Sunday, October 25, 2015

ASK THE READERS - Should I buy VTR, KMI, or POT?

We started this series back in November of 2014 as a way to add some fun to our buying process. We plan to continue doing these Ask the Reader post once a month (except when funds are limited) and will be maintaining the stocks purchased in a separate portfolio just to see how they perform. 

For each ASK THE READER post, we will select 3-4 current stocks on our watch list that we feel are worth buying.  But to add some fun into our buying process, we have decided to put our faith in our fellow bloggers and readers once a month. 

The stocks we have chosen this month are stocks that are currently at the top of our watch list and thus stocks we would be comfortable buying regardless of the outcome.  But we thought it would be fun to get our readers input and see if collectively, we can all beat the market with this interactive portfolio. :) 

Below is a chart below of our ASK THE READER purchases to date: 

So far, this account hasn't really done too well.  Mainly due to the fall of energy and oil stocks.  But it's OK, we are long term investors and have confidence that the so-called losers here will eventually see a turn around.  We've been investing long enough to know that there are cycles in everything.  Although it may take longer than we may like, we remain confident that many of these will eventually rebound.  Meanwhile, we'll just sit back and collect the dividends. :) 

Please help us get this account in the green by spending a few minutes to vote for ONE stock from the companies listed below.  Tell us why you like the stock that you picked. 

Thanks in advance for your STOCK PICK!

STOCK #1 - Ventas, Inc (VTR)
  • Sector: Financials - Real Estate
  • Market Cap: 18.3 Billion
  • Dividend Yield: 5.3
  • Consecutive years of dividend increase: 5 Years
  • Paying Dividends Since: 1999 (16 years)
  • Payout Ratio: 207.6%
  • P/E Ratio: 44.10

STOCK #2 - Kinder Morgan, Inc (KMI)
  • Sector: Energy - Oil & Gas
  • Market Cap: 64.0 Billion
  • Dividend Yield: 6.98% 
  • Consecutive years of dividend increase: 3 Years
  • Paying Dividends Since: 1937 (78 years)
  • Payout Ratio: 252.55%
  • P/E Ratio: 55.15
STOCK #3 - Potash Corp (POT)
  • Sector: Materials - Agricultural Chemicals 
  • Market Cap: 18.2 Billion
  • Dividend Yield: 6.95% 
  • Consecutive years of dividend increase: 4 Years
  • Paying Dividends Since: 1990 (25 years)
  • Payout Ratio: 79.17%
  • P/E Ratio: 12.08

The 3 companies we picked this month have three things in common: 1) they all pay great dividends; 2) they are all billion dollar companies; and 3) unfortunately, they all have undesirable payout ratios!!! Of the three, which company do you think has the best long-term prospects?


Thank you in advance!!


  1. Yes. But here is my order. VTR, POT, KMI

    1. Thanks DivHut for the feedback. We've been watching VTR for a while now and currently do not own any shares so we would certainly welcome adding another company to our Family's Dividend Stocks Portfolio.

      Thanks for stopping by. AFFJ

  2. KMI just telegraphed slightly lower div growth thru 2020 (now 6-10% instead of 10%). That's still pretty impressive, if you ask me, especially off the 7% yield base they have now.

    You gotta go with KMI now. It's not a yield trap if the cash flow is easily covering it. I own POT, as well, but I think the growth in that dividend is going to be very light for the next few years.

    I don't own VTR, as I prefer O in that space. But, even then, I'd still go with KMI.

    No bad choice, though.


    1. Thanks for the vote. I agree that a 6-10% growth is still considered above average, especially if you consider the entry yield is already high. We currently own shares of KMI in our Family's Dividend Stocks Portfolio but wouldn't mind adding a few more shares to our current holding. AFFJ

  3. I think DivHut nailed the order if you need to buy something now. I would be tempted to wait a few weeks and see what happens. I still think there are better opportunities ahead. Have a great week!

    1. Income Surf - We try to buy something each and every month to make sure we keep the gas on the peddle. Sure, we may guess correctly by waiting, but there is still that chance we don't. So for us, and as long as we are choosing what we feel is the best value at the time, we rather continue to buy than to try and time the market.

