#DividendsMatter -- July 31, 2020

Why some of the CNBC crowd looked so dour yesterday, market cap:

• AAPL: $1.775 trillion;
• AMZN: $1.584 trillion; trading up 4.1% today; up $125 dollars with "all" analysts guiding much higher; some guiding $4,000
• MSFT: $1.525 trillion; and trading down 1.22% today;
• GE: $53.488 billion; down 2.3% today; down 15 cents trading at $6.11

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#DividendsMatter

Before we get started: the big question no one is asking: when will AAPL increase its dividend? Answer: not before May, 2021.

Now, back to rambling.

After yesterday's explosive surge in Big Tech (AAPL, FB, AMZN, GOOG) and the run-up that TSLA has had this year, and the remarkable jump (and crash) of KODK in the last 48 hours or so, tells me one thing: not only does no one know what's going on in this market (even more than usual), but there is actually little connection between "valuation" and share prices. Apparently even Nokia is making a comeback.

It's hard to buy into the "efficient market hypothesis":

The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.

I see two things glaringly wrong in that hypothesis.

One: all available information. 

All available information for whom? Insiders? CNBC analysts? And what is "information"? Doesn't "information" require some amount of analysis. And we could go on and on.

Second: market prices should react only to new information. What is the definition of "new"? And how fast does "new" information become "old"?

So, what other strategies are there? With commission-free trades and the ability to buy shares by the fraction and the requirement that brokers keep track of gains and losses for the IRS and most importantly, because of sites like nasdaq.com one can make trades based on dividend "information."

This information has always been available, but wow, what a pain to find it, in the past. Not any more.

Remember how some folks "ladder" their CDs? One can do something similar with blue chip stocks that pay dividends. But one can do it much more frequently than one can do it with laddering CDs.

On a weekly basis, one can buy a chunk of publicly traded shares that pay a high dividend, buying the shares in time for the "record date" and then selling those share some time later to buy the next publicly traded company that pays a nice dividend. Yes, I know all the caveats -- all things being equal, the share price will drop by the same amount as the dividend on the ex-div date, but it certainly seems to me that within a day or two, the share price (up or down) will not reflect the ex-div price. Things are simply moving too quickly in the market these days.

If I'm doing it, I can only imagine a lot of folks who now work at home are also doing it. In the pre-Covid days folks could not "trade" at work for the most part. But now, with so many folks working at home -- like everyone in New York City, my hunch is a lot of folks are dabbling in the market on a daily basis much more than they used to.

Just rambling.

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OKE

I got to thinking about dividends the other day when a reader mentioned that OKE is unlikely to be able to keep paying its dividend currently at $3.74 with an APR of almost 13%. I agree completely. The payout ratio is almost 250%.

This is where OKE stands:

• today OKE is down almost 3%; like much of the rest of the market, down today
• OKE has consistently raised its dividend for a number of years
• OKE goes ex-div today which accounts for some of the drop in price today, all things being equal;
• "record date" is August 3, 2020, so one can still buy it today but you have to be fast (by the end of the day, assuming that your broker gets the trade made and the shares show up in your account Monday)
• payment date is August 14, 2020
• the only question is if/when OKE will announce a cut in its dividend -- OXY slashed their dividend; everyone could see it was going to happen, and it did, no surprise

I had planned to buy OKE but the timing did not work out for me personally; had the record day (August 1) not fallen on a Monday I would have done it (yes, I'm sure that makes no sense, but it does to me).

What I think is most interesting: common sense suggests OKE has got to cut their dividend but their history of dividend increases certainly suggests they are studying this long and hard.

Anyway, idle rambling.

Oh, I forgot. Simply Wall St talked OKE yesterday. Interestingly enough, not one word about dividends.