• The Market Will Keep the Momentum in 2011 (January 15, 11)
• The Market Will Have a Good Run Over the Next Two Months (August 22, 10)
• RAIT Financial Trust - Revisited (August 14, 10)
• KKR Financial Holdings: A Value Investment Pick (August 06, 10)
• Are We Going into Another Depression? (July 05, 10)
• Why RAIT Financial Trust Looks Like a Comfy Investment (Apr 23, 10)
• CELM - Not All Chinese ADRs Are the Same (Apr 22, 10)
• Super Star Pick of the Day - PMI (Mar 31, 10)
• Gold Prices for the Year of 2010 Revisited (Mar 23, 10)
• The Near Term Outlook for Major Solar Stocks
  (Mar 17, 10)
• Value Investing for Your Retirement - Next Pick
  (Feb 20, 10)
• The Near Term Trend for Chinese Solar Stocks
  (Feb 11, 10)
• Where Will Gold Price be Heading for 2010
  (Feb 06, 10)
• Value Investing for Your Retirement - KFN
  (Jan 05, 10)
• Super Star Pick of the Day - SANM (Dec 07, 09)
• Will October's Market Minic September's Comeback?
  (Oct 02, 09)
• Sinovac Biotech: Still Worth Owning? (Sep 21, 09)
• Super Star Pick of the Day - KFN (Aug 31, 09)
• Super Star Pick of the Day - GCI (Aug 27, 09)
• Super Star Pick of the Day - RTK (Aug 19, 09)
• Super Star Pick of the Day - AIG (Aug 08, 09)
• Super Star Pick of the Day - MNI (Aug 03, 09)
• Market Trend and Our Strategy to Pick Our Next Big Winners
  (Jul 25, 09)
• Buying on Fear (Jul 07, 09)
• Hot Stock of the Day - FITB (May 11, 09)
• Hot Stock of the day - BAC (May 09, 09)
• Hot Stock of the Day - BRCD (May 08, 09)
• Hot Stock of the Day - ASH (May 07, 09)
• Value Investing for Your Retirement - MTL (Feb 01, 09)
• Value Investing for Your Retirement - BK (Jan 17, 09)
• Don't Fall on the Trap of Short ETFs (Jan 03, 09)
• Once in a Century Financial Crisis Once in a Lifetime Investment Opportunity
  (Sep 26, 08)
• How Long Will This US Stock Bear Market Last?
  (Oct 13, 08)
• Buy Open Gap Down at Support (Aug 26, 08)

Value Investing Series

KKR Financial Holdings: A Value Investment Pick

August 6, 2010

If you want me to name one stock which is worth for long term investment (buy-and-hold), it has to be KKR Financial Holdings (KFN).

KFN just announced its latest earnings. The company earned $0.51/per share in its latest quarter and earned $1.33/per share for the first half this year.

More importantly, the company raised its quarterly dividend by another 20%: from $0.10 to $0.12.

The following is its dividend history after it resumed its dividend since Q4, 2009:

• Q4, 2009 - $0.05
• Q1, 2010 - $0.07
• Q2, 2010 - $0.10
• Q3, 2010 - $0.12 (expect to deliever this month).

We bought this stock July 30, 2009 at a price of $1.79 and have reduced our cost basis to $1.57 now, using our dividend-reinvestment-plan and will reduce it further to $1.45 if the coming quarterly dividend is to be re-invested.

Now the company's dividend equals to $0.48/year. Let us assume that the company's dividend keeps unchanged for the next two years. That means, our cost basis will be reduced to $0.49 two years from now if we keep implementing our dividend reinvestment plan.

What does that mean? That means our initial investment will allow us to collect a 100% annual dividend after three years of our buy.

That is, we buy-and-hold this stock without any trade during the three year span, our initial $100k investment will distribute at least $100k annual dividend to us (it will be tax free if the money is invested in Roth IRA account). The stock will be traded at least $10.00 then (it is now an $8.50 stock).

Don't forget that the company's annual dividends were well above $1.00 before the current recession:

• 2005 $0.32 (The company did IPO in Q4, 2005 with IPO price of $25)
• 2006 $1.86
• 2007 $2.16
• 2008 $1.80
• 2009 $0.07
• 2010 $0.29 (up to Q3)
• 2011 ?
• 2012 ?

If the company can increase its annual dividend to $1.00 level in two years, our initial $100k investment will give us more than $200k annual dividend.

That is the true investment we have been looking for.

No daily market analysis, no frequent tradings.