      I'll put you down as a vote for VTR. Thanks for stopping by and commenting. AFFJ

  4. Sustainable dividends require consistent, regular cash flow, generated by earnings - so when this cash flow is reduced the Payout Ratio goes up.

    KMI currently has a "dividend at risk" with a payout ratio over 250% TOO HIGH, as well the current price ratio to earnings is very high - this is an indication to me that it is over priced.
    VTR as well is has too high a payout ratio and to is expensive at this time.
    POT has a sustainable dividend, and is reasonably priced - therefore would give a margin of safety to an investor.
    Thinking forward I believe that we will need Oil and Gas, but the most sustainable product we need is food, Potash is the worlds largest producer of nitrogen, phosphate and potash all needed to feed a growing world.
    Therefore at this time in this market I am buying Potash in my Dividend Portfolio
    Thanks for asking

    1. To be honest, I like all three. Hence the reason why I narrowed it down to these three companies. But I do appreciate your take on the matter. I also felt that the payout ratio was too high, but as other bloggers have reminded me, you have to look at the payout versus FFO or AFFO. Considering this, I think VTR dividends are relatively safe.

      Thanks for stopping by and leaving us with your vote. Best wishes. AFFJ

  5. I just picked up Ventas (VTR), so naturally I think the valuation is pretty good :)

    My vote goes to VTR

    1. Few other comments:
      - Looking at PE and payout ratios for the earnings in case of VTR and KMI are misleading. REITs and MLPs (I realize KMI is not a MLP, but for all intents and purposes, we need to treat it like one) need to use the P/FFO or P/AFFO metric when looking at valuation instead of P/E.
      - KMI's valuation is a bit stretched and earnings growth will eventually taper off unless the company buys more assets in the coming months/years. Having said that, a 6-10% div growth guidance for 5 yrs with a starting yield of 6.7% is still pretty amazing.
      - POT has lower debt than some competitors such as AGU and CF, but higher than MOS. But overall, the financials look great and the company can raise money to fuel growth. As it stands, POT has minimal EPS growth going forward and that is why they are looking to buy other fertilizer companies - to grow those earnings. Their latest bid to buy K+S failed, so we will have to see where they go from here. I personally like AGU a lot more than POT.


    2. You are certainly in good company with your VTR pick as it appears to be the overwhelming favorite among readers. Unless something changes in the voting overnight, looks like we will join you as fellow shareholders sometime during tomorrow's trading session. :)

      Thanks for stopping by and providing us with your vote and explanations. Best wishes my friend. AFFJ

  6. Ventas, safest dividend and balance sheet.

    For Ventas, it is a REIT so conventional payout ratio does not tell you much. You have to look at the payout versus FFO or AFFO, because REITs do not show earnings the same way as normal corporations.

    1. Thanks for the link gunnar. Interesting read. Hope it helps others looking into REITs as well. Also, thanks for leaving us with your vote for VTR. Your feedback is appreciated.

      Regards, AFFJ

  7. Definitely VTR. Growing at 7% per year with a 67% FFO payout ratio and lots of tailwind for hospitals and nursing care.

    KMI is dead in the waters. they have a large backlog but no capital to invest.

    I'm staying away from POT for a while since the potash cartels are fighting each other and crushing that commodity.

    1. You are certainly not alone in your selection. VTR seems to be the clear leader among the three companies we are considering. We don't own VTR currently so definitely looking forward to add yet another dividend payer to our family's dividend stocks portfolio.

      Thanks for stopping by. Best wishes, AFFJ

  8. KMI for me. I'm sure there will be better times ahead for this company. At this level, I think they provide a very nice entry point. Payout ratio is high, but that's because they heavily rely on the price of crude oil, which will rise, sooner or later.

    Best wishes, DfS

    1. It's hard to ignore KMI at these levels. Whether KMI comes out on top or not, we will certainly continue to keep our eye on the stock and may consider buying a few shares if it continues to dip further (below $25).

      Thanks for your thoughts. AFFJ

  9. Thank you to all who voted. The current tally is as follows: VTR - 5; KMI -2; POT-1. So unless there is a huge change of events and new votes come in for KMI or POT, it looks like we will be picking up shares of VTR in tomorrow's trading session. If KMI dips below $25, it would be really hard not to pick up a few shares of KMI as well. ;)

    Thanks again. Keep the votes coming!!