Value Investing News

Any company could afford to boost distributions in a single year. Any type of business could also have a high yield, especially if it distributes all of its cash flows to shareholders. It takes a special kind of a business model to afford a proper balance between investing back into the business and distributing excess profits to shareholders.

For dividend growth investors, there are certain attributes of investments that are more relevant than others, such as yield and dividend growth. To illustrate the power of dividend growth consider that an investment’s yield-on-cost will double every 5 years if they grow their dividend by 15%/year or 7 years at 10%/year or 14 years at 5%/year.

I am a firm believer that asset allocation plays a significant part in a portfolio’s long-term results. Recently, I received a question asking if you could have a diversified portfolio of dividend stocks. It is an interesting question that deserves further examination.

Over the last couple of years we have seen companies fail to raise their dividend, cut their dividend and some even decided to stop paying their dividend. In some cases their financials did not warrant the change. So, how do you fin companies with a positive dividend culture?

The dividend aristocrats list includes companies which have increased dividends for over 25 years in a row. It is equally weighted and re-balanced once an year. Over the past 3,5 and 7 years the index of elite dividend stocks has managed to outperform the S&P 500 by 5%, 3.7% and 4.40% respectively.

There are certainly many ways to categorize the different styles of investing in dividend stocks, including yield, risk, growth, etc. Over the years, I have found that most dividend investing styles fall into one of the three major categories listed below:

The stock market has been on a consistent bull run since it hit a low in March 2009. As stocks keep hitting new highs for the year however, buyout by the prospect of economic recovery, many value investors are getting nervous about valuations. The P/E ratio on the S&P 500 for example has risen to its highest levels in several years.

Screening the ModernGraham Valuation Database for the 10 lowest PE ratios.

Sequoia's Q3 portfolio has been filed. New or increased positions include: AAP, PX, AOC, EOG, CACC, BDX, LTR, CB, BMY, CHK, BER, DHR, WMT, PG, V, JNJ, KFT, etc.

Screening the Modern Graham database for the 10 most undervalued companies.

An update to the Low PE Portfolio with a screen for 10 companies trading at low price to earnings ratios.

Looking for some companies to research this weekend? Here are five that I like. Each passes the ModernGraham tests for the Enterprising Investor, based on the teachings of Benjamin Graham.

Most companies use debt for a variety of reasons in their operations. It could be either short term or long-term obligations. If there’s anything the 2007-2009 financial crisis has taught us, it is that excessively leveraged companies could easily blow up after a chain of negative events. Thus it pays to know what the debt situation for a particular company you are investing in actually is.

I am a firm believer in keeping things simple. However, you can simplify things to the point they no longer have value. In my opinion, a lot of the commonly used financial metrics can be very misleading unless you understand what is behind them. Let’s take a closer look at Dividend Payout.

Financial stocks,which used to be great dividend investments,have had their share of troubles over the past two years.The sector has rebounded sharply since hitting its lows in March.Since the major dividend growth stories of the past such as Bank of America and US Bancorp have cut dividends, most dividend growth investors seem to have a very low allocation to the sector.As a result dividend inves