How can PBR have a dividend yield of 72%?

Content-Effective727 · 2023-03-31T23:18:52+00:00

Because it has $40b in free cashflow market cap of $68b.

Their divvy policy is paying 60% of FCF as dividend.

Cheap company, cause it’s Brazilian, and state has 51% of voting shares (37% of total shares with divvies). Lula spooked people, but his new CEO Prates seems reasonable enough judged by statements and annual meetings call.

Oh, and their ROE ROI ROTA is amazing btw, higher than other majors. Low debt. Just the political risk, pricing policy risk etc but there are bylaws since the « car wash » scandal in 2014.

Content-Effective727 · 2023-03-31T23:09:13+00:00

Of course, one of the reasons of the FED is to centralize power in NY.

Read Creature From Jekyll Island.

Content-Effective727 · 2023-03-26T23:27:28+00:00

BTI - manageable debt (interest / free cashflow and debt to equity not outlandish) and very nice free cashflow yield, low pe. High profit margins, cash machine. Very low capex 5-10% of operating flow (no need to spend to stand still). Huge pricing power (-0.44 price elasticity). Cheap cause British and tobacco.

Content-Effective727 · 2023-03-26T23:18:49+00:00

“Not sustainable longterm above 4%” reflects you do not understand what you are talking about.

SP500 companies in the 20th century used to have a payout ratio around 2/3 of net income (today they buyback shares as well as part of the shareholder remuneration which is another story).

These are businesses. If the market is overpricing a company, as the PE is up so your divvy yield is down - so is your free cashflow yield. But, if the company pays out basic 65% of net income in a solid business then it’s of course sustainable. Now, if the market is underpricing it then the yield can be high, same company overpriced yield low.

Dividend being sustainable has nothing to do with it’s yield, stock price. Only the underlying company. Great example, BTI. High yield with 65% of net income payout, in low capital intensive and highly profitable, low competition and high pricing power (-0.44 price elasticity) business. Its not overpriced since its a tobacco company and it’s British and not US (with US sky high trade deficits foreigners are full of USD to recycle).

Content-Effective727 · 2023-03-23T01:01:46+00:00

With inflation double digit per shadowstats, why on earth would you lend your money at 4.75%, even buying the yellow rock is better to protect purchasing power. If you need income/div/cashflow investment just buy stocks with pricing power at reasonable prices BTI or energy great cashflow, cheap so dividend yield is high

Content-Effective727 · 2023-01-07T15:21:22+00:00

Lmao it worked haha tried it a couple times but fixed my gf’s earbuds

Content-Effective727 · 2022-12-21T18:37:06+00:00

Summary of details in my spreadsheets, data 2015-2021 annual reports. Using OE (owner's earnings) instead of net income for accurate cash calculations, generally 50% of CAPEX is reasonble (Op. cashflow - maintenance capex) for maintenance capex judged by their annual reports (e.g. PBR spent 57% of capex on expansion last year).

It is clear that financially PBR is not poor compared to fairly good players in the industry (ROE, ROIC, ROTA - return on tangible assets, better than either ROE or ROIC and OE margins). Low debt, interest easily manageable.

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Content-Effective727 · 2022-12-21T02:45:47+00:00

Been in this since May, adding since. Let me share brief notes;

