Dividend-paying stocks may be the best option for investors looking for income, Jason Brady, managing director and portfolio manager of Thornburg’s limited-term income and U.S. government strategies funds, said at the annual spring forum of the Financial Planning Association’s New York chapter last week. “Stocks are like Ponzi schemes unless they’re paying cash—you’ve got to get someone to buy from you at a higher price,” he said.
Instead, he recommended that investors turn their attention to the yields available from equities. While derided as a waste of money companies could be using to reinvest in growth during the dotcom boom, the opposite is actually true. “You’d think companies that don’t pay dividends would do better because they’re reinvesting the money, but they screw it up,” Brady said, whereas companies that have to pay out a chunk of their earnings to shareholders are more judicious about where they spend what’s left.
Source: On Wall Street
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Fair value is really a simple concept. Given some select information such as dividends, dividend growth, holding period, discount rate and few other inputs, one can easily calculate the fair value of a stock. As with most simple things, the devil is in the details – the inputs must be correct to calculate a reasonable fair value, otherwise, garbage in, garbage out.
Like most investors, I prefer to have it all – a great dividend stock
at a low price. However, this isn’t always possible. As a dividend investor first and a value investor second, I will always favor dividend fundamentals over fair value when forced to choose. If you make a mistake and pay too much for a great company, eventually time will correct that problem. The same can’t be said for a poor or mediocre company.
Source: Dividends Value
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Colgate-Palmolive Company is a consumer products company, whose products are marketed throughout the world. Colgate’s Oral Care products include toothpaste, toothbrushes, oral rinses, dental floss and pharmaceutical products.
CL dominates the oral care category with a worldwide toothpaste market share of almost 45%. The company’s confidence in its growth prospects are reflected in it most recent dividend increase of 20.5%. Historically, the company has produced strong free cash flow. Its debt level has prevented me from purchasing the stock in the past. CL’s debt to total capital has been as high as 91% in 2002. Over the years the company has steadily decreased this ratio to its current 51%. Though it is still above the 51% I prefer, the trend is headed in the right direction and the company’s FCF payout is low enough to support continued debt reduction. I am looking to initiate a CL position in May.
Source: Dividends Value
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Next Jan. 1, a package of tax changes enacted under President George W. Bush expires. These provisions contained a historic change for dividends: For the first time, most were taxed at the same low rate as capital gains. Until then dividends had been grouped with interest, with both taxed at the higher rates levied on wages. In 2003 the nominal top rate on qualified dividends (usually, on stocks held longer than two months) dropped to 15%, where it has been ever since.
Next year, what will the top [U.S.] tax rate on dividends be? The short answer is that the 2011 nominal rate on dividends could be either 20% or 39.6%. Or something else—it is impossible to say given the legislative mood these days. If Congress doesn't act, next year the top dividend rate would automatically revert to 39.6%. But this lapse isn't likely to happen, for a reason many have overlooked. Lawmakers can't simply allow the Bush changes to expire in the way they did with the estate tax, because the lapse would affect even more low earners than high earners.
Source: Wall Street Journal
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“Investors should be wary about becoming overly aggressive with their equity portfolio positioning given the still fragile economic recovery,” wrote Brian Belski, Oppenheimer’s Chief Investment Strategist. They should consider “allocating some portion of their equity holdings toward stocks with solid dividend growth properties in order to guard against periods of potential stock market volatility.”
This week will be a good test if the less exciting, but historically steadier group is ready to retake the high-fliers as many companies typically owned by investors in part for their dividend payouts, like Procter & Gamble (PG)and Exxon Mobil (XOM), report earnings this week.
Source: CNBC
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Picking winning stocks is harder than it looks. Here are 10 rules that will improve your odds of success. These 10 rules of will help you make better decisions. But they are not the final answer. You still must do your research. The more you know about your stocks, the better your results.
