How to ID what to invest in
BUY AND HOLD works for this site's "investment approach": invest in companies that have a history of increasing their dividend, and that also every 10 or 15 years have had a "stock split".
Also, the chart of Annual Dividends is much easier to "relate to" for "actionable" information:
Hence, the "mantra" inserted throughout this site: INVESTING so STOCK PRICE MOVEMENT is IRRELEVANT when deciding when to SELL.
For your first attempt at using the following manual instructions for "How to ID what to invest in", input DIS (the stock symbol for The Walt Disney Company) to see if that company still qualifies as "a DIVIDEND GROWTH COMPANY in which you can invest", as it did when the preceding paragraph and image above it were created.
How to ID what to invest in -- and a couple of important "tips" if you do invest in stocks!
INVESTING so STOCK PRICE MOVEMENT is IRRELEVANT when deciding when to SELL.
VERY IMPORTANT UPDATE:
The following instructions for manually duplicating our screening using finance.Yahoo.com haven’t been updated to reflect the specifics of using finance.Yahoo.com since its revision in early 2016. Although all the data necessary is still available on finance.Yahoo.com, the specific approach to accessing that data has become more complex, and the response time is somewhat slower than it used to be. THEREFORE, THE INSTRUCTIONS THAT FOLLOW SHOULD BE USED IN THE SEQUENCE THAT IS SUGGESTED, TO ACCESS, and evaluate as indicated, EACH TYPE OF DATA IDENTIFIED; however, the click-by-click information is no longer accurate.
2. In the "Search Finance" input area either type in the company's stock Symbol or its name.
3. When the company you are researching appears in the drop down search results list, click on it.
a. LOOK FOR COMPANIES WITH POSITIVE EARNINGS: If the "EPS (ttm)" is a positive amount continue to the next step, 3. b., -- OTHERWISE, STOP AND START OVER INVESTIGATING ANOTHER COMPANY.
b. LOOK FOR COMPANIES WITH DIVIDENDS: If the "Div & Yield" shows an annual "Div"idend amount, and next to it in parenthesis a "Yield"% continue to the next step, 3. c., -- OTHERWISE, STOP AND START OVER INVESTIGATING ANOTHER COMPANY.
c. MAKE CERTAIN THE "% Dividend Payout" IS REASONABLE: Now calculate the "dividend payout" as a % by dividing the "Div" amount by the "EPS (ttm)" amount (i.e., Div/EPS (ttm)), then convert this ratio to a % by moving the decimal point two places to the right. If the "% dividend payout" is less than 75.0% (i.e., a smaller ratio than .7500, for example .2800, which converts to 28.0%) then continue to the next step -- OTHERWISE, STOP AND START OVER INVESTIGATING ANOTHER COMPANY.
4. CHECK THE COMPANY'S RECENT DIVIDEND HISTORY: In the list of links find "Historical Prices" and click on it.
5. Change the "Set Date Range" "Start Date" to a year at least eight years earlier than the current year and click Apply.
6. Then move the "bullet" point to the right of the dates from "Daily" to "Dividends Only" by clicking on "Dividends Only".
7. Then click on "Get Prices".
8. LOOK FOR UPWARD TRENDS IN DIVIDEND PAYOUT: You should see that the three most recent full calendar years reflect at least one dividend payment in each of those years.
9. If the test in the previous step is met then continue to the next step -- OTHERWISE, STOP AND START OVER INVESTIGATING ANOTHER COMPANY.
10. THE DIVIDEND HISTORY SHOULD BE EVALUATED IN TERMS OF THE TOTAL DIVIDEND(S) PAID EACH YEAR: At a minimum there should have been at least one dividend increase in one of the past 3 years -- and no decreases in that first 3 year period, unless it was related to a stock split. [Note1: Sometimes companies will pay a large one-time special dividend, then revert back to the normal dividend payment pattern. Don't count such an occurrence as a "dividend decrease".] [Note2: If you see there have been splits (AND SPLITS WHERE THE FIRST NUMBER IS BIGGER THAN THE SECOND NUMBER ARE A GOOD THING!!) then x:y means that at the indicated date the record of shares held by an existing stockholder was adjusted to show x for each y share(s) previously held (and proportionately on that date there was an equivalent adjustment to the share price and the dividend, so effectively there was no immediate change in the value of what the shareholder owned).]