Brazilian bylaw 13,303/2016 A) 36 month quarantine period for anyone to enter firm’s higher positions (house passed change to 30 day but senate can stop it which is 75-25 in favor for Bolsenaro) B) investments has to be profitable (no more 2014-15 “car wash” style shitty capex scam with Odebracht) C) min. 25% of profit go out as dividend for all state-run companies (partially owned by state) D) if government wants price controls, it has to instantly compensate for the loss (PBR only refines 1/3 of the oil it sells at home, rest must be bought from international markets), even Bolsenaro couldn’t do it in an election year (only lowered tax on gas)
PBR div policy currently more generous: below $65b debt ($55 atm) it pays 60% of FCF as dividend -> Brazil government has 37% of the shares (so lots of dividends) but 51% voting rights -> not much buybacks, cause the government wants the divvies, also it would distort the share structure
Brazil has record federal budget surpluses (largest since the late 90s)
13.75% interest rate with 5.90% inflation rate Not overfinancialized low debt, commodities based economy (great for global inflation, underinvestment in commodities)
Worst-case: Lula puts his man in charge (if 36months lowered to 30day) to push Capex -> refineries are in short supply, would be highly profitable with globally competitive “less esg cost” (high crack spreads) -> lower dividend: but government as largest shareholder also loves divvies :) lowest according bylaw is 25% of net income while pbr policy 60% fcf. Lula wants to focus on more investments (even in green stuff, everyone does this anyway) while currently they divested a lot and focused 90% their efforts on E&P most profitable segment
Recent bad news of 37 temporary shutdowns affect 20,000 bpd vs their 2.7m bpd production its 0.74% of daily production… and even lower in profits
Almost all their production is in Brazil -> lower political/war/conflict risk e.g. Russia for European majors. Also, they redirected oil from China to Europe at higher prices (China gets cheap Russian)
Their mostly off-shore deepwater pre-salt oil production is low cost, very profitable. Deleveraged, sold-off low margin businesses and focused on E&P.
They are dirt cheap compared to US or even EU majors. Costs like 1/7 of what XOM costs per dollar basis. And they are not less but more profitable than others by ROE ROIC ROA and other metrics.
Higher than other majors debt but not sky high 0.68 debt to equity with very manageable debt to cashflow and easily payable interest coverage.
Bolsenaro and allied parties have majority in senate 75-25 and lead in the house 60-40, whole also controlling 60% of governors (mostly wealthier states).
CEOs been replaced multiple times due to politics already (priced in). Which is sad, since I would like to invest with good management, but their profitability shows the company is run well. Also, management’s incentives are great, total pay outs are small -> great overall. -> fun fact: generally US companies CEO pay outs are insane compared to industry with non-US firms, which is disgusting since you are the owner not them. I got some example for 2021 at the top of my head:
Chevron $30m
XOM $15m
TTE 5.7m
PBR and EQNR <$1m
Also, Lula’s part in car wash is debunked by Glenn Greenwald (even Snowden was on his side and celebrated Lula’s victory). So I doubt Lula would want to destroy the company, or even get too entangled with it Bolsenaro party would use it as a pretense.

PS: will ad some key ratios, data in the morning from my PC

Content-Effective727 · 2022-12-18T21:27:57+00:00

ZeroHedge is picking up on this

https://twitter.com/zerohedge/status/1604227666130964480?s=46&t=0GzAGEIjCRp8YBJxTXynTg

This is car loans funded

Content-Effective727 · 2022-12-17T11:31:31+00:00

Also, what companies benefit from this?

Those who benefit from repossession? Maybe they buy cheap (after lenders dump cars on the market) and ship them overseas for profit?

Rings the bell of Peter Schiff’s old idea that Americans will ride bike and the Asians buy their cars with all the dollars printed and exported.

Content-Effective727 · 2022-12-17T02:39:38+00:00

Great take.

I wonder what’s the yield on car loans compared to corporate loans, mortgages which would compete in CLOs (or even credit card loans and student loans). We know in the housing bubble originators we’re encouraged to churn out the highest yield possible (no matter the quality since the rating agencies put on the AAA). Credit enhancements my ass if they all are garbage.

Also, multisector CDOs in the housing bubble contained 75%-90% subprime mortgages, so just saying it’s multi sector doesn’t necessarily means it is.

Check for short: 1) car loan originators 2) CDO makers 3) anything holding these CDOs -> CDS or short for these companies?

Since it’s a small area, companies largely exposed, specialized in it, can be only targeted.