1. Diversify
2. Ignore gurus
3. Avoid cheap stocks
4. Follow smart money
5. Profitable
6. Follow the cash
7. Low debt
8. Strong price chart
9 Not overpriced
10. Don't overreact
Source: Santa Cruz Sentinel
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Dividend yields and price-to-earnings multiples are often used as initial starting points when creating a portfolio. Because current market conditions are unstable, as everything from the price of oil to the valuation of the financial sector is constantly contradicted by prominent research reports, investing in cheap, high dividend-paying stocks may be an ideal approach until the future becomes clearer.
High dividend yields are typically achieved by investing in closed-end funds, real estate investment trusts, utility companies and royalty trusts, while pharmaceuticals and technology corporations, for example, usually pay only a modest dividend as they use most of their earnings to fund expansion. Yet, the pharmaceutical PDLI BioPharma maintains their dividend policy to yield 16.1%. Although this is largely due to the decreased share price resulting from continued revenue shrinkage, managements' refusal to cut dividends indicates their belief of prosperity in upcoming periods.
Source: Investopedia
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For a stock to be an effective inflation hedge it must raise its dividend each year in excess of the inflation rate. For a list of stocks with a long string of consecutive cash dividend increases, see this list.
Source: Dividends Value
(Photo Credit)
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When companies decide to pay a dividend, we see that as a commitment on their part. Companies almost never want to cut or eliminate dividends. I see dividends as more like a marriage than a date. It is easier to break up when you are dating than after you’re married. So when a company decides to pay a dividend, it is using one of its capital allocation tools.
If we just chased the highest dividends, it would probably lead us to companies under stress where the market doesn’t believe those dividends are sustainable, which would set us up for those dividends to be cut. Or it leads you into Master Limited Partnerships, REIT’s or Utilities, which are areas we tend to avoid, because, those companies often don’t meet our balance sheet and return on capital criteria. So we don’t hunt for the highest paying dividends we can find.
Source: ValueWalk.com
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Dividend stocks are a proxy for equities, and not a different asset class. For many decades before the big bull run of the 1980s started, investors held common stocks exclusively for the right to receive dividend distributions from corporate profits. Dividend investors live off dividend income. The goal of every investor is to have their portfolio throw off enough income which would be more than enough to cover their expenses. Dividend investors do not plan on selling off principal to live off assets, which is similar to cutting off the branch of the tree you are sitting on.
Spending only income and keeping capital gains reinvested into the portfolio and not spendable is something that many organizations have done for decades. Most endowment funds, trusts and foundations follow the principle of spending only income from dividends and interest or rent and treating capital gains and losses as additions or subtractions to principal. Some examples include the Hershey Trust or the Nobel Foundation. These entities have managed to remain “retired” for far longer than most fee hungry financial advisers have stayed in business. While a typical retirement is expected to last for approximately three decades, investors could definitely learn something from these endowments. They should try to find an optimum balance for sustainable income generation that would provide maximum longevity for portfolios just in case.
Source: Dividend Growth Investor
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There are many common misconceptions about dividend investing. For example, all dividend paying stocks are stable companies. Or, a dividend from a stock will more than offset any losses you receive in share price over the long term. However, there is one that I find most persistent in both new and experienced dividend investors. It is often viewed as a reason to buy a stock, yet it should never be the only reason. I know I have been guilty of basing a buy decision on this misconception in the past.
That misconception is that a dividend stock that increases its dividend is a good buy. Please do not get me wrong, as a dividend growth investor one of my most important criteria when completing stock analysis is a long track record of increasing dividends. However it is not the be all and end all that it can seem like when you read a blog like mine. There are numerous other factors that must go into your decision to buy a stock.
Source: The Dividend Guy
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Dividend stocks are slowly making a comeback, so which ones should investors watch for? Michael Farr, president of Farr, Miller & Washington and CNBC contributor, and Jeffrey Kosnett, senior editor at Kiplinger’s Personal Finance, shared their best plays.
