SIP006: Bob Ciura on the Investing Due Diligence Process - Sure Dividend Sure Dividend

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SIP006: Bob Ciura on the Investing Due Diligence Process

In this episode, I’m thrilled to be interviewing Bob Ciura, a Senior Vice President at Sure Dividend, the company that backs the Sure Investing Podcast. Bob has an MBA from the University of Notre Dame and spends his time performing fundamental, bottom-up equity research on dividend stocks for Sure Dividend’s website, publication partners, and premium investing newsletters.

In this interview, we discuss Bob’s investment due diligence process, his thoughts on why dividend stocks outperform, and the characteristics that he believes make an outstanding long-term investment. Please enjoy my conversation with Bob Ciura.

Full Transcript Below

Nick: I just wanted to begin by taking some time to thank you Bob for being interviewed on the Sure Investing podcast now.

Bob: the pleasure’s mine.

Nick: I thought we could begin by just asking when was it that you began to be interested in investing and how did your journey as an investor begin?

Bob: well I first started to be invest interested in investing when I was in college. I changed my major about halfway through to finance and I did that because I thought it would be a better career choice for me and I as I advanced my studies I became a lot more interested in the stock market and then I began investing pretty much right out of college.

So I believe I bought my first stock when I was I think 22.

Nick: do you remember what the first stock you bought was?

Bob: I do it was Altria Group which is the old Philip Morris.

Nick: now that’s been one of the best that’s been one of the best-performing stocks I think of all time if you go back over say like a 30-plus year time period so that’s very interesting that that was your first stock definitely a great choice.

Bob: yes and actually perhaps the biggest reason why I bought Altria was because I had read Jeremy Siegel book the Future for Investors why the tried and true triumphs over the bold and the new. In that book he discussed how from 1925 to I believe 2003 like you mentioned Altria was the best performing stock which was such a shock to me because you know there’s kind of a perception that in the stock market in order to produce market beating returns over time you have to take huge risks.

And his book really kind of disproved that and showed that what really drives returns over the long term is earnings growth and then reinvested dividends and that’s sort of sparked my interest in dividend investing.

Nick: now would you say that from the beginning you were predominantly a dividend investor or has your investment philosophy changed over time?

Bob: my investing philosophy has kind of changed the same I’ve always been attracted to dividend stocks and value investing. You know the research has been pretty consistent over time that dividend stocks particularly those like the dividend aristocrats that we write about every day and that raise their dividends each year significantly outperform the overall market.

Nick: yeah definitely going back to your college days you mentioned that you changed your major halfway through. I’m curious as to whether you were something completely different like say a biology major or an engineering major or were you always interested in business from the beginning.

Bob: uh you actually got it right I was a biology major because I thought I wanted to be a dentist. but that’s just really was about where my area of interest was and so I moved into business because I thought it would just be a better path for me and as I say the rest is history.

Nick: that’s super interesting to me because I had the exact same experience in my first year of college. I was doing biology as well and I just really didn’t like it I wanted to be a doctor.

Bob: I just said no kidding because that’s such a coincidence.

Nick: yeah hilarious you know so it’s really funny it’s really amusing me and I did a year of biology and I hated every second of it so I basically went to the academic advisor for that department and said I don’t like biology I like numbers what can I switch to that will still allow me to graduate on time? and that led me to switching to a double major in math and stats which is not super applicable in the business world but I definitely enjoyed it a lot more than a biology degree that’s for sure.

Bob: yeah I totally agree I do really much enjoy it either I hated the labs and so just wasn’t a good fit me.

Nick: yeah definitely now speaking to someone with more formal business training than I have. Would you say that you’ve noticed that there’s a wide divergence between stuff that actually works in the real investing world versus the things that they teach you in conventional academic financial theory?

Bob: you know what I do think there’s a difference in school it’s very academic obviously so you learn all the formulas you learn time value and you learn you know how to use the cash flow register on your financial calculator and you go through discounted cash flow.