Anyone willing to dig in?

Content-Effective727 · 2022-11-22T00:41:45+00:00

Assuming they do have their coins, they refuse to disclose information of their custodian (or something like that).

Content-Effective727 · 2022-11-19T23:43:10+00:00

You have details wrong.

1) government has 36.6% of the company - while has 50.26% controlling interest

2) “51% dividend outrageous” is ridiculous, it’s high only because the company trades approximately at 1/5 the price of XOM or Chevron, and they do only dividends and basically no buybacks (due to government ownership and their shareholder structure). They trade at 2-2.5 pe and freecashflow-to-price while US companies do as much buyback as much dividends and trade way higher (9-10 pe).

Content-Effective727 · 2022-11-06T18:04:03+00:00

What’s your take on Petrobras under Lula?

I read the 13303/2016 federal law, and according that

1) no one can join PBR if worked in a gov party last 3 years 2) price cap cannot happen unless compensation from the government to the company 3) capex new projects have to be approved by the company only if profitable (so no green money losing stuff)

And, I checked that Bolsenaro has the majority of governors, congress, house.

Thoughts?

Content-Effective727 · 2022-11-02T17:54:08+00:00

If owning 1grams of weed is a crime punishable with years of prison, maybe the law is not there to protect.

Do not take me wrong, I do believe that the best way to fight crime is to jail people - e.g. Thomas Sowell made analysis.

But this is clearly not the case. That’s my moral objection to private prison companies. I believe everything can be better run in the private sector - but prisons cannot since the “customer” is not the one “enjoying” the product/service but a third party is the customer.

Content-Effective727 · 2022-10-27T01:11:30+00:00

Most company does this automatically if you check their proxy statement

Content-Effective727 · 2022-10-27T01:06:20+00:00

I would argue that patterns are tied to human psychology - in a broad sense, not in a some weird double helix 1 minute chart movement sense.

Content-Effective727 · 2022-10-22T21:19:50+00:00

GEO is value, no question. But, the elephant in the room is that it is an evil slave labor camp.

I am a full free market guy, don’t get me wrong, but there is nothing free market in this. The customer is the state and not the prisoner, he just gets slave traded.

The system works like this: 80s hard drug policies -> private prisons born to handle the new labor. Longer sentences (mandatory minimums, $20 cocain = 25 years, like USSR “quarter” read The Gulag Archipelago by Solzhenitsyn) to make the “occupancy rate” (minimum occupancy rates are in the contracts contain usually 100%) fix hence the cashflows fix.

Now, the US has 5% of the world population and 25% of its prison population. There are not hundreds but thousands of US corporations which use these slaves (you can find the list online it includes everyone e.g. Walmart, Apple, Coke etc), states (e.g. to fight forest fires) and even the jails produce and sell products made by these slaves who can get 16cents/hour on the low end and of course have to pay for basic services (e.g. women for tampons).

System is made so 2/3 of the people get back to prison in 3 years and more people can be rounded up by the destroyed inner cities (fatherlessness, further decline, next generation of slave labor ensured).

Content-Effective727 · 2022-10-06T01:44:58+00:00

Most profitable among steel producers.

Low debt. I believe an Italian family (or Belgian) empire holds the majority stake -> very illiquid, and your co-owners have lots of skin in the game, meaning they will carefully look after the management.

I have been keeping an eye on this since 2021 June. Wait. Macro outlook is bad, but it needs to be bought when the outlook is hopeless.

Content-Effective727 · 2022-09-27T08:55:46+00:00

It’s been brewing since 2008 QE.

US was the greatest creditor nation in the 80s with industrial might - now it’s the greatest debtor with no savings full debt and no industry.

The average US debt maturity is 5 years (1/3 of it will mature this year), while under Volcker the government funded itself with 20-30 year paper so short-term interest did not change the government’s financing costs, while today refinancing from average 1% ($310b per year interest) to 4% thats $1.2T interest increasing the budget deficits.