“The great opportunity is not only in underpriced stocks, but in underpriced stocks with dividends,” Farr told CNBC. “But you have to be a little careful, because with tax law changes and Medicare surtax on all types of income coming up, dividends may be a little less attractive in the future.”
Source: CNBC
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If you're looking to get income from your investments, you'd probably agree that more is better -- and you can find dividend stocks that will give you the income you want. So how can you pick stocks that not only pay you healthy dividends now but will continue to increase their payouts in the future?
What's behind a dividend stock
To answer that question, I decided to take a closer look at companies that have put together a long track record of dividend increases. By looking for common themes among the stocks that consistently increase their payouts, we'll hopefully find clues of what to look for among younger companies that don't yet have such long histories of rising dividends.
Source: Motley Fool
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Equity analysts are busy at work estimating earning for upcoming quarters, creating financial models to attain the value of covered stocks, produce research reports regarding economic conditions and companies, and make investment recommendations based on their findings. Since most everyday investors do not have the analytical know-how or even the time to perform their own stock analysis, analyst recommendations are often used as a guide to determine which stocks should be bought or sold. Here we look at seven stocks that carry a buy or strong buy rating and pay investors a considerable dividend.
This list of dividend stocks is composed of a wide range of industries, making it possible for you to choose the one that will best diversify your portfolio. In fact, the only thing the aforementioned stocks have in common is that they are praised by analysts and offer sizable dividends.
Source: Investopedia
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With just 30 component stocks, the Dow Jones isn't a very broad stock index. And since it's full of the big blue chips that never wiggle more than a percent or two in a single trading session, it's often seen as a stodgy grouping of companies without much to offer investors.
But while the Dow certainly has its detractors among short-term traders with a need for instant gratification, these big-name blue chips have a lot of appeal to conservative investors. And some of the biggest selling points for Dow stocks are their healthy dividends. In fact, the "worst" dividend stock out of the top 10 high dividend yield components returns an even 3% annual rate. If you're looking for stable stocks with a hefty dividend payout, the Dow is full of them. To help you get your share, here is an updated list of the Top 10 Highest-Yielding Dow Dividend Stocks.
Source: TheStreet.com
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It is really quite simple if you employ a sound asset allocation model and systematically invest during the good times and the bad. Easy to say, and do, when things are going well, but many people have a hard time buying into a market that has been declining for an extended period of time. To the contrary, many investors sell their positions and move to cash when things look bad. Then move back into equities once they rise for a period of time. Sell at the bottom and buy at the top is not how to make money in the market. Many observers point to March 2009, when the S&P hit its low, as the bottom of the most recent market downturn. If you were following a disciplined approach and bought that month, you most likely are sitting on some incredible gains. Consider the stocks I purchased in March 2009:
Source: Dividends Value
(Photo: gerard79)
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According to Barron's, approximately 75% of S&P 500 members increased their dividend payments for Q110, representing a $4.4 billion net increase, and a major shift from the $39 billion decline from the same period last year. They say that the liquid assets of corporate America amounts to about $3.1 trillion, which could make the potential for further dividend hike's closer to reality.
Conditions for Barron's to rank the best dividend stocks include: dividend yields above 1.8%, rising earnings, and a dividend that was less than 60% of operating profit. In summary, the top five dividend stocks with appreciation potential are...
Source: StreetInsider.com
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WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index. WMT enjoys dominant positions in most markets where it competes. The company continues to gain market share aided by the economic downturn as consumers choose WMT over higher-cost competitors and take advantage of its convenience. Its unmatched scale leads to favorable terms on everything from the products it sells to store leases and distribution agreements. These advantages are demonstrated in the company's strong free cash flow of $3.63/share for FY 2010, up over 23% from FY 2009 and 2.7 times FY 2008's comparative number of $1.33. The company recently announced an 11% increase in its cash dividend. ...
Source: Dividends Value
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Many older Americans face an ugly reckoning right now: To retire on time, they’ll need to increase what they save by as much as 80 percent. But savvy investors are figuring out how to close the gap by turning their savings into extra income. In its May issue, SmartMoney magazine offers a guide to keeping the cash flowing.
