CAG update. last sept, CAG lowered earnings guidance a little, but raised the dividend. I thought the 4.3% dividend looked safe and their PE was reasonable (under 12), so i posted "Dividends increased from 80 cents to 92 cents. Payout ratio at (div / eps) 0.92 / 1.85 = safe dividend. $0.92/$21.17 = 4.3% yield, about the same as many utilities. Good diversification for me. And although you folks don't care, their PE is acceptably low. :o)" So I bought CAG at < $21.50 at that time.
The stock price is now $26.27. The dividend still OK at 3.5% ($0.92 / $26.27), but with the stock price price increase since then, the PE is now 14.5. prob a fair PE, but not as undervalued anymore. So I just sold and got a 24% stock price increase over 9 months, plus the dividend.
I am posting here to make the same point that I have made a few times. (I get pooh poohed whenever I mention it). You thumb your nose at valuation saying that increasing dividends is all that is important, and that capital gains are for others. I think it is fine to look for quality companies that pay an increasing dividend, but you should also filter for valuation and avoid overvalued stocks. Why overpay?
I do not want to criticize postings on this individual pick, because it could have gone either way. But think about it. :o)
dabum:
CAG doesn't meet my criteria for purchase. High Quality as defined by Miller is a company with superior financial strength, low debt, strong cash flow and credit worthiness. It has a safety rating by Value Line of 1 or 2. Or, a Morningstar rating of BBB+ or better. ... Then I look for a long history of raising dividends.
felix:
I don't see CAG being on any list you are looking at unless it is an avoid list.
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