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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: kodiak_bull who wrote (15313)	7/20/2002 9:54:03 PM
From: pvz	Read Replies (1) \| Respond to of 23153

KB, your question: <The investor's real question, given $10,000 to allocate, is does he put it into money markets for 1.5% return, short treasurys for 2.5%, 10 year treasurys for 4.5%, a "safe" dividend yielding stock for 4-5% plus/minus whatever, or pay 25 X trailing earnings for a shot at the American dream? > IMO, the Fed Model methodology is most relevant if applied to those "safe" dividend yielding stock that you mention. Maybe it's a better methodology for individual bluechips, rather than applied to the market as a whole. I do hate to use the "things are different now" argument, but I really do wonder if dividends are as important as they were say 50 years ago, because of the negative tax implications of receiving dividends. I am theoretically much happier forgoing dividends, if the company repurchases its stock instead. Unfortunately it is difficult to distinguish between pure stock buybacks and those made to compensate for the dilution caused by lavishly issued stock options. So I'm also quite contented with a medium sized dividend as long as the PE isn't out of line. After all, if the dividend is too high, it signals some extraordinary risk. For example, do you remember how high MO's dividend yield was when it bottomed a couple of years ago? Right now, look at MRK. Its PE is 13 times 2002 earnings, dividend yield is 3.3%.