With short-term price gains expected to be low, of course, the offense played by stocks may be less Drew Brees football fireworks and more three yards and a cloud of dust. That’s why advisers are reemphasizing dividend-paying stocks, which pay a portion of their revenues directly to shareholders. Granted, the recession wasn’t kind to dividend yields, as beleaguered companies got stingy and cut payments. The average yield of stocks in the S&P 500 is currently 2.0 percent, down from the historical average of 3.8 percent. In the days of go-go stocks, “we would have laughed at that,” says Joan Crain, a senior director and wealth strategist at Bank of New York Mellon. But the trend is turning, as companies see their profits improve. Standard & Poor’s senior index analyst Howard Silverblatt says that since November, there have been around 100 dividend increases and only two decreases; overall, he expects that dividend payments will rise this year after having fallen for the past two.
Source: SmartMoney
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Here is something that you may not realize about Warren Buffett: counting only his take-home pay, the Oracle of Omaha is a pauper compared to his peers. With a yearly salary of just $100K from Berkshire-Hathaway, the grandfatherly Buffett just barely finds himself among the top 30% of earners — a mere pittance for one of the world's richest individuals. But as we all know, there is more to this story than meets the eye. After all, Warren is not exactly wondering where his next meal is coming from... The difference, in this case, is in the dividends.
You see, aside from the paycheck he received from his "day job," Warren earned an estimated $42,583,971 in income last year from the dividends spun off from his own personal holdings.Those dividend money machines accounted for 99.76% of his estimated 2009 income, keeping him flush with cheeseburgers and business jets. And with the yields on the benchmark 10-year Treasury note hovering in the 3.8% range and the market struggling to rebound, Buffett's dividend portfolio will likely outperform in 2010, adding to his massive fortune. True to form, he buys them, holds them, and watches them grow. Simple — but effective.
Source: Wealth Daily
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Investors typically view a big dividend as a defensive weapon, a means for generating income even when a stock isn't performing well. Some traders take dividend investing to an extreme level, employing a call-options strategy that, when it works, can juice a stock's yield even more. There is a risk, of course. In this case, the downside is, theoretically, all the way to $0.
This dividend-arbitrage strategy doesn't have an official name, but at its core is a basic covered call, an options trade in which an investor sells call options on shares already owned. Selling the calls obligates the investor to sell those underlying shares at a predetermined price on a preset date in the future. In return the investor collects a small payment—called the premium—at the outset.
Source: Wall Street Journal
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Have you ever pondered the concept of forever or infinity? It is truly mind boggling! What is even more astonishing is that when I buy a stock, my target holding period is forever. For most people, myself included, that is hard to grasp and to carry out. When things start going bad, our primal instinct of flight kicks in and we want to sell. In many cases, that is the time we should be buying. Holding a stock through an economic downturn is much easier when it pays a rising dividend.
Below are several companies giving their shareholders a reason not to sell by increasing their cash dividends:
Source: Dividends Value
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As you may know, I like to scour YouTube and other video sites for new videos posted that cover the world of dividend investing. More often than not, there is not much new there and if there is, it is of low quality. This one talks to Morningstar and offers up the Vanguard Dividend Appreciation Fund (VIG) as a potential dividend pick for the right individual.
Source: DIV-Net
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In a corporate world where cutting costs has become key to survival, it's amazing to some investors that there even are dividends out there. However, I can see why so many investors have made it a priority that the stocks they buy pay dividends.
It has been a long road back to Dow 11,000 so it makes sense that investors, in their attempt to squeeze every bit of profit out of the market, have turned to dividend-paying stocks. It's free cash that you get simply for owning select stocks -- and it adds up!
