How to you determine if dividend stocks are trading in excess of their calculated fair value? Capital appreciation is not the primary reason for investing in dividend stocks. Dividend fundamentals are what drive my purchase decision, and if I could only look at one metric it would be the Net Present Value of the Money Market Differential (NPV MMA Diff.)
Some might ask, 'why not just target yields that are higher than the MMA Rate?' That ignores the most powerful concept of Dividend Income Investing - Dividend Growth. Compound interest (interest on interest) is a powerful concept, but growing, compound dividends is the income investor's most powerful ally.
Source: Dividend Growth Stocks
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