Dividends4Life: 3 Dividend Growth Stocks With Wide Margins Of Safety

Before using the margin of safety, an investor must be able to evaluate the shares he is looking at. The goal is always to buy undervalued companies if you are looking to make strong profit. A good way to determine the value of a share is to use a dividend discount model. It is a relatively simple model, and it's easy to use. It will help you put a dollar value on a company and its ability to generate dividend payments. Let's assumed you have made your calculations and found that company XYZ's shares should trade at $10. This is known as its "intrinsic value". The "$10" is found based on your stock analysis and dividend discount model. Then, if the company stock is currently trading at $9, you benefit from a 10% discount; this is your margin of safety.

In order to show you real-life examples, I've selected three interesting buys with wide margins of safety: BlackRock (NYSE:BLK) - It's a bad month for the market, and it has also affected greatly BLK's stock price. Caterpillar (NYSE:CAT) - Among my three examples, CAT is probably the one that is closest to a falling knife and where the margin of safety could be a lure. 3M Co. (NYSE:MMM) - MMM is a great example of a good company with a falling stock price that is following the overall market without any good reason.

Source: Seeking Alpha

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