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Old 10-12-2010, 05:21 PM   #21
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Thanks Charlie!

Looking forward to your analysis, recommendations and comments!
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Old 10-15-2010, 06:26 AM   #22
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Keep up the good work OP
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Old 10-19-2010, 10:37 PM   #23
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As promised, returning to my evaluation of the Value Line weekly newsletter and the pick of the week.
The goal is to limit stocks to the strongest financially in both financial rating and safety, while showing a consistent history of dividend increases each year with no cuts. This week’s issue 8 featured industries that should have been a boon to dividend investing but to my great surprise almost none of the stocks met the minimum criteria and yielded over 2%.
The industries are:
· Thrift
· Real Estate Investment Trust
· Life Insurance
· Precious Metals
· Metals and Mining
· Basic Chemicals
· Drugs
· Human Resources

The thrift industry and REIT featured plenty of stocks with good dividends but the economic crisis has dropped virtually all of the stocks beneath the minimum investing criteria of a “2” for Safety. These along with a minimum Financial Strength rating of B+ are two rules I would never violate. The need to have a secure stock with strong financials is the means to hold a stock for multiple years. The two closest stocks to meeting the criteria in these dividend laden areas was HCBK – Hudson City Bancorp and O – Realty Income, both had all the criteria excepting the safety rating and both yield about 5 %.

But the pick is a Chicago favorite in my backyard – ABT Abbott Labs. With a top rating in Safety, Financial Strength, Price Stock stability and Earnings Predictability and annual dividend growth of 8-9 percent per year Abbott is a dividend lover’s dream. This stock is very reminiscent in price action since Y2K to Coca Cola. Overvalued in 2000 at a PE of 30 it has fallen to a PE of 12 while sales and earnings have continued a straight up track. Profit margins in the last year of 18.9% and Operating Margins of 29% are the highest in 10 years and Abbott continues to earn an excess of 25% on shareholder equity. They are busy making acquisitions and turning a 2-3 percentage of their employees into early retirees as a result of SGA and R&D consolidation. A very solid company whose dividend should double within the next ten years if the company remains on it’s expected path. A slowdown from the 9 percent growth would be an early warning sign that something is amiss at Abbot and the first sign I would expect to see if the fortunes of Abbot were to turn downward.

At a current price of 52.87 I’ll pick up 377 shares of stock for my $20,000 for an annual dividend payment of $663.52 netting a yield of 3.3%
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Old 02-12-2012, 08:23 PM   #24
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I decided to resurrect this thread as a review of the dividend investing method I prescribe to and to review the results as last week I received the latest update to the issue I began the thread with and thought it might be interesting to review and update. Issue 11 is one of my favorite issues of Value line because it has so many stocks that meet the dividend criteria I like while being in the retail industry which is not usually thought of as fertile ground for consistent dividends. Of the stocks I liked all have advanced their dividends significantly and well in excess of inflation.

VF Corp despite a very large run-up in price from 9/10/2010 is still my selection from this issue. VF Corp had a price increase of 84% and a dividend increase of 20% It still holds its very strong ratings for Price Stability, Price Growth Persistence, Earnings Predictability and the earnings continue to grow. $6.44 in 2010 and expected to be $9.30 in 2012. Sales are up from 7.7 billion to 11 billion and the dividend payout ratio has dropped to 31% from 37% so dividend increases in the realm of 15% per year appear very likely for the foreseeable future. 3 more years of 15% increases will give a annual dividend of nearly $1,100 per year from the original investment of $20,000. The 248 shares of original investment would now be producing $714 in annual income up from the starting point of $595. Despite the price increase and the yield being relatively low at currently just over 2 percent this would continue to be my selection from this issue 18 months later. Valuation is the only negative that is starting to enter into the decision of whether or not to hold VFC but we are not there yet and future dividend increases may hold the valuation issue at bay. If the stock were to continue to soar to where this stock yielded less than 1.5% I would switch to my #2 selection for this issue.

Of the prior runner ups – Ross Stores - who I really liked in the original posting excepting the low dividend rate - nearly doubled in price outstripping the 75% increase in the dividend and is currently yielding only 1.08% probably too low for most dividend investors, including me. It pains me because I think this stock will continue to raise its dividend consistently and strongly but this is too low a point to start from. This is definitely a stock to keep in mind if a large market decline were to strike making this company a more solid dividend yielder.

