Dividends4Life: How Earnings Growth Drives Dividends and Returns

How Earnings Growth Drives Dividends and Returns

Posted by D4L | Tuesday, February 22, 2011 | | 0 comments »

In order to prudently answer the question of when to buy a stock, an investor first needs to know the value of the company behind the stock. At the most basic level, a company derives its value based on the fundamentals behind the business it operates. Focusing on, and calculating the fundamental value of a company, lies at the core that differentiates the investor from the speculator. Investors want to know what the business is worth, and where its value comes from past, present and future. Speculators, on the other hand, are mainly interested in the price of the stock and typically only concerned with its recent movement.

To us, the evidence is crystal clear, fundamentals provide a critical perspective that investors should be aware of. Possessing a clear and accurate picture of how well a business has performed on an operating basis is a vital component towards making sound and prudent investment decisions. Contrary to what some might argue, the fundamental operating results of the business tend to persist. The nature of a company's business and the industry it operates in can be reliably evaluated and understood.

Source: Seeking Alpha

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