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