Value Investing News

Commitment is a word often thrown around, but rarely backed up with actions. Salesmen are committed to your needs until you sign on the dotted line - then they are committed to next unsigned contract. A true measure of character is how committed are you to doing right when the times are hard and you are tempted to go astray?

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You expect your employer to give you a salary increase periodically. Why wouldn’t you expect the same from your investments? One of the most important aspects of a dividend stock is its ability to consistency raise dividends over time.

One of the many reasons I like dividend stocks is because they provide continuous feedback. As time passes, dividend investors see their income grow steadily. You don’t have to wait five to ten years to determine if the strategy is working. Each dividend and dividend increase provides reassurance that the strategy is working.

Management typically evaluates short and mid-term economic and business conditions when they decide on allocation of limited resources. Cash is one such resource, which could either be reinvested back in the business, or returned to shareholders. Companies typically achieve some optimal balance in allocating cash flows from earnings between owners and the business.

Most investors are not surprised when a company cuts its dividend. They saw the early warning signs well in advance of the actual cut. Here are three signs that a company is heading toward a dividend cut:

In my dividend database, I track nearly 190 stocks in 19 different sectors. Generally, the characteristics of certain sectors tend to match those that dividend growth investors are looking for, thus their constituents are often make better dividend investments. In the case of the stocks I track, nearly half of them are in these three sectors:

We have all heard it… Stodgy, for old people, yawn, boring! These have all been used to describe dividend growth investing. As a dividend growth investor, I sometimes think our strategy is the most misunderstood. Periodically, it is good to remind ourselves why we are dividend growth investors.

The Consistent Cash Creators stock screen looks at companies with consistent free cash flows and high normalized earnings yield. Not one position selected by the screen in 2009 produced a negative return and the overall average return was 62%.

I was amazed to find several companies on the champions list, which have raised distributions for over 50 consecutive years. The companies include:

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.