ALD is a regulated investment company and therefore at least 90% of earnings must be passed thru to shareholders. It is similar to a REIT, but the pass thru rate for REITs can be lower.
Many REITs with a 70% pass thru (dividned to FFO) yield 7.5% to 8% presently. Generally, REITs with lower pass thru rates (higher retention rate), have higher risk, and lower growth rate (because the retain less earnings for growth), so they have higher yield. Some REITs which have a retention rate of 90% are yielding 10+% -- TCR, for example. A year ago, before REITs were smart to own, they yielded higher rates.
An 8% dividend is sustainable if the market prices the stock to yield 8%. If the stock price drops due to unfounded worries, and the yield increases to 10%, then a 10% yield is sustainable. Nothing has changed but the price of the stock.
You said -- "Stocks don't yield 10% in a 2% divi environment.", They certainly do, and management says they will maintain it, and increase it.
You also said you would be careful owning any bank stock now. You are cutting yourself off from some nice possibilities. WM still has room to increase. GSB which has been mentioned here, is now rumored to be on C's acquisition list.
grommit |