Source: NASDAQ
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S&P 500 members hold more than $1 trillion of the stuff [cash], including cash equivalents and short-term investments. That’s a 35% increase from the end of 2008. Why so much? The recent increase is owed to a mix of panic and prudence. A year ago, stock and house prices cratered, consumers clutched their wallets and lenders locked their doors, so company managers responded by selling off inventory and cancelling costly projects. As a result, while paper earnings plunged, cash flow remained relatively healthy, and because most companies stopped buying back shares and a few cut their dividends, cash balances swelled.
Cash put to good use can propel stock prices higher. Deutsche Bank recently published a report highlighting S&P 500 members that the investment bank believes will spend sharply more on dividends and share repurchases in coming years, based in part on the portion of cash flow they’ve retained of late, and on the amount by which their available cash exceeds their costs. Below are three companies mentioned in the report.
Source: SmartMoney
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William Bernstein, who co-manages $156 million at Efficient Frontier Advisors, advises people to spread their bets far and wide, even into downright risky assets. For investors in taxable accounts, he suggests a portfolio that places 35% in Treasurys, 30% in municipal bonds, 25% in a short-term corporate bond fund and— here is the kicker—10% in stocks. For investors in tax-exempt vehicles, he suggests 45% Treasurys, 30% in a short-term corporate bond fund, 15% Treasury Inflation-Protected Securities and, again, 10% in stocks.
It might sound crazy, but the numbers bear out this approach, according to an analysis by Morningstar for The Wall Street Journal. Using return data and delving deeply into financial arcana like standard deviation and asset correlations, the study found some surprising results: On average, this asset strategy would have resulted in annualized returns, including reinvested dividends and interest, of about 4.8% and 4.9% for taxable and tax-exempt portfolios, respectively, since March 1997. That compares with average annual returns of 3.14% for one-year CDs, according to Bankrate.com, and 3.2% for 30-day Treasury bills during that period.
Source: Wall Street Journal
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In “The Future For Investors,” Siegel discusses how dividends are “bear market protectors” and “return accelerators.” He gives as an example the Great Depression of the 1930s. The Dow Jones Industrial Average reached its peak price on September 3, 1929 and didn’t hit that level again until November 24, 1954 – more than 25 years later. Zero price appreciation for 25 years. Stocks were the worst place to be during this period, right? No way. An investor who bought the stocks in the index at the peak in September 1929 and reinvested dividends actually made more than four times his money -- a positive return of more than 6% per year during this 25-year period! This is more than twice what an investor who sold stocks in 1929 and bought bonds made and four times what an owner of treasury bills made.
Reasons for Dividend Stock Outperformance. The question remains why do dividend-paying stocks exhibit such superior investment qualities? There are a number of reasons:
Source: Investing Daily
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Some dividend investors have a holding period of forever, thinking that all stocks suffer slides or even dividend cuts, so it all works out in the wash when your priority is on the quarterly payout. If that describes you, then the answer to the question of when to sell is simply, "Never." Other dividend investors find quarterly payouts nice but really secondary to share values. Investors with this mind-set typically set stop losses or set sell targets because it's the stock price that matters most. If that describes you, then obviously you're not asking when to sell a dividend stock--you're wondering when is the best time to buy and sell based on the best share price.
For those that fall in between, pulling the trigger on a dividend stock is a balancing act. They grant some leeway to stocks with a hefty and reliable payout when shares slip, or they'll stick with a stock that has slashed its dividend because it has upside potential for shares in the long term. But where do you draw the line?
Source: Forbes
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When it comes to picking dividend stocks, the current high-yielders are just too obvious. There's nothing easier than looking up whatever stocks have the highest yields at any particular moment. As a potential shareholder, therefore, you have absolutely no competitive edge over any other investor when it comes to buying shares of these companies. Essentially, you're investing with the herd. Again, that's not necessarily a problem -- if you're comfortable with the dividend herd's results. To gain an edge, though, you have to look deeper at something that doesn't pop off the stock pages. In my opinion, that edge lies in dividend growth, especially among stocks whose yields are at least still on the low side.