When I started to invest in the real world with my real money I quickly found that a lot of those models are based on assumptions and you can trip up pretty easily if you are overly aggressive in what you assume in terms of a company’s future growth rates and how you discount that back.

And so I learned a kind of the hard way early on as I’m sure many other investors did that you know the old saying applies garbage in garbage out. So if you’re too unrealistic about your projections then things don’t go very well and so I found that valuing dividend investing was just far more effective in my case.

Nick: you mentioned having to learn the hard way that those types of models don’t necessarily work in practice. is there any one particular investment or one particular learning opportunity that you think would be worthwhile to share with our listeners?

Bob: uh well I bought a few stocks right before the Great Recession hit because that’s when I was just starting my investing journey. you know I I can’t really remember what those were but a lot of them were kind of the high-flying tech stocks of the day not many paid dividends and my Altria stock pretty much destroyed them all in comparison especially through the Great Recession and even afterwards.

So that kind of reinforced the lesson of valuing dividend investing and that the slow and steady is Jeremy Siegel wrote kind of hence outperformed all else.

Nick: I completely agree with that now thinking about you know good investment solid core holdings in your portfolio now I’m curious to hear about your investment due diligence process and what why what you would recommend what strategies you would recommend that our listeners follow if they want to find compelling and conservative and save long-term investment opportunities?

Bob: sure of course well I think before anyone buys any stock it’s critical that the investor understands what a company does its business model how it makes money the products it sells who its customers are and just as importantly who its competitors are you really have to get a good idea of what the company does because I think that there’s a tendency to views stocks as just sort of gambling chips at a casino.

But that’s really not how it works in the real world and so understanding a business through and through is the first step and I think reading through a company’s annual reports their SEC filings the 10 K the 10 q use going through their investor presentations listening to conference calls going through their earnings releases all of that is really critical to the fundamental valuation process.

Now once that is done I think I’m the best investment opportunities are companies that are profitable have strong brands have growth potential because obviously you don’t want to get sucked in the value traps. You know you want to hear 30 years from now but will have made more money over the long term than they do today.

I look for strong balance sheets and strong economic moats which is a term that was popularized by a Warren Buffett which describes companies that have competitive advantages that can last over many years.

So just in a nutshell I guess those would be a few of the key themes that I focus on.

Nick: you mentioned the concept of a competitive advantage or an economic moat as Warren Buffett puts it and I could tell just from the writing you do as sure dividend and the way you approach investing that it seems like he’s had a or his approach has had a pretty big impact on the way that you approach investing.

Are there any other kind of mega super investors or you know high-profile institutional investors that have had a big impact on the way that you invest your own money?

Bob: yes absolutely Seth Klarmann is someone that we follow over it closely because he’s a very famous value investor he sticks very rigidly to those core value investing principles. I’m also a big fan of Peter Lynch although he’s obviously no longer a manager. His book One Up on Wall Street is a book that I would recommend to anyone who is interested in buying individual stocks and he was of course the former manager of the Fidelity Magellan fund which was such a strong performer mutual fund during his tenure there.

So those would be some of the high profile investors that I’ve learned a lot from their work and I employ those practices every day.

Nick: good to know thanks for sharing.

when it comes to your due diligence process which we talked about later would you say that there’s a sorry which we talked about earlier would you say that there’s a particular financial statement or financial metric that you tend to rely on heavily when doing your due diligence?

Bob: absolutely my favorite financial statement is the statement of cash flows which can seem similar to the income statement but has a very important difference which is that earnings per share which is at the bottom of the income statement can be managed by executives and management at a company. they can you know take charges against earnings or exclude things to come up with an adjusted earnings figure and that can be a little misleading at times it can kind of skew the image of how a company is really doing.

