Category Archives: Dividend Growth Stocks
Coming from the opposite direction from that article, here I use F.A.S.T. Graphs to identify which stocks from the 59 most commonly held dividend growth stocks persistently have traded at valuations that are lower than what F.A.S.T. Graphs presents as “earnings justified” valuation.
On the graphs in this article:
The orange line represents “fair value” as determined by F.A.S.T. Graphs, which apply Ben Graham’s valuation formulas to each stock’s earnings record.
Which Popular Dividend Growth Stocks Are ‘Always’ Overvalued? [PepsiCo, Inc., The Clorox Co, Paychex, Inc.] – Seeking Alpha
Putting the two themes together very recently, there has been discussion about Coca-Cola (KO) being a high quality company that never seems not to be overvalued. In the course of those discussions, it became clear that many feel that KO “always” trades at a premium valuation, so if you want to own it, you might as well accept that you’ll need to pay up for it.
These high dividend growth rate (DGR) issues seem particularly attractive to younger investors, who often feel that with several decades of compounding ahead of them, high DGRs are more important than high yields. They feel that they have plenty of time to develop excellent dividend streams. Examples of names that typically come up are IBM (IBM), Wal-Mart (WMT), and Exxon-Mobil (XOM).
The lives of outliers – those people whose achievements fall outside normal experience -follow a peculiar and unexpected logic.
The definition of outlier is quoted at the very beginning of the book. An outlier is:
The Fourth Scenario For When Should I Transition From Capital Gain Investing To Dividend Growth Investing? – Seeking Alpha
An author, whom I consider a friend, Robert Allan Schwartz, recently penned an article describing his views on when young investors should transition from growth to dividend growth investing. In this article found here, he created a series of three scenarios and created a set of parameters from which to run them on. Although I felt that his parameters were reasonable, and his scenarios plausible, I also felt that they grossly underestimated the true power of what I would call a pure growth strategy. Frankly, I felt he inadvertently shortchanged the powerful performance capabilities that true growth stocks are capable of achieving.
On the list of stocks that have been dropped [from the annual ‘Top 40 Dividend Growth Stocks,’ some of them have been dropped for having a yield that is too low. So let’s say I already own [a stock], and two years later the current yield drops below 3%, but my yield on cost is still above 3%. I’m guessing you would drop [that stock] from the top 40 list, but would you sell it as well? Would I be correct in saying it depends on what the yield on cost is at that time?
There has been a spate of recent articles and comments stating or implying that dividend growth stocks are in a bubble. David Jackson, the founder and CEO of Seeking Alpha, stated the following in a recent comment.
I haven’t found any other asset class [beside dividend growth stocks] where there are similar causes or indicators of potential overvaluation risk, specifically:
1. macro factors (interest rates, demographics, and tax rates),
2. a significant preponderance of positive articles on SA, with relatively few “challenging” articles,
3. high and rising interest from novice investors. (Please note: I’m *not* saying that all dividend investors are novices; there are many deeply experienced and sophisticated dividend investors.)