Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Dividend Growth Investing and chit chat. -- Ignore unavailable to you. Want to Upgrade?

To: albertmads who wrote (2061)	2/1/2022 10:24:48 AM
From: cemanuel	9 Recommendations Recommended By chriscrna Graustus Jacob Marley marsdon MinionMom&MarineWife and 4 more members Respond to of 2146

What I do is every few months I run every stock I own or am interested in through a screen. I use the following factors in the screen: Five-year Dividend Growth - must be positive, above 10% ideal Five-year eps Growth - must be positive, above 10% ideal Debt to ebitda ratio - some exceptions for capital-intensive companies and pharma but otherwise ideal is 1.5 and below, 2.5 is a worry sign, 3.5 is do not buy Payout ratio - below 70% with a few exceptions such as utes, MO. Ideal is below 50% Consecutive Years raising the dividend - when buying for dividend income, 5-year minimum. 15 years of not cutting is ideal to take the Great Recession into consideration I use those numbers to set a target price for each stock. To date I have been buying for dividend income and have always looked for a price between a 15 and 20 PE and use the above numbers to decide what multiplier I want to use. For a company like LMT with double-digit earnings and dividend growth I'll use closer to a 20 PE. For a company like PM I'll be more in the 15 range. There are some sector PE differences. I include these in my screen for awareness: Market cap beta I used to avoid high beta companies but don't any more. I just want to be looking for them at the low end of their cycle and be aware they may move a lot. I have become more open to mid-cap companies. Now I don't buy based on all of this - it's a screen. When a company is close to or below my target price I do what I call my deep dive. At the very least this involves going to the company IR site and looking over the last 5 ARs and reading the latest one through. Then I write down cash flows and calculate the 5-yr cash flow/revenue growth. There are quite a few companies with good eps growth numbers where much or even all came from buybacks. I want growing companies and for me this means cash flows. Once I've done that I firm the price up or, sometimes, make it a no buy. Also, there are no absolutes. I will pay what I call a premium for a company I consider worth it. So I try to stay at or below a 20 PE but can go above it and sometimes a company taking on debt through an acquisition can actually be a reason to buy. For the past 3 years I have tried to only buy companies with a minimum of a 2% yield as I was close to retirement but have made a couple of exceptions there as well. I do not have a set algorithm though. I have a range and get a feel for the company, then go with a price. I also have some Seeking Alpha Blog Posts on this process. This is the most detailed, and longest: seekingalpha.com I'm about to start buying for my IRA which will be a TR account, not for dividend income to live on. The screen will be very similar but some of the metrics to set a price will look different. In fact next time I run it I plan to have two price columns for each company; a Taxable Account (dividend) and IRA (TR) price. And some companies that look good for one will be worthless for the other.