Whereas the statement of cash flows can’t be faked because that focuses purely on the cash in and cash out of a company and if you are to calculate free cash flow which is just the operating cash flow – to capital expenditures you really have a very pure and true sense of how the company is performing from a cash flow perspective. Which in my opinion is more important than earnings per share.

Nick: do you think that free cash flow is still a highly useful metric when it’s applied to companies that have varied capital like business models like say oh maybe an insurance company or a technology company?

Bob: not in all cases. No I do agree that in some cases statement of free cash flow it might not be the best metric to use when evaluating a stock because like you said certain industries life insurance companies they’re not going to show huge levels of free cash flow. So in those instances there are exceptions to every rule and so for an insurance company you know looking at the balance sheet and the income statement might be better. But I think in most cases cash flow does tell the story.

Nick: yeah I mean I can definitely appreciate that perspective the the ultimate goal of any rational investor is to generate a steep a stream of cash flow for themselves from their investment portfolio and you really can’t do that unless your investors are generating cash flow of their own which they can send back to you.

Bob: agree.

Nick: now speaking of dividends and you know cash flow and passive income what’s your opinion on share buybacks as a you know versus dividend payments and other capital allocation policies do you have a preference would you rather your investees buy back stock or send you dividends?

Bob: my personal preference is for dividends. I like to get paid real cash that being said I do see merit in share buybacks because when used properly they can grow a company’s earnings per share and they offer a tax advantage status over dividends. you know as you know stocks that pay dividends to shareholders not only does the company pay tax at the corporate level but then the investor pays tax on the dividends and so dividend stocks are succumbed to double taxation which provides share buybacks with an advantage.

The one caveat to that is when share buybacks are not used appropriately in my view which is when companies will issue share buybacks only to offset the dilution from share based compensation. in other words companies some will award huge amounts of stock options to their management team and then they’ll have to spend a lot of cash flow to buy back shares to offset the dilute of impact from that. So that’s an instance in which I don’t favor share buybacks.

But in all in all else being equal I just tend to favor dividends because you know dividends can’t be faked it’s real cash going in an investor’s pocket which for many investors such as retirees can do so much good for them by allowing them to spend that money on maintaining their lifestyle paying for necessary expenses. Whereas you can’t really do that what should let’s share buybacks.

Nick: I have a company in mind when I ask this question so I’ll share my answer after but I’m curious are there any companies that come to mind right now as examples of companies that are buying back their own stock when it is irrationally overvalued?

Bob: uh yes well letters there’s many instances of that and that’s a great point that’s another reason why I’m slightly skeptical of share buybacks is that you’ll notice share purchases tend to be conducted at the wrong time. share repurchases tend to increase quite a lot when the markets are running up like they are now which does make sense because companies have more cash flow available to buy back stock when the economy is good and profits are up.

But nevertheless they do tend to buy back shares after their share prices have gone up quite a lot and then during economic downturns when their share prices are much better bargains share buybacks tend to dry up.

Nick: so are there any examples of companies doing that right now that you’d like to share with their listeners?

Bob: um well I would say I mean obviously the technology industry is a huge area where share buybacks are prevalent. but even within technology you can find companies that are doing it well and those are the ones that I would tend to favor like Apple for example or IBM is another company that steadily reduced its share count over time.

So you know you can think in any industry you’ll find companies that are doing it properly and others that aren’t and the ones that aren’t are the ones that you want to avoid. I don’t have any specific stacks off the top of my head but I’m sure that we’ve run across them before in our research.

Nick: yeah definitely I mean one that comes to mind for me and I actually haven’t looked at them in a while so maybe it’s different now. but McDonald’s stock I think is a little bit overvalued and the company’s still aggressively buying back stock which I don’t think is probably the best use of their shareholders money.

Bob: I would agree and it’s disappointing almost because so many of the dividend aristocrats of which McDonald’s is one seemed to be at least fairly valued not overvalued. And so you know what the markets haven’t run up for virtually the past decade uninterrupted it’s just a lot harder to find stocks that are still attractively valued and you know the economy is doing well so there’s strong profitability for most blue chips and that’s why they’re buying back so much stock.

