..."Read what I am saying very closely: there is no point in paying 20$ for a stock that you expect to return 19$ in dividends, if you hold it forever. I happen to expect that the company will PROBABLY yield 19$ worth of dividends."....
Who would hold a stock "forever"? You select a time period at which time you evaluate conditions and if they look promising and divvys keep rising why sell?
You ride your profits.
..."Your potential for losses is even greater as the price goes up."...
How do you figure? If appreciation continues along with rising dividends, how could you lose?
...."I am in fact invested in a very speculative development stage biotech company (RXII). Not because it is safe (it isn't), but because the potential rewards outweigh the risks. That is not true of SFL at these prices. We are just slightly above the net present value, as calculated by me."....
I am averse to risk and very conservative in my selection of equities and that's why I load up on stocks that have depreciated to an attractive price like SFL and have an unusal niche in their repective field. Getting in at $6.24 when SFL hit the bottom of $4 last March at which time it was paying $2.40/shr gave me a rate of over 38%. Even after they cut the dividend in half my rate was 19%.
I disagree with your premise that SFL is risky here because the potential for growth in a global recovery is huge. Unlike any other oil tanker company they are the most diversified and when you consider they have a 52 weeks high of 121.65%, a profit margin of 61.73% and an operating margin of 57%, and dealing in oil which is always in demand, why would you even consider investing in another equity?
Read what I am saying very closely: there is no point in paying 20$ for a stock that you expect to return 19$ in dividends, if you hold it forever. I happen to expect that the company will PROBABLY yield 19$ worth of dividends.
Your potential for losses is even greater as the price goes up.
Interest rates are a way to quantify risk. The "risk free" rate is the highest interest rate you can get "risk free", basically by investing in US Treasury bonds (though, I have to admit, even that is risky, and getting riskier as our national debt rises). You can earn about 4% by doing that. Or you can earn slightly more, by investing in SFL. But SFL is MUCH riskier than investing in the US Government.
As I have said before, the dividend yield is too low to even hedge against the risk of capital losses due to ONE factor, let alone things like interest rate risk, default risk, etc. SFL is in pretty good shape with regards to default risk, but interest rate risk is a problem: if the risk free rate rises, the stock becomes even more expensive relative to a risk free investment.
You can call me "fearful", but I am definitely not risk averse. I merely want to be paid for the risks I take, and I am sophisticated enough to know how to quantify that. The more risk I take on, the more I expect to be paid for it.
I buy my risk as cheaply as possible. If you over pay for risk, you lose out, on average.
Consider a bet where there is a 10% chance of making 110% on your investment, and a 90% chance of losing it all. That is a GOOD bet to take on, even though you will likely lose 9 out of 10 times. The RISK is cheap.
I am in fact invested in a very speculative development stage biotech company (RXII). Not because it is safe (it isn't), but because the potential rewards outweigh the risks. That is not true of SFL at these prices. We are just slightly above the net present value, as calculated by me.
You are the most fearful conservative person I have ever run across on an investment discussion site. I frankly can't think of any stock I own which even comes close to SFL in safety, in terms of being protected from unwanted price drops by its already low PE and safe handsome Div yield.
Please enlighten me as to a couple stocks that you think are "safe" if this one is too risky. I bet you don't dabble in chinese penny stocks much, or technology, or ????
This upswing on heavy volume is making me giddy.
Thanks for the input, will let it ride at least to the earnings announcement next month. From a cash flow perspective, SDRL has a greater influence on SFL than tanker rates...that unknown is making me just a little nervous.
I've never had good luck with trailing stops. Seems to dip just enough to take me out before rising again.
That is a nice P/E, but this stock is incredibly volatile. All it takes is a supply shock in oil to make the stock price plummet , and there is more than a 2.3% chance of that happening this year. Note that 2.3% is the risk premium gained from dividends. Heck, supply shocks happen every couple of years, not every 5 decades, as implied by the risk premium.
Net present value is a better indicator than P/E. Its net present value is at about 19 or so, considering that the risk free rate is about 4%.
For your sake, I hope you're right. But you're taking a gamble, and the odds are against you. For my sake, I hope it drops to an unreasonably low price again.
..."Are you kidding ? This stock is headed back to the 30's. PE under 8
Div of .30Q down from .55 and the earnings COULD support a return to .55 even with no improvement."....
Agreed except for one fact. The dividend was cut in half from .60 to .30, not .55. But you're right, we will see .60 or more again once those charter rates begin to climb shortly. Might even get a slice of the Frontline $33Million SFL got in March in the next qtrly. dividend coming up.
I had that question after the recent recovery from the very small post-divi dive but then looked at the two-year chart and changed my mind. I, too, am feeling a little piggy on this one but it looks like it still has plenty of room to run. But just to make myself comfortable and since I'm well into the black on it, I put a 15% trailing stop under half of my position to preserve my profits in case of some unforeseen news.
B-bots....Rule #1 is not to lose money. Rule #2 is to make more money...! Myself, because I was up well over 100% on SFL I took 50% of my holdings in SFL off the table (SFL is still 10% of my current holdings).....now all of my SFL is free stock/money (plus a nice pocket of dividends)...! That said, because I am an older investor, I am a dividend player and not a trader (I will take that profit and go shopping for much higher dividends)...! I feel that SFL still has a lot of room to run up-ward...some stop loss orders may be the best play for investors like yourself...!