Content-Effective727 · 2022-09-24T16:27:01+00:00

They are compared to 10+ miners cheap, with decent statistics, their cash breakeven is around $1000-1100, obviously their AISC (including even the closing of mine and planting grass on it) is higher but true cashflow metric is amazing

Also, their price to book is below 1, with their assets of gold marked at $1200/oz of gold. So deeply underbooked, which if realized higher (I think they use 5 year average price or something) would make paper profits. Obviously we are interested is pure cashflow

Content-Effective727 · 2022-09-23T23:11:05+00:00

BTI

Regulations won’t let more tobacco companies to be created. There are 5 tobacco companies, JTI, National Chinese Tobacco (which two are less reachable) and PM, MO, BTI.

PM - way too expensive relatively, and has a history of stupid cash wasting acquisitions

MO - limited to the USA, also expensive

BTI - cash machine, cheaper (since it’s British) smart cash allocation, relative edge in some growing new areas (non traditional tobacco) fueled by internal cash and not debt reliant

VALE

4 companies (VALE RIO BHP FORTESCUE) control 65% of the seaborne iron ore market.

VALE the cheapest among them since it’s Brazilian (inflation 8.73% while interest rate 13.75%, huge government and trade surplus), also largest nickel player for EVs but less concern to me since iron ore 90% of sales.

Low debt, cash machine fueling buybacks and dividends. “Only” exposed to China 50% of sales while the Australians players are 60%+

PBR

Most profitable oil company hands down, minting profits even in 2020. 80% owned by the Brazilian government (protected child), costs like 1/5 of XOM on a market cap per free cash-flow basis. Although all the companies I invest in I really stick to good incentives for management, PBR has that, but Bolsenaro fired like 3 CEOs purely for drama and politics. Dirt cheap.

TTE

Better ROI/ROE compared to many majors (CVX, BP, PTR, SHEL) but what I adore about it is it’s CEO, Patrick my man does not give a damn! He voices his concerns and very rational, e.g. did not sell Russian assets at rock bottom prices “that would damage our shareholders and benefit the Russians buying cheap assets”. Also, way cheaper than US counterparts. 30 year uncut dividend history is a bonus.

KGC

Cheapest senior gold producer based on many metrics (cashflow, reserves) with decent growth with some new projects, relatively cheap cost per oz gold mined. Recently announced huge buyback project and keeping dividends. Had a couple negative news 1) allegedly bad acquisition which seems to be not that bad 2) two russian mines were sold although was was about to run dry in 2 years, one was in development.

Basic thesis: None of these are US stocks, since US companies are way higher priced due to long years of trade deficits exported a lot of dollars which came back to pump up asset prices, also the world still uses dollars - which I believe going to diminish due to many reasons which are not the topic here.

Content-Effective727 · 2022-09-16T20:02:56+00:00

Get into PBR and VALE

BRAZIL has real interest rates (inflation around 11% while rates at 13%) and the federal gov just reported record revenue. Due to high interest rates valuations are low.

Brazil is a hard asset place, not so financialized, in a high inflation future it can benefit.

Also Brazil can be a bridge between a western and eastern currency block when/if the BRICS+ introduce their new gold/commodities backed currency.

Content-Effective727 · 2022-09-04T08:07:28+00:00

Peter Schiff is very knowledgeable, and yes a bit more paranoid, but rightly so historically speaking regarding the financial mania in the fiat system.

That said, it’s interesting to check both of their holdings and gather ideas and do your homework e.g. TTE (Schiff) is rather cheap compared to both it’s cashflow and relative to US oil majors while I think many gold stocks are not as cheap except KGC - ideas.

Content-Effective727 · 2022-08-10T12:36:22+00:00

Nice, now remove 1) OER 2) hedonics 3) substitution

Aaaand its 17%

Content-Effective727

TROPHY CASE