But like we’ve discussed at these prices they’re probably not getting a great deal on those shares that they’re buying back.

Nick: yeah definitely so we understand now that you like you prefer dividends over shared buybacks which makes sense. what are your thoughts on special dividend payments?

Bob: I like special dividends you know I think any dividend is a good dividend. special dividends are great I happen to own some Ford stock and they a couple years ago instituted a policy of paying a special dividend each year when their profits are strong enough to justify a special dividend and it can be kind of a nice cherry on top of the sundae you know each year to have a little bit extra dividend coming in so I certainly don’t have a problem with special dividends.

Nick: I’m not familiar with Ford special dividend policy actually. So how much I’m curious I know that’s a relatively high yielding security already how much additional yield would you receive as a result of those special dividend payments?

Bob: well it depends on how much they pay I think last year forward special dividend was a nickel per share and this year it might be 10 cents although I would have to double-check on that. but if let’s assume that it’s 10 cents this year with their stock price around $10 a share it’s about an extra 1% return and as you said it’s already such a high yielding stock I mean the dividend yield from the regular dividend is over 5%. So you know you’re looking at a total yield of about six and a half percent I think this year based on where Ford stock is currently trading. So it’s very attractive for anyone who appreciates or desires income from their investments.

Nick: yeah for anyone who is unfamiliar with the Ford investment thesis one of the big reasons why they’re able to trade us such a high yield without paying out an unsustainable dividend is because the price to earnings ratio is just absurdly low it’s in it’s in the single digits. I think the last time I checked it was around five or six times earnings which is just unheard of for such a blue chip company.

Bob: yes it is and GM is about the same valuation GM has a bit lower of a dividend yield and Ford but they’re both trading as you said very low P/Es in the mid-single digits.

Nick: yeah definitely a unique investment proposition there. So we’ve talked a lot about on this call so far but when to buy a stock and you mentioned you like looking for companies that generate gobs of cash flow and return those cash flows to investors and have business models that are generated by strong brands with high margins and loyal customer bases.

The opposite of buying stock is selling a stock and that’s the other component of portfolio management in your opinion what are the key signs that an investor should sell stock.

Bob: well there’s three things that I would look for if I were ever to decide to sell a stock and I have sold some stocks occasionally.

The first thing I would look for is if a dividend is cut and that has an obvious implication for investors that you will lose out on a lot of the dividend income that you had been receiving and the other part of that that’s unfortunate is that when stocks cut their dividends they usually will see a huge drop in their share prices as well. so a dividend cut is usually grounds for justice far as I’m concerned.

Another instance would be if the business model is broken if the fundamental case that you had for buying a stock it’s no longer there. for example if a company has a huge acquisition that seems to be a bad acquisition in a waste of capital or if there’s a some sort of a scandal or an you know an accounting scandal for exists for example or changing the management structure. Anything that causes the reason why you bought the stock in the first place to be no longer true could be reason to sell.

And the last reason for me would be extreme over valuation which is a good problem to have because that means that you’ve bought a stock at a fairly low price and it’s gone up a lot and now the evaluation has gone ahead of where you personally believe fair value should be. and that’s one of the principles that you use very strictly in our analysis of stocks and for example if a stock is trading at about a hundred and fifty percent or more to our estimation of fair value it’s now a sell candidate and the reason for that is to protect your profits to harvest those gains before the evaluation adjusts back lower.

You know it’s pretty simple when you think about it it’s buy low sell high and so those three principles are considerations that I think about if I’m thinking about selling a stock.

Nick: now your last sell criterion which I completely agree with by the way it sounds like you’re basically trying to avoid bubbles within the stock market you’re trying to sell things when they’re irrationally overpriced and reinvest those proceeds into opportunities that just make more sense.