Nike Is one of the top rated stocks in the value line system I use being a A++ in Financial Strength and a “1” in safety and in the top 10% in price stability, growth Persistence and Earnings Predictability. With dividend growth from 9/10/2010 of 33% but price increase of 43% NIKE is also working to lower the yield today compared to September of 2010, reducing its relative value, but still the stock is a very solid company that continues to perform exceptionally well. This stock is a great stock in any portfolio but the yield of 1.4% is keeping it just out of the runner up spot today.

Target was the only stock of the runner-ups to not advance, basically holding a flat price despite an increase of 20% in the dividend. Target is getting ready to open over 125 stores in Canada by 2014 and is also using its excess funds not paid as dividends by redesigning existing stores. the addition of these stores is likely to give a short term cost in 2013 which is one of the excuses analysts would use to not recommend the stock. However the overall fundamentals at Target remain sound and further increase in the dividend of 17% appear to be likely in the next few years so with a dividend of 2.3% this would move this stock up to the #2 position in my list of stocks for this issue and would be the replacement for me of VFC if the need to sell VFC were to arrive.

As a point of comparison for these stocks the S&P500 for the same time period as reflected in the Vanguard VFIAX is up 20% with a 15% increase in dividends. The dividend ETF DVY is up 19% in price with a 5% increase in dividends, however that fund's yield is higher than these stocks at 3.2% at today’s prices.



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Originally Posted by Running_Man View Post
Dividend Stock of the Week

For the near term as I have resubscribed to the Value Line Survey I will for fun be listing my pick of the week of the stocks listed in the weekly issue of Value Line. Over the next 13 weeks I will pick 13 stocks that will be by design all dividend payers, from diversified industry groups and conservative by nature. The desire would be to select stocks that should average to multiyear holdings. I will pick each stock as a 2% portion of a mythical 1MM portfolio or $20,000 each. The basic rules for inclusion as a pick are:
1) Must be rated in the top 25% of all Value Line stocks for Financial Strength and Safety – Goal is to have 8 of the 13 picks with a Safety Rating of 1
2) Must pay a dividend with a reliable record of dividend growth
3) Price Stability must be in the top 65% of all companies
4) Earnings Predictability must be in the top 65% of all companies
5) Timeliness of 3 or higher with a strong preference to stocks rated 1 or 2.

Selling will occur if :
1) Value Line reduces the Financial Strength at all or if Safety falls below 2. A cut in Safety ranking is a strong reason to sell a stock in and of itself but is not automatic.
2) Timeliness rating falls to 4 or lower.
3) Dividend is cut or expected increase unexpectedly does not occur.
There are other more subjective guidelines I follow that may be expanding on in the future. The reason for most of the rules is to obtain a dividend stock that no matter what the market is doing will be bringing a dividend home that will grow in excess of inflation. All of the criteria are by using only the Value Line Survey, for myself I always check further by reading the most recent Edgar filings and trying to listen to management on a earnings call to see if their plans sound reasonable.

For this week the Value Line industries are:
Apparel
Retail Automotive
Retail Shoe
Shoe
Retail (Special Lines)
Electric Utility (West)
The Issue #11 was a very strong issue with 22 stocks rated “1” in timeliness and many stocks meeting the criteria for selection. After a review of all stocks in the issue I decided on this week’s selection as V.F. Corp “VFC”.

VFC is the world’s largest publicly traded apparel maker with such brands as Lee, Nautica, Wrangler, the North Face and Jansport to name a few. It has increased the dividend every year for over 17 years and is currently yielding 3 percent. The dividend payout ratio is at the high end of it’s historical range so the growth is receding from a 10 year average of 11 percent however dividend growth should still be well above inflation rates. V.F. Corp is showing growth this year led by a strong performance in China. The large international presence, management’s commitment to the dividend, the ability to maintain margins in this very tough economic environment and ratings far above the minimums for investing led me to selecting this stock. So with my $20,000 and allowing for $50 commission and $48 in slippage of price from the close I would have 248 shares earning an annual dividend of $595.20 resulting in a dividend yield of 2.98%

