Bill Ackman Pushes Target to REIT Spin Off, Pershing Square Capital
Ackman argues that his deal would create value for Target, and in many cases spin-offs of subsidiaries in companies can create value, but what happens when you pull all of the most valuable assets out from under a company? Wouldn't that take away from Target's ability to get credit and cause Target to become a less valuable company? The balance sheet of Target would show a huge depletion of assets, which is a significant factor in the value of a company.
I don't see one good reason why Target would want to pay an inflated rent amount on something they already own. This REIT that Ackman wants to create would essentially suck the value out of Target by driving the cost up. Also, did I mention, the REIT is going to force Target to pay a dividend to it. Ackman claims the dividend won't be that high, but dividend claims can change from quarter to quarter, so who knows? I think this has been done before...
Remember the late department store Mervyn's? Mervyn's department store has gone bankrupt and will be closing all of its stores and firing all employees due to Cerberus Capital Management's structured deal of separating land and retail operations. They do something called "tunneling" where they have the land company charge the retail company an extremely high lease price, and also forced Mervyn's to pay a really high dividend to the land owning company. This is what drove Mervyn's to its end. Cerberus pulled the assets out from under the company, sucked it dry, get to sell off the land, and reap giant profits.
Kmart was not helped by Eddie Lampert's hedge fund doing a similar deal where they separated the land and sold it off, leaving Kmart on life-support after a bankruptcy filing.
Both Eddie Lampert and Cerberus Capital Management have made exorbitant amounts of money, and they left shareholders and employees absolutely nothing.
Bottom Line, these type of deals have proved to destruct value of the company. Management and Shareholders : DO NOT let Ackman's arrogance and financial sophistication seduce you into ruining such a great company. Ackman knows that he can make more money off of the real estate Target owns than he ever could on Target itself. Once he makes anywhere from several hundred million to a couple billion dollars, do you think he will care about Target?
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5 Best Dividend Stocks
Even some of the best investors in the world are getting crushed over and over on their investments in this cruel, erratic stock market. Stock Investing can be very confusing, and it seems someone is suggesting one stock pick when the other says to sell that stock.
One way to ensure a return on your investment is investing in stocks that have a dividend. Some companies pay dividends that overshadow our recessionary market. My mission was to find high-yielding dividends from good companies for independent investors like you. If you want returns in this market, my stock investing advice to you is to consider dividend stocks.
After scouring the stock market for the best dividend stocks, I found:
5 Best Stocks for
Dividends:
1. Frontline Ltd. (FRO)-
this shipping company moves oil,
bulk, and metal ores and continues its earnings growth and dividend
growth year after year. This stock currently yields a
39% yearly
dividend (or $3.00/share
quarterly) at a price of nearly $30. Standard and Poor's estimates
the 12-month target of FRO stock to be $59. Even though the yield
in a year may be closer to 15-20%, that is a huge dividend! Also,
if you buy stock of FRO now, then you can enjoy the gain from $30
to almost $60 and have the 15-20% dividend. With a P/E of 3x
(average stock P/E is 10-14x) this stock is a money making
machine.
2.
SunTrust Banks Inc. (STI)- Suntrust's stock dividend yields 7.5%.
This large regional bank has held up
well compared to other banks during this stock market crisis. This
stock is well off of its 52-week high of $73.80, so it has a lot of
potential upside gains in the future. This is a solid company with
strong growth prospects in the future.
3.
Pfizer Inc. (PFE)- This drug company has a household name and
7.5% dividend
yield at its current price of
$17.10. With revenues of nearly $50 billion a year, you know this
company is going to be standing strong for a very, very long time.
Buy stock in Pfizer if you think a 7.5% dividend and a discounted
stock price looks like a great investment.
4.
AT&T Inc. (T)- Another stock with a household name, At&t,
has a dividend yield of
6.33%. Standard and Poor's
gave At&t stock the highest rating, 5 stars. This company
enjoys the exclusive right to sell the iPhone, which has boosted
its revenues. Realize that this stock is also priced low compared
to it's historical highs.
5.
Duke Energy Corp (DUK)- What would a dividend stock list be without a
utilities company? This stock yields a 5.9% yearly
dividend based on the Oct. 24,
2008 price. This large utility company has a market value of $20
billion. Duke Energy has been paying dividends on their stock since
1926. That should tell you how reliable this company really
is.
There are still ways to make money during this gruesome bear
market. Stock dividends can be a addition to your portfolio
strategy for stock investing. Realize that the dividend yields are calculated
as a percent of current stock market price and may fluctuate. In
rough times, buy stocks with higher constant dividend payments for
a stream of income or reasonable gains.