When you look around today’s stock market do you see any individual securities or baskets of stocks or even sectors that you would say are in a bit of a bubble right now?

Bob: oh well sure yeah I definitely think some of the large cap tech is in a bubble it’s not close to it particularly with the internet stocks you know Amazon, Netflix, Facebook, they’ve been popularized as the FANG term they trade for huge value in some cases over a hundred times even forward estimates obviously they don’t pay dividends and they might never and in those cases I think investors buying it these levels could be setting themselves up for pretty poor returns going forward because even if those companies continue to grow at a high rate and they probably will,

They have to grow at such a high rate to justify their valuations that returns could be quite low even if they continue to grow and that’s what we saw in the late 90s in the dot-com bubble is that stocks like Cisco for example or Microsoft their market caps soared above 500 billion in some cases and they had to spend the next decade sort of growing into those valuations. And so investors who had purchased those stocks in the late 90s generated returns of almost zero and in some cases negative returns and it’s not because the company did poorly as I mentioned. The company itself continued to grow but they had to grow into those valuations and so that’s something to watch out for.

I think in other areas of the economy and other sectors industrials are a bit of a concern. There’s a group of dividend aristocrats from the industrial sector that are very strong businesses they have great products and strong industry positions and competitive advantages stocks like 3m, Emerson Electric, Dover, Illinois Tool Works, they’re very strong businesses but as we’ve written repeatedly about them their stock prices to start price attractively enough to buy today.

Because they’re trading at price to earnings ratios I think near 30 and they will continue to grow earnings probably in a high single-digit to low double-digit range but the risk of the contracting valuation multiple is so severe that even if they continue to grow earnings and pay their dividend yields. Total returns could be quite poor and so the industrials would be a group that I’m slightly wary of right now.

Nick: thanks for sharing that was actually super interesting because I if you were to ask me the same question I would have echoed your thoughts about the technology sector and I agree with your thoughts with the industrial sector it just wouldn’t have necessarily come to mind for me but you’re definitely right there those stocks are trading at valuation multiples that probably don’t make sense relative to how fast they’re growing right now

Bob: yes like so and also when you look at their historical valuations these stocks are trading at price to earnings ratios in the mid-teens not that long ago just a few years ago and now their valuations will go on up far in excess of their earnings growth in some cases and so that’s a dangerous sign to look out for.

Nick: yes definitely I’m going to flip that question on its head and ask you basically the opposite question. Where in today’s stock market do you see the greatest opportunity for investors?

Bob: well that’s a tough question because value is really hard to find you know with the S&P 500 on average trading for a price to earnings ratio above 25 it’s really hard to find any areas of the market that are really undervalued.

I do think there are pockets of value that you can still find. I think the energy sector looks pretty good right now after having suffered a few really bad years with oil and gas prices plunging since 2014. There are still some really strong stocks like Exxon Mobil and Chevron that have pretty modest valuations and strong dividend yields of close to 4%.

I think pockets of retail still look attractive because retail is suffered so much in the last few years as Amazon looks like it’s taking over everything. So that’s kind of compressed valuations there and dividend yields are a little higher as a result.

So there are still pockets of value I think health care looks pretty strong although valuations are definitely higher in health care but I think those valuations are justified for stocks like Johnson & Johnson or Pfizer. They’re not the cheapest stocks around but they have such strong long-term growth potential because we’re in an aging society and demand for health care is only going to grow. Probably at a rate that’s fast sir than GDP in the US and they have strong so in that situation I still reasonably priced.

But outside of that like I mentioned I think it’s really challenging to find value right now.

Nick: what are your thoughts on the retail sector?

Bob: well retail is obviously hard time comparable sales for a lot of large retailers particularly department stores and specialty retailers are challenged ecommerce is obviously where the growth is in retail and companies are having to spend so much to compete with Amazon and then you add on top of that that ecommerce is much lower margin.

