November 14, 2007
Off the Charts: Washington Mutual’s Dividend Yield
Here’s a longer term look at Washington Mutual’s dividend yield. I’ve been widely reviled for having recommended WM in the mid-$30s, where I thought it was a bargain and represented good value. Assuming they don’t cut the dividend, Washington Mutual yielding over 10% is, cue Crazy Eddie, an INSANE bargain.
Cat: | Time: 10:04 am (utc+8)
November 14th, 2007 at 10:32 am
They haven’t cut in more than 15 years (maybe never, but I’m too lazy to check).
I went long a slug of financials in August as well. Didn’t sell nearly enough in October :o(
So are you doubling down here? ;o)
November 14th, 2007 at 10:43 am
That’s what happens when the stock price takes an INSANE haircut.
Seriously, I hope it bounces back for you, but I believe Killinger has enormously mismanaged it.
November 14th, 2007 at 10:45 am
Babak: No, I’m not doubling down because I have too much to start… I’ll just wallow in my squalor and take abuse from assorted nobodies (fellow bloggers). ;-)
November 14th, 2007 at 10:54 am
So that’s what we are, “assorted nobodies” ?
I’ve been called much worse. :)
Listened to the start of the HD conference call this AM. CEO Frank Blake said they see continued weakness into ‘08. Says the 60 year historical average for const. spending as a percentage of GDP is 4.8%, it got up to 6.25% in ‘05; and currently sits at 4.5%.
He went to say that even though that ratio is below the long term average, they see further weakness in the housing industry.
HD with a 3% div. yield - anyone interested ? I think it’s worth a small nibble here for long term oriented accounts (3-5 yr. time frame min.), but I’d scale in over time.
November 14th, 2007 at 11:04 am
assorted nobody checking in-
WM sucks for atleast a few more months, until after they cut.
November 14th, 2007 at 11:07 am
ToddinFL: Yes, you pajama-wearing basement dweller. ;-)
I already own HD, purchased way way above here, where it was a “bargain” and represented “good value.” (Man, I’m getting my ass handed to me, lol.)
November 14th, 2007 at 11:21 am
Cheer up. I did well based on you’re China top thread, so at least one of us is making something from your intuition.
November 14th, 2007 at 11:30 am
CapGain: I’ll be happy after three to five years of suffering.
November 14th, 2007 at 12:23 pm
I wonder how much higher the supposed dividend yield can go ;-)
November 14th, 2007 at 12:34 pm
That depends on how much Romanian subprime mortgages you underwrite. The sky’s the limit.
November 14th, 2007 at 1:43 pm
See NCT for a much higher dividend yield :)
November 14th, 2007 at 3:05 pm
CM,
I’ve been buying WM at these levels for the past 6 weeks. Dollar costing from having bought in the low 30s. I’m a firm believer in this bank. Their service is awesome and I’ve been using them for years. I plan on holding on for more then 5 years so at these bargain levels I think things will be looking pretty eventually.
I’m also a holder of GS for what it’s worth. A lot of financial exposure but who would have guessed this mess?
What will get interesting, and I don’t know enough yet to really provide much knowledge, is the looming credit card defaults that a lot of commercial banks are starting to see. I wonder how financial stocks and the markets are going to react to this in ‘08?
November 14th, 2007 at 11:10 pm
What do WM buyers here think of Thornburg Mortgage (TMA) and its putative 29% dividend?
November 14th, 2007 at 11:33 pm
Have followed and/or invested on and off in WM since 1994. It is currently by far the largest position in my p.a. with a cost basis (unfortunately) of $32. I do believe holders will make money as the company recovers although a dividend cut may occur. Their deposit network on the west coast and various other cities is highly valuable and their credit card operation is also saleable. A combination with a large east-coast based bank (not b of a) at some point is highly likely. Hang in there.
November 15th, 2007 at 4:08 am
The leverage on banks is huge. A nice deposit network is a thin reed when it’s trying to hold up $40 billion in ARM loans.
November 15th, 2007 at 6:59 am
As mathematicians say, everything regresses to the mean - even dividend yields.
I can see that a “rough” mean is around 3%.
What would be a fair price for WM if it yielded a mean of 3% for the next 5-6 years?
This yield is below the current yield of the Treasuries, isn’t it?
November 15th, 2007 at 7:42 am
I wouldn’t count on the value of their cc business, as that is likely to soon get hit to the same extent as their mortgage business.
I do though believe that WM is too big to fail and as such Killinger is a one-man-rate-cut.
November 15th, 2007 at 11:14 am
@Tom: TMA is yielding 7.4%, no?
@Hypatia: Assuming that WM continues to pay out $2.24 a year in divs, then the stock price would have to rise to $74.66 a share for the yield to fall back to 3%
November 15th, 2007 at 12:30 pm
With such high leverage, I am not sure if I want to touch it. My suspicion is that most of that debt they used to financed their portfolio is going to be under performing.. I can’t say I am comfortable with the thought of those notes being called on… scary. The dividend is definitely in jeopardy, seen with with a couple of Puerto Rican banks.. Sorry to be a downer about it.
November 15th, 2007 at 2:48 pm
bjd: Yes, well that’s the fear, but scary times are when great bargains emerge.
September 26th, 2008 at 8:10 am
WaMu is done. Long live The Chairman.