Running_Man
Thinks s/he gets paid by the post
- Joined
- Sep 25, 2006
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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.
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.