Comments on Dividend Growth Investor: American Capital Strategies (ACAS) Dividend Analys...

W,Thanks for your opinion. I am not a fan of ACAS ...

2008-11-24T07:23:00.000-08:00

W,

Thanks for your opinion. I am not a fan of ACAS anymore after they suspended their dividend for 4Q 08.

I think that companies like Realty Income will also be hit hard by the credit crisis, as they also need credit and stock offerings to expand.

With all due respect, I think dividend investors (...

2008-11-24T07:20:00.000-08:00

With all due respect, I think dividend investors (and all others) should avoid ACAS.

American Capital, like other BDCs, depends on continuous access to the capital markets to grow. As we know, the capital markets are shot and it's impossible to predict how long they'll stay that way. ACAS is trading under book value, and if it must issue equity it will dilute shareholders.

Worse, they may trip their own loan covenants if their book values continues to deteriorate - and there's a good chance it will do so. ACAS already reported a significant spike in problem assets.

All the private equity companies have taken severe hits in this market. Allied Capital, ACAS' closest competitor, is already facing financial distress.

Even if ACAS doesn't go under, I still think dividend investors should look elsewhere. This stock's earnings, as demonstrated vividly by the graphs, are very lumpy. If I am buying something as a dividend holding, I'm looking for a steady business - like Realty Income, Genuine Parts, Johnson and Johnson or US Bancorp. I might speculate on something like ACAS, but I sure wouldn't buy it for the dividends.

The diversity of ACAS' portfolio companies allows ...

2008-09-05T13:26:00.000-07:00

The diversity of ACAS' portfolio companies allows me to benefit from ACAS' effort not to be enslaved to economic cycles for returns. One reason I am especially excited about ACAS is that it is likely to remain underpriced because it is widely misunderstood by analysts.

The longer ACAS remains irrationally underpriced (that is, priced by a market characterized by fear and uncertainty rather than data and considered evaluation), the longer we can expect high-yield reinvestment through the DRIP.

Assuming that when financials are again loved by the analysts, ACAS again trades at a premium to NAV, ACAS' drip will enable below-market reinvestment, which is a nice bonus.

My own comments on ACAS are tagged and include posts on AGNC.

Take care,
--J

Good review. ACAS is my favorite dividend company....

2008-05-17T04:57:00.000-07:00

Good review. ACAS is my favorite dividend company.

Best Wishes,
Dividends4Life

Div Guy,I am more of an equal weighting type of gu...

2008-05-16T07:55:00.000-07:00

Div Guy,

I am more of an equal weighting type of guy.. I don't want to be too concentrated in one particular stock or sector. But ACAS does look like a great company..

Great review. I recently bought more shares of ACA...

2008-05-16T07:50:00.000-07:00

Great review. I recently bought more shares of ACAS and it is my second largest holding.