I’m getting a number of responses concerning my last post. Before I go further into anything pertaining to corporate bonds, I need to fulfill that which I said that I would do.
First off, the stock program I’ve employed for the past 14+ years has its own market timing function. I follow it closely, but frankly, my own OEXpert 7 timer is a better tool, but I always keep track of the program’s timing functions, because there are those occasions when both give a low-risk market entry signal at the same time. It’s just that my own timer will catch opportunities more frequently than the stock program will. When they are both telling me the same thing… I can get excited about that!
Looking at the program’s timing function… I’m willing to bet that it is pointing right at that time when the upcoming election outcome is known… either before, during, or after; and then, I’m thinking the indicators in the program will have gotten into place, and the election result kicks off a new rally. If anything should alter that perception of what I think is going down with my timers, I will let you know… or, you can always ask. I’ll also update the OEXpert 7 timer, as it is occurring to me now that it might also be logically pointing at the same future time frame; the upcoming election in 3 1/2 weeks. Let me work and think on this some more….
Next, I ran the search for the very best of the safe-dividend growing stocks. It’s been awhile, and things don’t change much. But, that’s precisely what you want, because you’re trying to INVEST, not trade.
My criterion is straight-forward. I can chart all the same for an equally-weighted average of all the companies in the S&P 500. First, I note that the “analysts’ consensus of forward-looking earnings estimates” for all 500 companies was right at $3.01 ten years ago, and is just a little above $4.50, at $4.68 right now, for what was projected earnings growth of 55% over the past 10 years. Also, that line for these 500 companies is pretty raggedy looking; with a steep dip during the ’08/’09 GFC (global financial crisis).
Next, I chart the actual dividend payout for all 500 companies the past 10 years, and I see it starts at $.69 a share to end at $1.33, for a dividend income growth of 93%, but with a 20% cut during the same GFC.
Thirdly, I check the price charts for the purpose of looking for price patterns that give clear indication that these companies were in demand during the past 10 years in such a way that they had experienced significantly more appreciation than the average for the 500 stocks in the index. These 3 criteria then work like this:
- If a stock’s past 10 years of EPS looks smoother, and rose considerably higher than that line for all the 500, I have a superior earning company than the average.
- If I have a dividend payout line that also looks better, in the sense that I have a continually upward, stair-step pattern of past dividend payout, that both handily beats the payout for the average of the companies in the index, and doesn’t have 20% cut from August of ’08, to December of ’09, again due to the GFC. I know I have a company less affected by outside economic forces, such as the GFC had brought to bear.
- Finally, if the EPS and dividend payout truly are superior to that of the average of the 500 companies, then the ‘proof will be in the pudding’ of its price, in that it will have been rewarded with superior appreciation. Now, the average price appreciation for all 500 stocks currently in the 500 for the past 10 years is… 90%, almost perfectly matching the 93% dividend income payout, but exceeding the EPS growth considerably. At some point, if EPS doesn’t genuinely pick-up, as it is not as of this time, something will have to give. Some dividends will get held, some cut, and possibly others suspended. When these things begin to happen, share prices will get hurt somewhat.
The point of my search is to find issues that have handily beat all three of those metrics for the average of the 500; that is, find past outperformers that look to have the wherewithal to continue to do so, going forward into the future. It’s somewhat imperfect, but it is the very best that we have to go on… and, research on no fewer than 359 investing strategies suggests that this is one of the very best ways to consider investing in common stocks.
If past EPS numbers rose 55% the past 10 years, I want those that at least doubled their EPS numbers in that time. If, from among those I find dividend payouts that grew by at least 200%, to beat the average’s 93%, they make the second cut. And, finally, if stocks roughly doubled the past ten years in price, I want mine to have at least to have tripled. And, if their EPS line is looking strong for what is believed to be that company’s actual reported earnings 12 months out into the future… that’s my prospect!
One other thing, and it drives people NUTS! How come the yield on these very companies is always so LOW?!?!? The answer: It’s because they are of such high quality! Their share prices get bid up higher, causing their dividend yield to be lower. A low yield, on a company’s shares whose dividend gets raised at a goodly rate higher each year, is a Key Tip-Off that you are dealing in the very highest quality stock issues!
Simply, running the search I just described, I come up with these. There are 28, but check out the price charts and thin your selection some, as they are not all looking technically healthy price-wise, even if EPS and dividend payout is looking good. See: ROST, JKHY, EFX, NKE is looking just awful, TJX, AOS, UNH, HD, SYK, BDX, HRL, SBUX, STZ, NOC, COST, INGR, LOW, TSCO looking sick, EL, SJM, AMGN, LII, LMT, NDAQ, FDS, CVS, AVGO and DG also looking ill.
Those demonstrating healthy technical price action are: ROST, AOS, HRL, STZ, INGR, LII and AVGO. That’s not many, and the market’s not been looking too strong lately.
I’ll update my timer soon, and report here on that result.
I’ve also been asked to re-post the link to my gold mining stock blog, which is here: https://goldstocktraderblog.wordpress.com/
Here’s to your successful investing!
Harold F Crowell