11. If the test in the previous step is met then continue to the next step -- OTHERWISE, STOP AND START OVER INVESTIGATING ANOTHER COMPANY.
12. MAKE CERTAIN THAT THE "Dividend Growth Rate" IS SUFFICIENT TO JUSTIFY THE COMPANY BEING CALLED A Dividend Growth Company: SKIP THIS STEP UNLESS the dividend history shows dividends were paid for at least the last 6 years. If dividends were paid for the last 6 years then the TOTAL DIVIDENDS PAID FOR the most recent FULL- year should be at least 1.4 times the TOTAL DIVIDENDS PAID FOR the FULL-sixth year back.
13. If the test in the previous step is met, OR QUALIFIES TO BE SKIPPED, then continue to the next step -- OTHERWISE, STOP AND START OVER INVESTIGATING ANOTHER COMPANY.
~~AT THIS POINT YOU HAVE THE EQUIVALENT OF OUR "HOLD" LIST (Primary Screen) RESULTS, a listing of stocks that are okay to “Hold”, because they haven’t met any of our “no longer accumulate" criteria. (Note: Our HOLD List (Primary Screen) criteria also exclude all: Over-the-Counter, ADR/ADS, REIT, Limited Partnership, as well as Non-optionable stocks and stocks with fewer than three analysts following them.)
ADDITIONALLY, STOCKS THAT MEET THE FOLLOWING STEPS 14. AND 15. ARE THE EQUIVALENT OF OUR “BUY” LIST (Secondary Screen).
14. In the list of links down the left side find "Balance Sheet" and click on it.
15. MAKE CERTAIN THAT THE COMPANY'S "Balance Sheet" and "Income Statement" ARE GROWING STRONGER: Make certain in the window that appears under the title "Balance Sheet" that the "View" shows "Annual Data" as black(or selected); then scroll all the way to the bottom of the columns with numbers and make certain, reading from right to left (i.e. the oldest dated column to the most current dated column), that the "Net Tangible Assets" amount has been "improving" (at a minimum the left, most recent amount, should be greater than the right, oldest amount) -- "improving" means that if the amounts are negative (i.e. bracketed) then the negative amounts have got smaller, or have turned positive.
~~Next – In the list of links down the left side find "Income Statement” and click on it.
MAKE CERTAIN THAT THE COMPANY'S "Income Statement" IS GROWING STRONGER: Make certain in the window that appears under the title "Income Statement" that the "View" shows "Annual Data" as black(or selected); then scroll all the way to the bottom of the columns with numbers and make certain, reading from right to left (i.e. the oldest dated column to the most current dated column), that the annual "Net Income Applicable To Common Shares" amount has been "improving" – and none of the three amounts should be negative (i.e. bracketed).
16. If the test in the previous step is met then continue to the next step -- OTHERWISE, STOP AND START OVER INVESTIGATING ANOTHER COMPANY.
17. Congratulations!! INVESTING so STOCK PRICE MOVEMENT is IRRELEVANT when deciding when to SELL. You have found a DIVIDEND GROWTH COMPANY in which you can invest.
Next it is important to understand When to "no longer accumulate" a Dividend Growth stock:
THIS IS HOW YOU SHOULD MANAGE DIVIDEND GROWTH STOCKS IN YOUR PORTFOLIO, if you do invest in them, MOST IMPORTANTLY you should ONLY NO LONGER BUY (or continue to accumulate) A Divident Growth STOCK WHEN you’ve purchased our current HOLD List (Primary Screen) and you find that a Dividend Growth stock you own isn’t still on our current HOLD List (Primary Screen). Not being on our HOLD List (Primary Screen) means a stock may have met at least one, or more, of our first 5 criteria for when to consider no longer accumulating a Dividend Growth stock.
