Value Investing News

Have you noticed that investing in dividend growth stocks has gone main stream? What a change from a couple of years ago when dividends were considered "stodgy, for old people, yawn, boring!" With its new found attention, dividend growth stocks aren't disappointing their newly acquired fans. When all is said and the last word is written, 2011 was a great year for dividends!

A vision is taking the time to contemplate and anticipate, in detail, what the future will bring. You can’t have a retirement plan until you have a retirement vision. It would seem to me that there are a lot or retirement plans out there but very few retirement visions.

This short article is a bimonthly news update of stocks for value investors that we follow in our “Margin of Safety Portfolio.” These are stocks identified to have a durable competitive advantage and, based upon our intrinsic valuation models and fundamental analysis, are trading at a discount to intrinsic value

COMPANY PROFILE
Incorporated in 1952, Lowe’s Companies Inc (LOW) is the world’s second largest retailer in home improvement. Currently, it has a network of over 1,750 retail outlets across the U.S., Mexico, and Canada.

To make our world easier to understand and explain, we like to organize and categorize things into groups for ease of reference. Dividend Stocks are no different. They can be placed into a few categories based on their historic performance and expectations for the future. Here are three broad categories and some representative selections from each:

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Who wouldn't like to earn a safe 15% on their original investment? Normally double-digit returns are the fodder of con artists or associated with extraordinarily risky investments. In either of these cases, the person is usually left holding despair in one hand and an empty wallet in the other. However, I have discovered that you can actually enjoy high yields with minimal risk...

This year the market has been quite volatile. With significant run ups followed by steep declines. This has provided income investors first hand experience in managing both their emotions and their income portfolio in an unsettled market. To make the most of these trying times, here are some concepts to help you succeed and thrive during a market correction:

A declining market is what value and dividend investors long for. There have been times in the past where I struggled to find stocks worthy of purchasing. Now, the challenge is to pick the best available stocks that will maximize my chances of future success. When looking for value priced stocks, the Price-To-Book (P/B) ratio is one that I like to focus on.

Lowe's Companies, Inc. sells retail building materials and supplies, lumber, hardware and appliances through more than 1,700 stores in the U.S. and Canada. Linked here is a detailed analysis and commentary.

Payback is the amount of time needed for an investment to earn its cost, undiscounted. Once you earn back your investment, some might say you are in a no-lose situation. I wouldn’t go quite that far, but you have found an investment that that has provided you a good historical revenue stream, and hopefully it will continue to do so in the future.

The recent turbulence in the market has provided income investors first hand experience in managing their dividend growth portfolio in a declining market. Here are some things that will help you succeed and thrive when the bear puts his paw print on the market:

This week week, I screened my dividend growth stocks database for stocks that will be yielding 10% in 10 years at current yield and dividend growth rate (based on Monday's close). The results are presented below:

If we were able to design the perfect dividend stock it would be one that is both high-yield and provide a high dividend growth rate. Its share price would appreciate ratable with its increasing dividend. All of this would be driven by increasing earnings and cash flow.

Dividends are not paid with sales, earnings, EPS, EBIT or EBITDA. Instead dividends are paid with cash. As an investor, you want to pay close attention to the cash flow statement. Unfortunately, it is probably the least used and most misunderstood statement. Ultimately, cash flow is what drives the value of any financial asset.

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When selecting dividend growth stocks, I take a value approach in determining the maximum price I can pay and still obtain my long-term target. The focus is on the investment's value derived from the future dividend stream generated by the stock. Since I am looking at stocks differently than many other investors, I can often find value, as I have defined it, when others can not.