Just saw this from one of the very most respected and widely read financial analysts and investment research publishers in the world.
“You don’t have to be a professional stock analyst to understand that the value of a business, ultimately, rests on how much income it can produce for its owners over time.
Income typically comes in the form of increasing dividends, which are provided by rising earnings power. That’s why there’s so much attention paid to quarterly earnings reports. Investors want to know if the companies they own are actually growing their earnings power.”
As I read that, I realized immediately, that’s all I do here. I begin my research, after a sort of a database for large, dividend paying stocks on the basis of the safety of their dividend… I only look at the Top 10% of all large company stocks that pay a dividend, first, and foremost of all, for the safety of their dividend. When I have that Top 10% for dividend safety, I then chart them all and look at the line generated by 10 years of EPS data. But, it is not past actual reported earnings that I look at. That data would be created and reported by the companies themselves. No, the EPS data I’m talking about is that forward-looking earnings estimate data that Wall Street produces for each company, and the data by which Wall Street makes its own investment decisions. I call it Wall-Street Gold! Try and find daily revised and updated data like that… you can’t. I’ve got it. It’s what makes this strategy and discipline work! The safe-dividend growth strategy; one of the very best tested and time proven stock market investment strategies ever devised. And, the very simple reason that it works is solely because of the truth of the one quoted statement above.
Further, I then chart the 10-year dividend payout of those companies exhibiting the very ‘best-looking’ upward sloping EPS line that suggests it can support and continually grow their dividend to its share-holders… in other words, I want to believe that it can continue to safely pay, as well as to safely grow their dividend to me. The charts tell this. Further, I want to see a stair-step pattern of continued dividend growth that results in at a least a doubling in 6 years, or so, and a tripling in 10. I can see all that in my charts.
Finally, you know you’ve found the very best of the best, when you can also see, over the same period of time, that Wall Street has rewarded these same companies with extra-ordinary price growth and appreciation, in recognition of their superior EPS growth, and safe-dividend payout. When you’ve found all three, you know you’ve found a past winner. Then, on the same basis of that past history, and the 1-year forward look into its prospective earnings estimate, you have the very best opportunity to try to locate only the best investments on Wall Street for your investment dollars… and you only need about 20 or so such companies, no more; and you’ll have a perfectly fine portfolio.
Never forget; your goal is to generate an ever-growing stream of portfolio dividend income. The value of your portfolio will actually take care of itself, and is secondary anyway!
Met Carlton today, and for him, I’m re-publishing the link to the only investment book anyone will ever need to read: Lowell Miller’s The Single Best Investment. http://www.mhinvest.com/files/pdf/SBI_Single_Best_Investment_Miller.pdf
He’s 24, and has every opportunity to become truly wealthy, if he only reads the Introduction and the first 4 chapters. It changed my life, but too late to make the giant difference it can for a young man like him.
Here’s to your successful investing!
Harold F Crowell