My runners up were:
Ross Stores – Very tough choice. if I held other dividend stocks yielding excess of 4 % already this fast growing dividend stock would have been almost impossible to pass on but with a yield of just 1.3% I could not choose it over VFC. In the end I went with the more conservative choice.
Nike – Dividend yield of 1.5% along with 3 years in early 2000 of not raising the dividend left not quite not enough for this very solid company to be selected.
Target – not selected due to dividend yield under 2%, but there is nothing in this company otherwise to not like. A long history of continually rising dividend at very high exceess of inflation and still paying out less than 25% of earnings.
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Old 02-12-2012, 08:44 PM   #25
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Good to see you back with this Running Man. Interesting that you bring up VFC again. It has had a really good run. It also will be reporting earnings on Thursday. I was just thinking about closing my position in VFC before this event happens and be happy with the profits made. Is there a reason I should rethink that move? I read your comments on the price stability and that could be a good reason to continue to hold as well as the dividend but it is under these kind of conditions that stocks like this get dumped on after weak or expected earnings. Do you think there could be any sense in selling and if the earnings report is not what stockholders expect that it could be one to get back into again at the lower price point and ride it up another time? Just a thought. I might add here that I don't have a large amount of money in these types of investments because they are my "fun" money.
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Old 02-12-2012, 09:57 PM   #26
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I believe one of the important items in making large gains in stock prices is being disciplined to know what would be the criteria to make you sell the stock in the first place. For me, the most likely scenario presently to make that happen would be a reduction in the timeliness to a "4", as VF corp was recently lowered to a "3". However there are a lot of stocks to fall beneath before it hits a "4" and I do not expect that anytime soon. As the dividend was raised as expected for the 4th quarter and earnings continue to grow year over year, the next most likely reason to sell will be an increase in share price to reduce yield beneath 1.5% as the rest of the indicators are really strong.

I would be more upset at myself for selling without having one of my selling rules implemented and watching the dividend extend to $1100 in 3 more years than I would be if the stock were to fall even 50% while my rules said hold. But I also believe each individual needs to develop their own rules of when to sell, and selling when a stock gains 80 percent in 18 months is not an unreasonable rule for selling a retail corp, though I myself would not follow such a rule.
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Old 02-13-2012, 05:58 AM   #27
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Thanks for that. I could not agree more that one needs to set criteria to sell as well as buy. What you present makes sense. Where are you getting the timeliness data?
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Old 02-13-2012, 10:39 AM   #28
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I subscribe to Value line, but it is available at most local libraries.
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Old 10-31-2015, 09:35 AM   #29
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Update on VFC:

It has now been a little over 5 years since VFC was first recommended here. It continues to be my recommendation, despite the recent issues VFC is having with a weaker dollar and weaker overseas demand it is continuing to grow and is still an excellent stock that I would not sell. I think reviewing this is a good way to show how using reliable dividends and consistent dividend growth is a great way to fund an early retirement.

The original 248 shares from August 2010 have since been split 4:1 to 992 and now the dividend which originally in 2010 provided $595 per year is now up to $1,468 per year (7.3% of the original investment). The stock value has increased at a faster rate than dividend growth and a little more than tripled from $20,000 to $66,980 at the close Friday.

In 2012 I expected the dividend to increase by 15 percent for the foreseeable future, it has averaged 20 percent increase since and I would anticipate that 15 percent is still the forecast for the intermediate term (3-5 years).

The stock is still a good value for purchase today and there are no reasons to sell this stock yet.
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Old 08-02-2016, 08:01 AM   #30
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Update on VFC:
I did sell my shares in VFC yesterday, after listening to the recent quarterly conference call the inventory issues from last year’s winter at VFC were a little concerning especially when they stated it was still good inventory and would be sold in the coming winter. This means they could not take a writedown on the inventory (most likely) and have no room in their accruals for any surprises. A company that is going better than expected would have written down the inventory in order to have the ability to overperform if the inventory could be sold at full price. So that combined with the recent drop to a “4” in timeliness by value line caused me to sell my shares yesterday. The replacement I purchased TGT Target which has a low PE a nice dividend 3.2 percent dividend for the next 12 months and consistent growth in earnings since 2008. Net profit margins have been increasing each of the last four years. Target has been purchasing shares with their cash flow while also reducing long term debt, a rarity in this investment cycle. I thought since I have been a big lover of VFC I should update.
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Old 08-02-2016, 10:58 PM   #31
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Thanks for the update on VFC.
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