The Fat Years for U.S. Airlines Are Coming to an End

hook_dupin said:
Disagree: buybacks can be very smart if management believes the buyback program can yield better savings than any change in operations. It means less dividend mouths to feed and perhaps more company control of the board.

The Delta and Southwest buyback programs probably made sense. I’m not so sure about United.
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Sure, but FOR AN AIRLINE?

AA has bought back around $10b, that is BILLION, during this round of profits.

95% of buybacks happen at the peak share price as they typically correlate with the higher earning years. The time to buy back shares is when the stock price is depressed, not elevated.
 
The time to buy back shares is when the board believes the shares are below their intrinsic value. The fact that a share price is up does not mean that it is above the intrinsic value. That's not to say that I think every airline share buy-back was a good idea, but it's false to say that buying back shares when they're up is necessarily bad.
 
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ATN_Pilot said:
The time to buy back shares is when the board believes the shares are below their intrinsic value. The fact that a share price is up does not mean that it is above the intrinsic value. That's not to say that I think every airline share buy-back was a good idea, but it's false to say that buying back shares when they're up is necessarily bad.
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All moot. Like I said the vast majority of buy backs occur at the peak share price. Complete waste of resources for the stockholders. I'm anti-dividend but would prefer that over a stock buyback.

Generally they're used to boost EPS even though no earnings growth has occurred.
 
ATN_Pilot said:
Well, can't really reason with an investor who's anti-dividend, so have fun!
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Dividends are essentially forced sales of stock with the extra disadvantage of having to pay taxes on them. Much better to keep the money compounding.

Edit: it also shows the company thinks the money is better spent paying investors and not investing back into the business. This is bad news for share appreciation (see EPS note above). Flat earnings is a death knell for stocks.
 
ATN_Pilot said:
Every value investor in history would disagree with you, including Warren Buffett. That should tell you something.
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I can't tell if you're serious or not - Warren is the most anti-dividend one out there and repeatedly strikes down the idea for Berkshire to pay one.

He uses the money earned from his other businesses to invest back into his - he can do a better job than the companies BH owns with their money. Normal everyday investors, not so much...

Given the choice I would much rather have a company growing its business by reinvesting back into itself vs giving me the money and forcing me to make a decision with it.
 
False. Buffett won't pay a dividend from Berkshire, but he specifically looks to buy companies who DO pay a dividend. He trusts himself to reinvest the money himself better, but he doesn't trust other companies to do the same. History shows that investors are FAR better off with dividends in their pockets than letting management do with the money as they wish.
 
ATN_Pilot said:
False. Buffett won't pay a dividend from Berkshire, but he specifically looks to buy companies who DO pay a dividend. He trusts himself to reinvest the money himself better, but he doesn't trust other companies to do the same. History shows that investors are FAR better off with dividends in their pockets than letting management do with the money as they wish.
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Ok you are making my point for me, you basically restated what I said.

As for only buying dividend stocks, it sounds great but what they don't show in the data is just how many companies drop off the list and new ones get added. The back testing is biased.

So what do you do with the dividends? You make conflicting remarks. So you think you can reinvest the money better than the companies you own? Why own those companies in the first place? If you can get better returns sell the shares and put your money there. You don't make any sense.

Vanguard dividend growth vs SP500 benchmark

Only dividend equity I like is "O". It's a REIT.
 

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wheelsup said:
Ok you are making my point for me, you basically restated what I said.
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No, I said the exact opposite, actually.

As for only buying dividend stocks, it sounds great but what they don't show in the data is just how many companies drop off the list and news ones get added. The back testing is biased.
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The problem is that you're only screening for dividends instead of screening for a long-term dividend record. I personally look for a 10+ year record of at least consistent payout, but preferably constantly growing payout year after year. That's also what Buffett looks for, and what his mentor Benjamin Graham recommended. A company that has been consistently growing its dividend year after year for 30 years isn't going to stop paying a dividend. It's guaranteed cash in your pocket to be reinvested as you deem worthy.

So what do you do with the dividends? You make conflicting remarks. So you think you can reinvest the money better than the companies you own? Why own those companies in the first place? If you can get better returns sell the shares and put your money there. You don't make any sense.
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I'm sorry, but that's a silly question. Many companies throw off massive amounts of cash, but that cash would not be worth reinvesting in that same business. You seem to have a very growth-oriented mindset, which hasn't worked well historically. Buffett uses See's Candy as the perfect example for this. See's is an incredible business. They generate cashflow like nobody's business. But it's not a capital-intensive business, and it would not benefit from reinvesting all of that cash. It's better to pay out that cash to investors (in this case Berkshire, which owns them now), and allow the investors to reinvest that cash in other businesses, as Buffett does. Buffett takes See's massive cashflow and reinvests it in either the other companies he already owns, or in new investments. Follow his lead and you'll be pleased with the results. Trust executives with your money instead and be disappointed time after time.
 
This is why security analysis isn't as simple as a stock screener. If it was, everyone could be a billionaire. Sorry, it takes some work. This is but one factor. There are many others. In the aggregate, you're going to be better off with dividend paying stocks. But you need to take your stock picking into a whole lot more than that. If you're someone who just wants to use simple screens and you don't understand how this all ties and together and don't want to learn, just buy SPY and leave it be.
 
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