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Why Buy Stocks Cheap Like Warren Buffett in this Bear Market?
While you may be worried about what to do with your investments in this recessionary stock market, you have to open your eyes to the opportunities out there.
Courtesy of About.com
Warren
Buffett has noted that this is a time for great opportunities, and
he made a statement to the world about it when he bought $5 billion
worth of Goldman Sachs
(GS) common stock and $3 billion worth of
General Electric
(GE) preferred stock. He also made a $4.7 billion
investment in Constellation Energy Group
(CEG) a few weeks prior to the GE and Goldman deals.
It's no question that this man, along with his Berkshire Hathaway
company, has enviable investing
talent. He has produced a 22% compounded return over the past 40
years! Not even the savviest investors on Wall Street can keep up
with that kind of return.
Stocks on the whole have taken a beating; some deserved it because
they were over-leveraged and run into the ground, but most stocks
that have suffered precipitous losses have been oversold. Investing
in stocks can be very tricky, but if you understand that stocks can
be undervalued because of fear and panic, then you can take
advantage of those prices.
Strong companies that you can see doing well for years to come have
been underpriced in this market; it is your job to find the best
undervalued stocks and let them take you on a profitable ride for
the years to come. One thing stock investors have a hard time doing
is being patient. With value investing in stocks, you have to be
patient because other investors in the stock market may not realize
the real value of a stock until next month, next year, or five
years from now. Do like Buffett does; wait and let it
appreciate.
The Dow Jones Industrial
Average is down over 26% for the past year
(trailing 12 months) and the S&P 500 is down around 29%!
With stocks down this low and this
widely spread. You could actually make big investing gains over the
next several years by simply investing in an index fund or ETF of
the S&P 500 or Dow. Right now you can't go wrong; the market
will get better over time and things will look up again. Why not
get a piece of the market while it's still down?
Stock investing advice is all over the place and when it comes down to
it, you are the one that ultimately has to make the decision. It is
good to get different viewpoints, but make your own strategy. Trade
stocks your own way; that is how you will make money investing in
stocks.
If you are interested in learning more about value investing, I
will be posting about value investing methods soon. Also, stay
tuned for value stock picks. I will find you some great bargains
out there to make you money...
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UPDATE: House Approves $700 Billion Buyout: Congress Reaches Agreement for Bailout Deal
Image courtesy of: www.daylife.com
UPDATE: The House of Representatives has approved a modified $700 billion government assistance plan. One major difference is to raise the FDIC insurance for banks from $100,000 to $250,000. Also, the middle class will get a tax delay on the so-called Alternative Minimum Tax. Other tax breaks including alternative energy provisions are included in the bill.
Through the long hours of Saturday night and early Sunday morning, US Congress reached a tentative agreement on the proposed bailout deal led by Secretary of Treasury Henry Paulson. The $700 billion deal has not yet been finalized, but the essentials of the bailout have been outlined. But how will this affect us, as taxpayers?
The agreement so far says that taxpayers would:
- Get an ownership stake in companies that receive bailout help.
- If any of those companies fail, taxpayers would be first in line to recover assets.
- There would also be possible profit-making opportunities for taxpayers if the troubled assets render profitable down the line.
The plan will also allow small community banks, pension plans, and local governments to sell troubled assets to the US Government. Executives of companies that seek the aid of the government will have closely-monitored compensation and will not be able to walk away with giant severance packages that some CEOs have enjoyed while being ousted from their suffering firms.
The Wall Street Journal
"3 Phases of a Financial Rescue with Strong Taxpayer Protections
* Reinvest in the troubled financial markets … to stabilize our economy and insulate Main Street from Wall Street
* Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets
* Reform business-as-usual on Wall Street … strong Congressional oversight and no golden parachutes"
-Office of Speaker Nancy Pelosi
Now I am not a huge proponent of bailing out large firms that took on too much risk, nor do I believe homeowners that took on a home mortgage that they couldn't afford should be saved from foreclosure, but you have to allow for some leeway. The government is who pressured mortgage bankers to underwrite unqualified loans in the first place (to increase home ownership), and the mortgage brokers took advantage of people they knew would not be able to afford the house they wanted (they get paid when the contract is signed). It comes full circle; it is too difficult to blame one party.
I doubt the Treasury Secretary, Hank Paulson, would push this deal so hard if he didn't believe that our country's economy might completely collapse if something is not done.
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