Also, using yahoo.com you can manually obtain the data to apply the following criteria for when to consider no longer accumulating a Dividend Growth stock:
A. a dividend is reduced (EXCEPT IF CAUSED BY, AND PROPORTIONATE TO, A STOCK SPLIT);
B. or the % dividend payout exceeds 95% of EPS (Earning Per Share);
C. or the % dividend payout is between 75% - 95% of EPS for two consecutive years;
D. or there has been no dividend increase for 3 years (EXCEPT A STOCK SPLIT CAN BE COUNTED AS EQUIVALENT TO A DIVIDEND INCREASE);
E. or consider no longer accumulating a Dividend Growth stock as long as this condition persists: if, assuming dividends have been paid for the last 6 years, the annual per share DIVIDEND PAID FOR the most recent FULL- year isn't at least 1.4 times the annual per share DIVIDEND PAID FOR the FULL-sixth year back (in making this calculation be careful to properly adjust the divisor, "annual per share DIVIDEND PAID FOR the FULL-sixth year back", for any stock splits during the five+ year time frame).
F. or consider no longer accumulating a Dividend Growth stock if a "STOCK BUY-BACK" is announced AND THERE IS NO DIVIDEND INCREASE ANNOUNCED;
G. and consider no longer accumulating a Dividend Growth stock if there is an unexpected departure of the company's CFO (Chief Financial Officer).
[Note3: These criteria for no longer accumulating a Dividend Growth stock have no relationship to the current price of a stock, and no relationship to the purchase price of a stock, because what we are recommending is a buy-and-hold strategy for dividend-growth stocks!! ALSO, THESE "no longer accumulate" RULES SHOULD BE SUSPENDED (for probably 12 to 18 months) WHEN ANY VERY UNUSUAL MARKET DROP OCCURS ("crashes" such as in 1987, or the "once in 100 years" events in 1929 or 2008, or the "flash-crash" of May 6, 2010), because after every such event in the history of the market new highs have occurred.]
18. IMPORTANT TIP #1: Because approximately one out of every twenty investable companies will "screw up" so badly that their common stockholders will lose everything, make certain you invest in a diversified portfolio of at least twenty companies so you only lose one-twentieth (5%) of your originally invested funds when that happens! Consider the following as a more detailed guide of how to accomplish this:
19. GIVEN THE FOLLOWING TEN"SECTORS" OF THE ECONOMY (each of which having multiple "Industry" sub-categories, which sub-categories should be ignored for simplicity) : Basic Materials/Commodities; Consumer Discretionary/Cyclical; Consumer Staples/Non-Cyclical; Energy; Financial; Healthcare; Industrial Goods; Technology; Transportation; Utilities and Telephone. After first excluding Over-The-Counter Exchange companies and ADR/ADS companies, USE "EQUAL WEIGHT INVESTING" FOR EACH of these ten SECTORS, by identifying AN EQUAL NUMBER OF COMPANIES FOR EACH SECTOR (BUT AT LEAST TWO COMPANIES FOR EACH SECTOR) that meet our criteria/screen as "a company in which you can invest". THEN INVEST APPROXIMATELY EQUAL AMOUNTS IN EACH OF THE COMPANIES (i.e. if you have $10,000 to invest in 20 companies then that means you should invest $500 in each, and divide the equal amount you are going to invest in each company by the price per share of each company, and buy that many shares). Also, be sure to find out if your broker has a method (usually at no extra cost) for you to designate that your dividends be automatically re-invested in fractional shares of the stock paying the dividend, if so make that designation. [Note4: The website https://www.motifinvesting.com/ enables you to easily make an equally weighted single dollar amount investment in a "motif" portfolio of as many as 30 stocks for a single transaction fee of $19.95 (or only $9.95 by selecting "Next market day" transaction). (Please note: At this writing motifinvesting.com didn't facilitate automatic re-investment of dividends, and there are certain citizenship requirements to open an account.)]
20. IMPORTANT TIP #2: Almost never, never, NEVER, "rebalance"! Only rebalance if the value of your holdings in a company exceed 30% of the total value of your portfolio, THEN "REBALANCE" BY ONCE EVERY 12 MONTHS SELLING 20% OF THAT POSITION UNTIL IT IS LESS THAN 15% OF YOUR TOTAL PORTFOLIO, THEN STOP ALL "REBALANCING" UNTIL A POSITION AGAIN EXCEEDS 30% OF THE TOTAL PORTFOLIO!!
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