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Strategies & Market Trends : Dividend investing for retirement

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To: Steve Felix who wrote (9411)	7/12/2011 2:38:41 PM
From: E_K_S	Read Replies (4) of 34328

What's your opinion on WM given Wedbush Securities downgrade? Even with their increase their payout ratio is only 64%. I think we discussed this one last year and I followed your lead into starting a position. I like the company. BOX is an interesting find. I have been studying the company and like their business model. It's almost like the rail leasing car business (I just sold my GMT) but they pay a much better dividend. The only problem is the amount of debt they carry. It's the nature of the business so I was reviewing the amount of leverage they use as compared to their piers (like in rail cars and/or ships). I ran across this thing called the DuPont formula: fool.com "...The DuPont formula can give you a better grasp on exactly where your company is producing its profit, and where it might have a competitive advantage. Named after the company where it was pioneered, the formula breaks down return on equity into three components: Return on equity = net margin x asset turnover x leverage ratio What makes each of these components important? * High net margins show that a company can get customers to pay more for its products. Luxury-goods companies provide a great example here. * High asset turnover indicates that a company needs to invest less of its capital, since it uses its assets more efficiently to generate sales. Service industries, for instance, often lack big capital investments. * Finally, the leverage ratio shows how much the company is relying on liabilities to create its profits. Generally, the higher these numbers, the better. That said, too much debt can sink a company, so beware of companies with very high leverage ratios....". -------------------------------------------------------------------------------------------------------------------------------- I need to review BOX to see if the DuPont formula applies. It seems to have worked well for SFL but too much leverage can also be dangerous. BOX has only been a public company for less than a year and does not have much of a history. BOX is also up over 40% from it's IPO in Nov 2010. I still like the idea of leasing containers (both refrigerated and dry cargo) for use on trucks, rail and ships. EKS

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