07-08-2014, 01:56 PM
(07-06-2014, 04:37 PM)cannew Wrote:You sound like a smart person, just as your mentor! I currently use past 10 year P/E, 10 year dividend yield, 5 year price to free cash flow and PEG to determine 'fair value' of a company. I don't care to much if I pay $1 or $5 'too much' for it's stock because I think it doesn't really matter that much for my horizon (20+ years).(07-06-2014, 11:36 AM)Robert_NL Wrote: I currently have 17 positions to monitor and I know some have over 30 positions to check, but where do these people get the time from to monitor them AND do research on new companies? How do you monitor your positions?
Here's a quote from my Mentor.
"When they are at least fairly priced (we use a stocks long term dividend average as a guide), I purchase certain common stocks with a long record of dividend growth and hold them for years, waiting for the dividend and the yield to grow. In the long run, yield provides most of the return. I also use yield, mainly, to determine value.
Some general ideas on the essence of dividend growth investing: You must believe it produces superior returns. You must stay on track. You can't waiver. You must buy only common stocks and only common stocks that pay a dividends. And further, only common stocks with a good dividend growth record. Load up on them when they are fairly priced…certainly not all at once. Valuation of the stock at the time you buy is most important. How do you know if they are fairly priced? I use a couple of value measures: yield, Graham's price and the cyclically adjusted (ten-year) price to earnings ratio. It's the growing income you are after (not high yield) so you do not have to eat into capital when you retire. Mutual funds do not produce much income: they eat into your capital to pay you. It's the long term income your assets produce that is important. You do not want a fixed income, do you? Motivation: Once you've owned a dividend growth stock for a decade or so, you will most likely be beating the market with you income alone. You must be brave to take the first step. Once your portfolio is set up, it pretty well runs itself…benign neglect.
Look at dividend growth investing this way. You will end up receiving much more than the original yield (dividend/price). As the dollar amount of your dividend increases over the years, you can say you are earning an increasing dividend yield on your original invested capital (higher dividend/ original price)".
I've followed his advice for years and I'm very satisfied with the returns and income growth over the years. Currently I only hold 21 stocks and will cut at least two at some point. I monitor the companies dividend, dividend growth and payout ratio, that's it. Over the past three years I've only made 5 trades and three were to buy. I'm waiting and hoping for a correction to buy more of what I already own.
(07-07-2014, 05:24 PM)Robandcindy2 Wrote: If you are inclined to purchase a subscription to Morningstar you can load your portfolio into their website and receive a portfolio update daily which carries important news stories about each position. Quarterly you will receive in PDF format a detailed M* analysis of your portfolio.I really like Morningstar and I regularly use them for quick fact checking on companies. I did read some issues of the M* Dividend Investor subscriptions and I liked the monthly issues. But I think both services (M* premium and M* Dividend Investor) are to costly for me. I rather spend the $380 per year for both subscriptions on dividend stocks than to subscribe to a online service.
If you don't subscribe to to any services, newsletters, etc. the M* basic membership is worth it.
Full disclosure: I have both a M* and M* Dividend Investor subscriptions. Very informative.
Cheers,
Rob
(07-08-2014, 02:23 AM)Dividend Watcher Wrote: I can spend several hours analyzing a company before I invest. Once I think I know how they operate and earn their money, it doesn't take much time after that.I don't care much if one of my holdings suddenly jumps in price or goes down, although I like to see the reasoning why (just as you do). I have only sold some speculative stocks the last three years and put all that money in to a small-cap ETF, just for the capital appreciation. I never sold any of my dividend stocks as I don't like to cut money trees
One method I use is to watch how far the stock is moving vs. the market. If the market overall, and I've found the S&P 500 and DJIA pretty much track each other, is up/down 1/4% and a company on my watchlist is moving up/down a couple percent, then I dig into why. Most of the time it's just an over-reaction to something by the traders (earnings beat or miss, perhaps) but sometimes it's a material change in the company. Let's face it, most dividend growth companies are pretty well-known names if you've been around the market for any length of time. You shouldn't be jumping in and out of a stock position for a couple quarters of earnings surprises or disappointments.
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