Proverbs 10:4 (ESV) “A slack hand causes poverty, but the hand of the diligent makes rich.”
You might just be starting your investment flock. Your portfolio of investments is your flock. Perhaps you have a flock of investments and have cash ready to buy another asset for your investment portfolio. If so, there are several mechanisms that I use to find and validate opportunities. One of my daily practices involves a free resource provided by the Wall Street Journal. Sometime after 4PM (CST) every work day, the WSJ publishes “Dividend Declarations” in their “Market Data Center.” Because I go there every day, I have a shortcut that takes me to that page. This requires about five minutes of my time. The time spent pays dividends, pun intended.
I’ll start with step number one in my evaluation process: Did any companies increase their dividend? Is this an opportunity or something to add to my “buy” list?
You will see that the WSJ gives you categories of dividends that have been declared. They always come in this sequence: INCREASED, REDUCED, INITIAL, REGULAR, FUNDS INVESTMENTS COS (mutual funds and ETFs), STOCKS (splits and reverse splits), FOREIGN and SPECIAL. Today I only want to talk about the INCREASED section.
Understand this: not every increase is worthy of consideration. Some companies may have a dividend increase, but they are a pitiful investment. So here should be your train of thought:
- Do I recognize this company? Do I already own shares? Should I buy more?
- What do the fundamentals look like? Is this a good company based on my written rules?
- What is the investment’s sector (business type)? Is the dividend payout ratio rational for this sector?
- Has the company increasing their dividend for five or more years?
- What is the P/E ratio for this investment?
- What does Weiss Ratings have to say about this investment? This often is my key for adding a new investment to the flock.
The attached image shows three increases for March 24, 2017. CAFD is eliminated immediately due to a very poor Weiss rating. We already own INTC and UDR. INTC has a history of raising dividends and their payout ratio is 51.42%. If I didn’t already own it I might consider INTC. The P/E (TTM) is 16.66. I would buy on a dip, perhaps at $34.50 per share. UDR is quite different in P/E and payout ratio, but it is also in a different business sector. It is a REIT with growth potential. If these were not in my flock, I would look for an opportunity to buy them from someone else’s field.