Valuation is the second most important component of long-term return. The rate of change of earnings growth is actually the most important, as long as sound valuation is in alignment. However, if you paid too much for even the best company, and it gives you all the earnings growth and superb business results that you expect, or even more than you expect, you can still lose money.
Clearly, it's the growth rate of earnings that determines an investor’s long-term rate of return. However, valuation will have a major impact on both return and the risk taken to achieve it. If the company grows earnings by 5%, then investors should also expect a capital appreciation opportunity of 5%, assuming they purchased at sound valuation. If they overpay, their return will be less and vice versa. For stocks that pay a dividend, the dividend income and any growth in dividends represents a nice "kicker" to the total return.
Source: Seeking Alpha
Related Articles:
- Don't Touch These 5 Dividend Stocks!
- 3 Dividend Stocks That I Will NEVER Lose Money On
- List of 195 Dividend Stocks Every Income Investor Should Know About
- These 11 Dividend Stocks Could Make You Wealthy
- 13 Dividend Stocks Headed In The Right Direction
Dividend Growth Stocks News
- Dividend Investing: 10 Years From Now, You’ll Be Glad You Bought These Magnificent Stocks - Yahoo.co - 7/30/2025
- 2 Unloved TSX Dividend Stocks for RRSP Investors - Yahoo.co - 7/30/2025
- Retirees: 2 TSX Dividend Stocks to Consider Now for TFSA Passive Income - Yahoo.co - 7/30/2025
- 3 Asian Dividend Stocks Offering Up To 4.6% Yield - Yahoo Finance - 7/29/2025
- 10 Best Dividend Stocks to Buy in August - Insider Monkey - 7/30/2025
- Duke Energy (DUK) Dividend Stock Analysis - 7/25/2025
- Chevron Corporation (CVX) Dividend Stock Analysis - 7/18/2025
- Emerson Electric Co. (EMR) Dividend Stock Analysis - 7/11/2025
- Amgen, Inc. (AMGN) Dividend Stock Analysis - 6/27/2025
- W.W. Grainger, Inc. (GWW) Dividend Stock Analysis - 6/20/2025
Valuation Matters For Buy And Hold Dividend Investors
Posted by D4L | Thursday, October 06, 2011 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.