Here's the theory: Before any dividend stock can arrive among the highest-yielding investments out there, it has to come up through the ranks. At some point, nearly every dividend stock started out paying a relatively small amount to shareholders. Yet time after time, you'll see how over the years, those modest dividends increase and eventually represent real money to investors.
Source: Motley Fool
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When looking at payout ratios, I prefer using a free cash flow payout instead of the traditional dividend payout based on GAAP earnings, which contains a lot of non-cash "noise." Some sectors, such as consumer staples and pharmaceuticals, are expected to do well during a downturn. For example, stocks such as Kimberly Clark Corp (KMB) and Abbott Laboratories (ABT) that sell products less dependent on economic conditions were able to grow both earnings and free cash flow between 2007 and 2009. What about industrials and other cyclical stocks whose results are tied to the economy?
One sign of a great management team is the ability to increase free cash flow when earnings are falling. Below are some companies that accomplished this feat over the last couple of years:
Commerce Bancshares (CBSH) | Yield: 2.20%
- Earnings (2007/2009): $2.56/$2.07
- Free Cash Flow (2007/2009): $3.68/$5.74
- Years of Consecutive Dividend Increases: 42
Emerson Electric Co. (EMR) | Analysis | Yield: 2.24%
- Earnings (2007/2009): $2.66/$2.27
- Free Cash Flow (2007/2009): $2.90/$3.37
- Years of Consecutive Dividend Increases: 53
Lowe's Companies, Inc. (LOW) | Analysis | Yield: 1.40%
- Earnings (2007/2009): $1.99/$1.49
- Free Cash Flow (2007/2009): $0.38/$0.58
- Years of Consecutive Dividend Increases: 47
3M Co. (MMM) | Yield: 2.50%
- Earnings (2007/2009): $5.06/$4.89
- Free Cash Flow (2007/2009): $3.51/$4.33
- Years of Consecutive Dividend Increases: 51
The ability of a company to grow its dividend throughout the economic cycle is highly dependent on the management's ability to generate cash in a downturn. This doesn't just happen. Management must be proactive and guide the company down a path that it otherwise would not go. Working capital must be a focus with inventories lowered, receivables aggressively pursued and payables stretched out to their maximum term. Another focus is deferring replacement capital without jeopardizing safety and long-term viability. It is all a delicate balancing act, requiring intimate knowledge of the company.
Often running a business for cash is detrimental to short-term GAAP earnings. For example, when when you produce less inventory than you are selling, you experience lower fixed cost absorption which increases current expenses, but also increases cash flow. Smart analysts understand this and focus on cash, not GAAP earnings.
Full Disclosure: Long ABT, EMR, KMB, MMM See a list of all my income holdings here.
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Not long ago, such shares roamed the market in abundance, but their very popularity has shrunk their numbers. To find them now, you'll need to expand your search. It's getting harder and harder to find a stock that pays a decent dividend. At least if you look in the usual places.
What's that you say? Look in the unusual places? Couldn't agree more. That's exactly what I'm aiming to do here. But the task isn't getting any easier: The name of the song the market's singing right now is "Where Have All the High Dividend Yields Gone?" One of the dividend screens that I run would regularly pull up 50 to 80 stocks before the financial crisis hit and pulled up even more during the depths of the Great Recession. When I ran it April 6, it came up with just 23 stocks.
Source: MoneyShow.com
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This article originally appeared on The DIV-Net April 5, 2010. Full Disclosure: At the time of this writing, I held no position in LOW (0.0% of my Income Portfolio). See a list of all my income holdings here.
Company Description: Lowe's Companies, Inc. and its subsidiaries operate as a home improvement retailer in the United States and Canada. The company offers a range of products and services for home decoration, maintenance, repair, remodeling, and property maintenance.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
LOW is trading at a discount to only 1.) above. The stock is trading at a slight discount to its calculated fair value of $24.84. LOW earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
LOW earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. LOW earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2000-2003, 2001-2004, 2002-2005, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1961 and has increased its dividend payments for 47 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
LOW earned a Star in this section for its NPV MMA Diff. of the $880. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as LOW has. If LOW grows its dividend at 15.0% per year, it will take 9 years to equal a MMA yielding an estimated 20-year average rate of 3.98%.
