Dividend Safety Signs and Warning Flags

Posted on September 20, 2012 | Investing

Many investors have sought shelter from the stock market storm in more mature dividend-paying companies, since the income from these firms provides at least some positive return in an otherwise bleak environment.

But the economic downturn has tested even the most mature and stable firms, with some forced to cut dividend payments. Others have managed to maintain current levels for the time being, but could be forced to make cuts in the future.

What signs can you look for that indicate the safety of a company’s dividend payment stream?

Investors in dividend-paying stocks typically seek stocks that are paying steadily increasing levels of dividend income, and have the cash flow and financial resources to continue to pay the dividends. There are a number of financial ratios and indicators you can use to evaluate this; the most common are listed below.

While these safety signs and warning flags are applied at the individual firm level, you should keep in mind that even the most well-managed company can be overwhelmed by changing winds within an industry. When you are evaluating a stock for its dividend payments, make sure you don’t lose sight of the bigger picture in terms of the environment in which the firm is operating.

Clearly, dividend-seeking investors need to evaluate the dividend payments themselves, how steady they have been and how much you are paying for them.

A dividend stream may be important to you, but a critical question is: How much is the market demanding for that stream of payments?

Read more »



Outrageous Advertising: A Survival Guide for Investors

Posted on August 27, 2012 | Investing

I am continually mystified by individuals’ gullibility in the face of exaggerated investment performance claims. Investors who are nobody’s fool when it comes to outrageous advertisements in other areas of their lives suddenly become naïve when confronted with equally outrageous investment performance claims. It doesn’t make sense.

For example, most of you wouldn’t give the time of day to a used car salesman who told you that an old car had only been driven to church on Sundays. Yet many of you not only gave the time of day, but actually paid good money—to refer to a successful ad campaign of several years ago—to an investment newsletter that claimed that in 13 years’ time it had turned $10,000 into more than $40 million.

Read more »



I Savings Bonds

Posted on August 9, 2012 | Investing

The fixed rate of return is determined when the bond is purchased. The variable rate is calculated semiannually based on the inflation rate.

The variable rate on an I Savings Bond is determined using the Consumer Price Index for Urban Consumers (CPI-U) for the months of May and November of each year. Fixed rates and semiannual inflation rates are combined to determine composite earnings rates. An I Bond’s composite earnings rate changes every six months after its issue date.

Fixed and variable rates for I Savings Bonds issued over the last 10 years are posted on the Treasury Direct Web site (www.treasurydirect.gov).

What if the value of the CPI is falling?

Read more »



The Dividend Puzzle: The Relationship Between Payout Rates and Growth

Posted on August 6, 2012 | Investing

In one of the most surprising research developments over the last four decades, Robert Arnott and Clifford Asness published an article in the January/February 2003 issue of the Financial Analysts Journal entitled “Surprise! Higher Dividends = Higher Earnings Growth.”

The controversial 2003 research by Arnott and Asness was further affirmed by Ping Zhou and William Ruland in the May/June 2006 issue of the Financial Analysts Journal.

Read more »



You CAN Lose With Bonds

Posted on July 26, 2012 | Investing

Stocks are risky because stock prices go up and down all the time—sometimes wildly so—and if you have money invested in stocks, the value of your original investment can drop substantially.

Read more »



Dividend Safety Signs and Warning Flags

Posted on July 19, 2012 | Investing

Many investors have sought shelter from the stock market storm in more mature dividend-paying companies, since the income from these firms provides at least some positive return in an otherwise bleak environment.

Clearly, dividend-seeking investors need to evaluate the dividend payments themselves, how steady they have been and how much you are paying for them.

Read more »



Finding Growth Stock Winners: Focus on 8 Fundamental Factors

Posted on July 11, 2012 | Investing

In the classic musical “The Sound of Music,” the character of Sister Maria (played by Julie Andrews) tells us that we should start at the beginning because “that is a very fine place to start.”

In our search for profits investing in growth stocks, however, we do the opposite and start our search at the end. The plain fact is that at the end of the day, what makes for a great growth stock is the fundamentals of the company:

Can the company continually sell more of its products and services at higher and higher profits?

Can it continue to innovate and adapt to marketplace changes and maintain a leadership position?

Because of this tendency for the game to change, I have found that it is necessary to rank stocks on more than one fundamental variable. I have found that there are eight tried-and-true key fundamental factors that drive stellar stock price performance and have stood the test of time.

Read more »



Top Charting Web Sites

Posted on July 2, 2012 | Investing

The FreeStockCharts site (formerly BestFreeCharts) is a relative newcomer to the online charting arena, but has already made quite an impression on us. From Worden Brothers, the maker of the popular TC2007 charting software, the site offers charting, scanning, and portfolio tracking on a free and fee-based basis. The site is unique in that it offers free streaming “real-time” charts of stocks, exchange-traded funds (ETFs), indexes, and forex (foreign exchange) without exchange fees. It does this by providing real-time data from the BATS (better alternative trading system) exchange.

Read more »



Making Sense of Profits Using Profitability Ratios

Posted on June 11, 2012 | Investing

Long-term investors buy shares of a company with the expectation that the company will produce a growing future stream of cash or earnings.

Read more »



The Basics: What Is the Over-the-Counter Market?

Posted on May 31, 2012 | Investing

“Over-the-counter,” or OTC, is a term loosely applied to securities that aren’t listed on an organized exchange—such as the New York, American, Midwest, Boston, Pacific or Philadelphia exchange. OTC securities are traded through at least two, but often numerous “market makers” who maintain bids and offers for the securities they trade. Securities that trade on a listed exchange are quoted by a solo “specialist” who is charged with maintaining orderly trading in a security.

Read more »



« Newer EntriesOlder Entries »