When evaluating a company as a potential income investment you look at its calculated fair value, ability to generate cash, debt position and the net present value of its dividend stream compared alternative "safe" investments.
In earlier articles, we have looked at each of these in depth. In addition, I look at four other metrics that individually are not as important as the above, but collectively provide great insight into the potential success of a stock as a dividend investment. Here are the four other key metrics that I look at when evaluating a dividend stock:
I. Dividend Growth Rate: The minimum dividend growth rate of the 1, 3, 5, 7, 10 year dividend growth rate or 15%, if "Rolling 4-yr Div. > 15%". This metric is True, if the dividend growth rate is 15% or greater. You can see how this is calculated in my D4L-PreScreen.xls model.
II. Years of Div. Growth: Years of consecutive dividend growth. This metric is True for 15 or more years.
III. Rolling 4-yr Div. > 15%: Dividends will double every 5 years if they grow by 15%. This test is True if dividends grew on average in excess of 15% for each consecutive 4 year periods, within the last 10 years of history.
IV. Years to >MMA: The number of years until dividend earnings exceed the earnings from a hypothetical money market account earning the MMA rate above, considering the other assumptions listed in "NPV MMA Diff." above. This metric is True if the number of years is less than 5.
Taken in the whole, these are tough metrics. Of the 87 stocks that I currently follow, only four had all the above metrics true. They were:AFLAC Inc. (AFL) - Analysis
These metrics focus on compound dividend growth, which is highly important for the successful dividend investor. In my new dividend analysis worksheet, a company will earn a Star for its other metrics if two of the above metrics are True.
Aflac Incorporated engages in the marketing and sale of supplemental health and life insurance plans in the United States and Japan.
- Dividend Growth Rate: 16.7%
- Years of Div. Growth: 27
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 1
Nucor Corp. (NUE) - Analysis
Nucor Corporation is engaged in the manufacture and sale of steel and steel products. As the largest minimill steelmaker in the U.S., Nucor has one of the most diverse product lines of any steelmaker in the Americas.
- Dividend Growth Rate: 15.0%
- Years of Div. Growth: 36
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 3
Paychex Inc. (PAYX) - Analysis
Paychex, Inc. provides payroll and integrated human resource and employee benefits outsourcing solutions for small- to medium-sized businesses in the United States.
- Dividend Growth Rate: 17.8%
- Years of Div. Growth: 17
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 0
McDonald's Corp. (MCD) - Analysis
McDonald's Corporation is the largest fast-food restaurant company in the world. Its restaurants serve a varied, yet limited, value-priced menu in more than 100 countries around the world.
- Dividend Growth Rate: 15.5%
- Years of Div. Growth: 32
- Rolling 4-yr Div. > 15%: True
- Years to >MMA: 2
Full Disclosure: Long AFL, NUE, PAYX, MCD. See a list of all my income holdings here.(Photo Credit)
Related Articles:
Looking For Strong Dividend Growth Metrics
Posted by D4L | Sunday, July 05, 2009 | commentary | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
Long-term investors know that dividends can have a major impact on returns over time. When the stock market is struggling to make gains like...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
We decided to go on a hunt for quality stocks that for one reason or another have been buried, and not just this year. We found three incred...
-
Buy and hold ... forever? It's a tall order, but a select few companies are potentially up to the task. You can build a wealth-compoundi...
-
Does the high interest rate environment we're living in have you feeling down? Here's something to remember that can help you turn t...
-
Dividend stocks can be consistent market-beaters. However, empirical research shows that the best dividend stocks tend to generate better-th...
-
High-quality dividend stocks are always worth loading up on. This is doubly true for companies that offer shareholders an attractive mix of ...
-
Some dividend-paying companies have seen their financials struggle over the years. These companies become vulnerable to dividend cuts which ...
-
Essentially, we’re looking for more Apples – tech firms with a large market cap (at least $1-billion) and the financial means necessary to p...
-
Numerous high-quality dividend opportunities are up for grabs at the moment, which may be appealing to some investors given the uncertainty ...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.