Other: LOW is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.
Conclusion: LOW earned one Star in the Fair Value section, earned two Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of four Stars. This quantitatively ranks LOW as a 4 Star-Buy.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $28.44 before LOW's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 47 years of consecutive dividend increases. At that price the stock would yield 1.23%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 13.6%. This dividend growth rate is less than the 15.0% used in this analysis, thus providing a margin of safety. LOW has a risk rating of 1.00 which classifies it as a low risk stock.
LOW is a stock that I have watched for some time. It is a well-managed company with a highly automated distribution network. The short-term weakness in the housing market is countered with LOW's long-term prospects given the U.S.'s aging homes and relatively high home ownership. LOW has an excellent balance sheet with low debt and strong free cash flows - which more than doubled in 2009. Even though LOW is trading below my $24.84 fair value price, I hesitate to initiate a position due to its low yield. For additional information, including the stock's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
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Martin D. Sass is now 67 and chairman of MD Sass, which invests $7 billion mostly via separately managed accounts. "I am religious about cash flow," says Sass. "To me it's the most important number." start with the "cash flow from operations" statement. This essentially consists of net income with noncash charges (like depreciation and deferred taxes) added back and cash-draining events (like an inventory pile-up) taken out. Now subtract maintenance-level capital expenditures.
Sass likes companies trading at low multiples of their free cash flow--low, that is, in relation to rivals today or the same company in past years. He also looks for a reason--or "catalyst" in analyst-speak--that might make investors turn more enthusiastic about the stock
Source: Forbes
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Smart investors are beginning to leave this ship of fools [government sponsored benefits] behind by building retirement assets that the government can't touch. In that regard, dividend stock investments are the safest road to a happy retirement. However, picking successful dividend paying stocks is not as simple as buying only the stocks with the highest yield. In fact, the stocks with the highest yields are the ones that often trip up investors the most.
Instead, picking winning dividend stocks usually requires finding candidates with two qualities.
#1 They should have a minimal risk of a dividend cut.
#2 There should be a high probability that the dividends will increase while you own the stock.
Source: The Wealth Daily
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What a difference a year makes. A year ago the headlines on Q1 2009 dividends were ‘Q1 Worst Quarter for Dividends Since 1955’, today’s Q1 2010 headline is ‘Dividends See a Rebirth in First Quarter’. Increases are up, decreases are way down – and dividend investors need to understand it’s not what you make in the good times, but it’s holding onto it in the bad ones. That’s why the Q1 numbers are so good. Last year in Q1, U.S. domestic common stocks reduced their total indicated dividend payment by $43.8 billions; that is $43.8 billion that investors didn’t get. And similar to a pay cut, it is $43.8 billion that they won’t be getting this year, or the year after this. This year however the tide has turned, with companies adding $6.4 billion back in.
