Aristocrats, Champions, and Achievers

I have to apologize, this post should have been one of my first ones but I got wrapped up in talking about other things and analyzing specific stocks. Hopefully many of you knew of the following lists, but for those of you just starting in dividend growth investing the following links are a valuable research tool.

Our main goal is to find stocks that not only pay a dividend every year, but also raise their dividend each year.  There are a few official lists that keep track of this information for us.  Each of these is a great place to start looking for potential investment ideas.  Of course, just because a stock is on one of these lists does not mean its a good buy.

Dividend Stock Analysis: Altria (MO)

I'm not sure there is a company that has created more wealth for investors over the past 40 years than Altria Group (formerly known as Philip Morris).  Between the dividends they collectively paid and companies that they've spun-off (Miller Brewing Company, Kraft Foods, and Philip Morris International) you would have made a great deal of money being a long-term shareholder.  Of course in hindsight investing we're all millionaires.  What we're concerned about is can Altria continue creating that type of wealth for its investors, or has its heyday passed by.  Altria is the latest stock I put through my analysis that was recently posted on SeekingAlpha.com.

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Side note:  When a stock like Altria creates so much wealth for shareholders it also can create a lot of loyalty.  As you will see in some of the comments on my post, these loyal shareholders don't take to kindly to my analysis of Altria as a future dividend growth stock.

Boring Terms We Need To Know: Cash Flow

You've probably noticed in my stock analysis that I like to use cash flow.  This is essentially net income for a company, but I feel cash flow is a much better gauge for measuring a company's financial health.  Net income (or earnings) can be more easily manipulated by accounting measures and does not always reflect the actual amount of money made for a period of time. So earnings does not always equal cash.  As dividend growth investors we care about cash first and foremost as a dividend payment is simply cash going from the company to the shareholder.

The Key to Smart Dividend Investing

Ask most income-seeking investors what they like best about dividend stocks, and they'll tell you the obvious answer: their current yield. But if you want to be a smarter long-term dividend investor, you have to go beyond current yields to learn the secret of dividend longevity -- in order to make sure those payouts will keep coming year after year, decade after decade.

It's easy to understand, though, why so many investors look first at how much income a stock will pay them right now. It's really difficult to find good sources of investment income outside the dividend-stock arena, as interest rates on bonds and other fixed-income investments are near rock-bottom levels.   Read More

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.

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.

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.

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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.

Boring Terms We Need To Know: Dividend Payout Ratio

The second term in our "Boring Terms We Need to Know" series is dividend payout ratio. Dividend payout ratio is an important statistic that we need to be aware of and use when analyzing a dividend stock.  If you found Yield on Cost to be fairly easy to grasp, then you'll have no problems understanding dividend payout ratio.

Dividend payout ratio is simply the percentage of a company's earnings that is paid out to its investors in the form of dividends.  The ratio is easy to find on Yahoo Finance.  Just go to the a stock's quote page, click on "Key Statistics" link and search for "Payout Ratio".  Here is an easy example if you want to figure out the ratio on your own.

Banking Stocks Presenting Dividend Values

Four years ago you would be hard pressed to put together a dividend portfolio without owning a few banks. In fact, the financial sector of the S&P 500 Index paid $51 billion in dividends to shareholders in 2007. Everyone is well aware of the major financial meltdown that occurred soon after causing many banks to cut or even suspend their dividends. By 2010, the financial sector was only responsible for about $19 billion in dividends, a drop of 62%.

Despite the dark cloud that still resides over banks today, there are positive signs that would lead one to believe a rebound could be near. 

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