It is compressing earnings and consequently valuations but that being said I think the large retailers like Walmart, Target, Costco, they have entrenched themselves so deeply that they’re not going away anytime soon. Their valuations are pretty reasonable in the mid-teens I think for Walmart and Target and they have strong dividend yields and they raise their dividends each year. so those stocks I think are still attractive.

Nick: yeah I definitely echo all your thoughts there. Taking a more narrow view are there any individual investment opportunities individual securities that stand out to you as being particularly compelling right?

Bob: now um in retail or just in general just in general sure well I think if you look hard enough you can still find value in just about every sector I think from the sectors that we’ve talked about in healthcare I still think Johnson & Johnson and Pfizer are strong I think Cardinal Health is very undervalued with a strong dividend yield and it’s also a dividend aristocrat.

In retail I think Walmart and Target are still fairly valued although they’re not quite as cheap as they used to be and for investors who are willing to take a little bit more risk in retail I think Macy’s is actually a pretty attractive opportunity here.

Macy’s has been one of the hardest beaten down stocks in all of retail I think it’s kind of a poster child for what people think will happen to retail now that Amazon is taking over. But there’s a lot of value to be found with Macy’s they have huge real estate value on the balance sheet they had an institutional investors of their Star Board produce a great presentation and Starboard estimated that Macy’s real estate was worth at least 15 to 20 billion and when you consider that the entire market cap on the stock is I keep 8 billion that essentially means they’ve got about twice their market cap and real estate value and that’s essentially valuing the retail business itself as though it’s worthless Macy’s is quite profitable .

There’s a strong case I think to be made for Macy’s they have a very high dividend yield I think above 6 percent and a very low valuation it’s a little bit riskier obviously because they don’t have the same scale as a Walmart or Target but for investors who are willing to take a little bit more risk I think Macy’s is a pretty strong value.

Nick: yeah definitely I’ve read that institutional investor presentation from starboard value and they made some really compelling points in there.

I think that Macy’s recognizes the value of the real estate because the last time I looked at them which would have probably been about three months ago now. But the last time I looked at them in their quarterly earnings presentations, management seemed extremely focused on harvesting the value of the real estate in their poor-performing locations and then using the proceeds from asset sales to perform their best loop or to improve their best performing locations and open new stores in more compelling locations. So that’s definitely a unique investment opportunity there.

Bob: yes I agree and I think doing a little bit of trimming the portfolio can ultimately help because I think the simple reality is that we became overly retailed in this country. Just too many stores and with growth in e-commerce a lot of retailers had to close some stores which isn’t necessarily a bad thing because as you suggest that the remaining stores can improve their performance.

Macy’s can use the proceeds from any asset sales to pay down debt improve their balance sheet and invest in new growth initiatives like backstage which is their off priced channel designed to compete better with specialty retailers on the discount side like TJX.

I don’t think the store closures are the end of the world for Macy’s and meanwhile they’re able to hold on to their prized properties like Herald Square and the others that are hugely valuable to them.

Nick: definitely I mean Macy’s is undervalued and you gave a fantastic list of other investment opportunities that are also undervalued. Do you have any suggestions for investors who are struggling to come to terms with buying stocks in a market that is on average so far above its long-term historical valuation averages?

Bob: um do I have any advice as far as how to get started or whether to be investing at all.

Nick: yeah I guess investors who are psychologically struggling with rationalizing making buy decisions when the stock market is on average overvalued?

Bob: yes that is a tough question it’s certainly something that I can empathize with because you don’t want to sit on the sidelines and not invest because you know you can miss huge bull markets like the one that we’ve seen for so many years.

But on the other side of it you don’t want to put your money in at the top. Ultimately I think that being invested will always be not being invested and I think a good strategy to try to mitigate the risk of buying an overvalued market would be to dollar-cost average to invest a set amount of money each month or each week.

And what that allows for is when the market is very high and stock prices are high you’ll buy less with that set amount of money and then when the market goes down you’ll buy more. So kind of helps smooth out the fluctuations.

