Tuesday, November 29, 2011

Dividend Stock Analysis: Microsoft

For our second stock analysis I decided to choose another holding of mine that I believe would turn out to be a buy based on my analysis. I was part right. I knew there would be flaws with my model, but I never intended for it to be the definitive answer to "should I buy this stock". This week I am analyzing Microsoft (MSFT).

This former stock star used to be the top holding in most major mutual funds in the 90s and early 2000s. Microsoft was constantly growing and consistently making billions in cash every year. Although their growth as certainly slowed, the billions of dollars continue to be made. Like Intel, Microsoft has transformed itself into a cash cow business that now rewards its investors in dividends instead of hoarding all the cash they make. Microsoft is in the early stages of a dividend paying company, and my analysis show's this may be a great time to get in on the action.

Thursday, November 17, 2011

When Do We Sell?

Since I reviewed Intel about a month ago the stock has gone up over 10%.  It was a nice jump and long overdue in my opinion.  The stock has been hanging around $20 area for several years now, all the while it has been beating analysts estimates and raising its revenue and income guidance. Personally I think Intel is still considerably undervalued based on present day valuation, but as a dividend investor I absolutely love being able to buy a dividend growth stock this cheap.  After all, the lower the price the higher the dividend yield.

But as dividend investors we don't care that much about the price of the stock.  We care about it when we are considering purchasing the stock, but after a purchase we should care about the dividend fundamentals and not the price.  I've gotten a few emails from people asking when I would consider selling part of my position in Intel and take some profits.  My answer of when I plan to sell Intel, "hopefully never".

I don't buy dividend stocks in order to make a gain on price.  I buy a dividend stock because I think that company will be around when I retire.  I believe that stock will continue to pay and raise their dividend for the rest of my life.  I want that stock to be providing me a passive income stream through dividend payments when I am 60+ years old.

Of course, that's in a perfect world.  There will be times when a dividend stock falters and its fundamentals forces us to sell.  Hopefully this is a rare situation, but we need to identify those situations that will cause us to sell our stock.

Monday, November 14, 2011

Dividend Stock Analysis: Kimberly-Clark Corporation

For my first in-depth dividend stock analysis using my new rating system I chose a stock I have owned for over a year now, Kimberly-Clark (KMB).  You may not be familiar with the company, but I am certain you are familiar with many of their brands.  KMB is a consumer care products company specializing in paper based products.  Huggies, Depends, Cottonelle, and Kleenex are just a few of their popular brands.

As a dividend stock investor I pay attention to who makes the products I use and have become loyal too due to their superiority over competing brands.  As a new father I am very happy with the Huggies diapers, when I reach for a box of tissues at the store I always look for Kleenex brand, and no matter what the price I will ALWAYS buy Cottonelle Aloe & E toilet paper.  Sorry if that last one was too much information, but Cottonelle is the reason I first looked at KMB stock.  Seriously, there is not other TP brand that compares to it.

Rating KMB gave me a good first impression on my new rating system.  When I purchased the stock a year ago the fundamentals were much different than they are today and it would have scored much higher than it does now.  I think this a good sign for my rating system though when using hindsight.  My stock analysis was selected by SeekingAlpha and published this morning and can viewed by clicking the "read more" link below.


Tuesday, November 8, 2011

Rating A Dividend Growth Stock

Miss me?  Sorry, I've been caught up in World Series baseball here in St. Louis and then had some computer "nerd" training all last week.  Well I'm back now, so lets get back to talking dividend stocks.

Since I first reviewed Intel a few weeks back I've been working on a way to analyze a stock and quantify it in order to rate if its an attractive buy.  I've come up with something that is a strong foundation, but this may be tweaked in the future.

When analyzing a dividend stock there are three aspects we are concerned with: dividend reliability, dividend growth, and fair value.