Value Investing News

Fairholme's Q3 portfolio has been filed. New or increased positions include WYE, CAH, BRK.B, HUM, SPR, BRK.A, SHLD, JOE, LUK, RRR, and WTM.

The Dividend Aristocrats index measures the performance of S&P 500 index members that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. (Source: S&P)

Since its inception 20 years ago, the dividend aristocrat’s index has outperformed the S&P 500.

As an investor in the accumulation stage, I tend to focus on companies with yields of at least 3% and expectations of future dividend growth. Most of these companies have a history of consistent annual dividend increases which exceeds ten years.

The number of dividend cuts in the S&P Dividend Aristocrats index increased to seven, as two more financial stocks cut their dividends in May.

One of my main objectives as a dividend growth investor is to seek investments which have a strong business model that throws out enough cash flow that could support consistent dividend increases.

Comments on current merger activities and list of pending mergers courtesy of mergerinvesting.com

In this tough market, investors are always looking for a way to make a buck. Merger Arbitrage is a strategy where investors could profit from the spread between the current price of the target and the expected price at close of the deal. This could be one strategy where investors could shore their funds during the current market turmoil and still make a buck.

Yesterday, the big news that moved markets was Pfizer’s 68 billion dollar acquisition of rival Wyeth. Pfizer will pay $33 in cash plus 0.985 shares of Pfizer stocks for each share of Wyeth. At Monday Wyeth closed at $43.39, which is 10.30% lower than the combination of Pfizer stock and cash, at the current price for Pfizer at $15.65.

Yesterday PFE confirmed that it will indeed purchase WYE for $50.19/share - $33 in cash in addition to 0.985 shares of PFE. Despite the tough credit environment, Pfizer could still afford to get the financing to pay such a steep price since its balance sheet is conservative with over 26.8 billion in cash and equivalents for the quarter ending September 28, 2008.

David Dreman's latest column at Forbes - Smaller companies, by which I mean the ones with market capitalizations below $20 billion, have done well in the past few years. This streak has to end someday--sooner rather than later, I'd wager. Then, portfolios with large capitalizations will come to the fore. Which ones to buy?