Source: BusinessWeek
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Entergy Corp. (ETR) is an electric utility holding company serves 2.6 million customers in Arkansas, Louisiana, Mississippi and Texas. April 5th the company increased its quarterly dividend to $0.83/share. The dividend is payable June 1 to stockholders of record on May 12, reflecting the first increase in its quarterly common stock dividend since July 2007. The ex-dividend date is May 10, 2010. Yield on the dividend is 4%. The yield based on the new payout is 4.04%. Bank of the Ozarks (OZRK) provides retail & commercial banking products and services via 70 banking and two loan production offices in AR, TX, NC. April 6th the company raised its quarterly dividend 7% to $0.15/share. The dividend is payable April 23, 2010 to shareholders of record as of April 16, 2010. The ex-dividend date is April 14, 2010. OZRK is a Dividend Achiever and has raised its dividend for 11 consecutive years. The yield based on the new payout is 1.62%. TJX (TJX) operates eight chains of off-price apparel and home fashion specialty stores in the U.S., Canada, Germany, Ireland and the U.K. April 6th the company increased its quarterly dividend 25% to $0.15/share. TJX is a Dividend Achiever and has raised its dividend for 11 consecutive years. The yield based on the new payout is 1.34%. IDEX (IEX) designs, makes and markets a broad range of pump products, dispensing equipment and other engineered products, serving a diverse customer base worldwide. April 6th the company increased its quarterly dividend 25% to $0.15/share. The dividend is payable on April 30 to shareholders of record on April 15. The ex-dividend date is April 13. The yield based on the new payout is 1.79%. Tanger Factory Outlet (SKT) is a real estate investment trust develops, acquires, owns, operates and manages factory outlet shopping centers in the United States. April 8th the company raised its quarterly dividend to $0.3875/share. The dividend will be payable on May 14, 2010 to holders of record on April 30, 2010. The ex-dividend date is April 28, 2010. Yield on the dividend is 3.6%. SKT is a Dividend Achiever and has raised its dividend for 17 consecutive years. The yield based on the new payout is 3.55%. In addition to the above dividend raisers, two Dividend Achievers declared regular quarterly cash dividends. April 6th RPM International (RPM) declared a quarterly dividend of $0.205/share with a 3.70% yield. The dividend is payable on April 30, 2010 to stockholders of record as of April 16, 2010. The ex-dividend date is April 14, 2010. Also, Murphy Oil (MUR) on April 7th declared a quarterly dividend of $0.25/share with a 1.70% yield. The dividend is payable June 1, 2010 to holders of record May 14, 2010. The ex-dividend date is May 12, 2010. To provide superior long-term returns a companies need to increase their dividends on a consistent basis. For a list of stocks with a long string of consecutive cash dividend increases, see this list. Full Disclosure: No position in the aforementioned securities. See a list of all my income holdings here.
Recently, the following companies announced increased cash dividends:
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Stocks that have a long history of consecutive dividend increases usually do better in a flat or down market than those issues that don’t pay dividends. Unlike most professional investors, I believe consistent, long-term dividend growth is a very reliable measure of future principle growth. Long-term dividend growth is a consequence of increasing revenues, increasing net income, good profit margins and excellent management. Patient investors are more comfortable owning a portfolio of dividend growth issues in a down or sideways market because quarterly dividend payouts partially offset or cushion the decline in market values.
Source: DJC Oregon
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Since the credit crisis hit, banks have routinely cut their once "safe" dividend payouts, often at the request of regulators. Now data is emerging which shows that this trend is reversing and dividend increases could soon become the new trend in bank-land.
According to a report today from Keefe, Bruyette & Woods (KBW), 17 banks raised their dividend so far this year. In all of 2009, only 31 banks raised their dividends while 202 banks cut, omitted or discontinued their dividends, according to KBW.
Source: StreetInsider
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A result of tax changes enacted in 2003, tax rates on dividends and capital gains were cut to a flat 15% for all investors. Now, the Obama administration and congressional Democrats want to see both rates rise to 20% for married couples earning more than $250,000 per year. However, if partisan gridlock prevents these new rules from getting passed, pre-2001 bracket rates would come into effect by default boosting the tax rate on dividends to just shy of 40% for all investors regardless of their income levels. Given the current state of turmoil on The Hill these days, it's increasingly likely that such a scenario could come about.
Source: Investopedia
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A high dividend yield can signal that a company’s shares are a bargain or that trouble is looming. The job of the value investor is to tell the former case from the latter. Common sense helps. If the broad stock market yields just under 2% and if a stock under consideration yields, say, 9%, there are only a few explanations. The firm might be a pass-through company that invests in something risky, like dodgy debt. Or, it might be a once prosperous but now withering company that hasn’t announced a dividend cut yet -- but everyone believes will soon. The cases that are more difficult to judge are those that fall in between those examples. What about a 5% yield in a 2% world?
Source: SmartMoney
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