But I think the biggest takeaway is that everyone should be invested US stocks particularly those that pay dividends and raise them each year are the best wealth building mechanism that we have.

They have far outperformed any other asset class and then includes bonds commodities and real estate so as I mentioned I think to sum it up being invested will always be not being invested.

Nick: definitely I act without a hundred percent I mean for me personally I am fully invested right now even though the market is basically as overvalued as it’s ever been when measured by the Shiller p/e ratio and I mean the best advice that I have is to just keep buying.

Bob: yes I agree completely and considering there’s just such a lack of alternatives there really doesn’t seem to be a better place to put your money. interest rates so low if you put your money in a savings account nowadays I mean you’re lucky to earn one and a half percent which really doesn’t even need inflation and so in real terms if you’re just putting your money into a savings account you’re losing money you’re losing purchasing power.

So you almost don’t have a choice but to invest because it’s really the only place to earn a decent return nowadays with interest rates so low.

Nick: yeah I definitely agree with that. And speaking on the topic of valuation do you see any significant risks that you think could trigger a major stock market correction or bear market?

Bob: well sure there is always risks I think the US economy is in a good place GDP. GDP growth continues to accelerate above 3% unemployment is below 5% the housing market is strong so there’s a lot of positive indicators.

I think the biggest risk would be number one over valuation which is in itself can be a risk if the markets are simply overheated and priced too far above the likely earnings growth for the S&P; 500 you know share prices could suffer. I also think rising interest rates is a risk and we’ve seen that in the past couple weeks with the dramatic volatility that we’ve seen in the markets. You know rising interest rates make borrowing more costly and for certain asset classes like REITs and MLPs that’s a particular issue.

I would be wary of stocks that don’t have strong balance sheets that are very heavily indebted and highly leveraged because rising interest rates will particularly impact those companies it will raise their cost of borrowing and that could really have a negative impact.

Nick: yeah definitely those are all very solid points you mentioned REITs and MLPs in that description and that’s an asset class that a lot of investors don’t really dive into. What are your thoughts on those two those two asset classes?

Bob: well I think REITs and MLPs can serve up a very valuable purpose primarily income they’re very popular among retirees and retail investors because REITs and MLPs typically pay dividend yields three to four percent above the sp500 average and even more in some cases.

So they’re great investments for income and so those are ones that I would recommend for anyone in or nearing retirement who will no longer be able to rely on a paycheck for unemployment and would like to replace that income somehow.

Nick: yeah definitely I mean I’II echo your thoughts there 100% I think they’re a really unique income investment opportunity for investors who need that with.

You know with that said do you have any investment that you see right now that you would classify as your favorite income

Bob: my favorite investment opportunity well I would stick with the tried and true the dividend aristocrats those are stocks in the S&P; 500 that have raised their dividends for at least 25 years or longer I think for investors with long time horizons that’s the best place to generate sustainable wealth over the long term. Because those are the stocks that have been proven to outperform.

For different types of investors there are other asset classes that might be better and as we just discussed I think for retirees MLPs and REITs look pretty attractive. They’ve been beaten down pretty hard since the start of 2018 because of the risk of higher interest rates. And so you can get some high-quality reads and MLPs for pretty attractive valuations and pretty high dividend yields.

For investors who need or desire income from their investments I think rates and MLPs are looking pretty good.

Nick: awesome I agree with you a hundred percent there. I wanted to close up by asking you one interesting and kind of profound question and that’s this.

If you had one piece of advice for an investor who is just starting today what would it be my one piece of advice for an investor beginning today?

Bob: would be start investing as early as you can and invest as much as you can because it will well be worth it.

Nick: awesome I agree with that completely.

Thanks so much for your time Bob it’s been a pleasure interviewing you today.

Bob: thank you Nick I had a great time pleasure to speak with you.

Nick: thanks so much for listening to today’s episode everyone.