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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Steve Felix who wrote (6426)	11/15/2010 10:36:31 AM
From: chowder	Read Replies (1) \| Respond to of 34328

If all you can do is choose based on the information provided, then #2 would be the logical choice. I couldn't make a choice unless I knew what the company did. I'm assuming you're looking to hold for a very long time and company #1 may be the better choice if their business model is geared for the long term. Most excellent long term hold companies will go through periods where they are expanding, merging, spinning off, introducing a new product or a various number of other things which may slow them down for 2-3 years and this may be their time to do just that. If that's the case with #1, then I would go with that. I would want to know who has the better cash flows or potential cash flows. It sounds like a trick question where #1 would probably be the best choice. ... :o)

To: Steve Felix who wrote (6426)	11/15/2010 11:18:52 AM
From: E_K_S	Read Replies (2) \| Respond to of 34328

Hi Steve - I would go with #2. I really want to pick the one w/ the lowest long term debt and greatest net income. A CAGR of 31 w/ a relatively low payout ratio implies to me that #2 has lower LT debt than #1. I now try to apply my Buffet theorem that states that a company is a potential Buy when 4 times it's net income is greater than or equal to it's Long Term debt. When a company can generate so much net income so as to pay off their LT debt in four years or less, then they can increase dividends and/or future capital investments providing LT growth and higher shareholder value. FWIW - My #3 position in the portfolio is COP. CVX is #2. ===================================================================== Ever thought of constructing "Dividend Yield" Bollinger Bands? From the article previously posted (Part II ... "Dividends Still Don't Lie" by Kelley Wright) it got me thinking about another possible historical dividend yield model - the Dividend Yield Bollinger Band. What about evaluating the extremes to the historical dividend yields using something like a "dividend yield" Bollinger Band analysis. This would help quantify the associated company risk w/ high dividend yields vs the norm. You might need to adjust the yields to reflect the current periods "real rate of return" so that the dividend yield bands better reflect the Fed's current interest rate policy. Therefore, once you constructed the historical dividend yield chart banded by the long term adjusted dividend yield band (use 2 standard deviations), you would hold the dividend payer as long as the yield stayed w/i the constrained band range. If the current yield was at the low extreme you would Sell and if it was at or near the high extreme you would Buy the position. At least you now have a quantifiable method to make your buy, sell or hold decision based on the current dividend yield of your position. A low dividend yield extreme would reflect a historically high stock price which should be sold and a high dividend yield extreme would represent a historically low stock price and should be purchased. The model would still not forecast any Black Swan event but I bet Buy signals would go off during or after such an event. EKS