FRT

3 Substantial Benefits of Dividend Growth Investing

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Dear members: There are three primary benefits of a well-executed dividend growth strategy, one that is carried out with prudence and care and one that pays careful attention to the intrinsic value of the stock and its critical cash-based components. Albert Einstein is reported to have called compound interest the “eighth wonder of the world,” but dividend growth investing has the potential to offer long-term investors so much more! Let’s explain. 1) Reinvested Dividends Compound Over Time Over the past decade, I have grown to appreciate the compounding dynamics of reinvested dividends on appreciating stocks even more than historical studies have revealed. The strategy of dividend growth investing not only benefits from the reinvestment of dividends into the purchase of … Read more

Stock Reports on 25 Dividend Kings to Pad Your Dividend Growth Portfolio

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Image Source: Jason Train By Valuentum Analysts Investors love dividends! After all, research has shown that companies that have paid an ever-increasing dividend for a long time do quite well in the stock market. In this note, you can download the stock reports of 25 Dividend Kings, or stocks that have raised their dividends in each of the past 50 years! Please select the company’s name/symbol below to download the 16-page report. Don’t forget that we also have Dividend Reports for these companies, too!  —– Genuine Parts (GPC) — 67 Years   Parker-Hannifin (PH) — 67 Years   Procter & Gamble (PG) — 67 Years   Emerson Electric (EMR) — 66 Years   3M (MMM) — 65 Years   Coca-Cola … Read more

5 Questions Advisors Should Ask When Interviewing Fund Managers

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Image Source: Investment Zen These are not your typical questions. These are the questions advisors should ask to help find the most analytical fund managers. The questions don’t cover strategy or market outlook, but instead hit upon the analytical foundation of the fund manager, which could be more important than anything else. Can you explain the difference between ROA, ROE, and ROIC? What you are looking for in the answer is a response that goes into the pitfalls of using return on assets (ROA) and return on equity (ROE) as a measure of a company’s ability to generate value for shareholders. Ideally, you’d want to hear a response that says ROA is muddied by the inclusion of non-operating cash in … Read more

12 Reasons to Stay Aggressive in 2024

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By Brian Nelson, CFA 1. The Fed has signaled that rate cuts could start with inflation at a 2 handle (2 point something) and not at exactly 2.0%. That means that the Fed may become anticipatory to prevent overshooting to the downside with inflation. We see this as positive for long-duration equities, particularly those whose free cash flow generation is robust in the out-years, inclusive of big cap tech and the stylistic area of large cap growth. 2. Unemployment is at structural lows of 3.7%. Employers are working hard to keep talent on board, and with each paycheck, employees are pumping more and more money into the stock market via retirement accounts. This tailwind remains a stiff one and will … Read more

Latest Report Updates

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Select the company’s link below to access their stock webpage where their 16-page stock report (pdf) can be downloaded. The stock webpage also houses the company’s dividend report (pdf), where applicable, as well as the latest company/industry commentary and news. For companies updated this week, their stock webpages will reflect the new data this weekend. American Tower (AMT) AutoZone (AZO) Best Buy (BBY) BHP Billiton (BHP) Bristol-Myers Squibb (BMY) ConocoPhillips (COP) Crocs (CROX) Cisco (CSCO) Cintas Corp (CTAS) CubeSmart (CUBE) Dollar Tree (DLTR) DocuSign (DOCU) Estee Lauder (EL) Ford (F) FedEx (FDX) Fiserv (FI) First Solar (FSLR) General Electric (GE) General Motors (GM) Global Payments (GPN) Leggett & Platt (LEG) Eli Lilly (LLY) Lululemon (LULU) McDonald’s (MCD) MercadoLibre (MELI) 3M … Read more

REITs Will Likely Continue To Underperform

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By Brian Nelson, CFA Stock prices and returns are in part a function of the cash-based sources of intrinsic value: net cash on the balance sheet and future expectations of free cash flow. Though there are many ways to slice and dice a company with respect to equity analysis, to arrive at an intrinsic value estimate of a firm, it generally comes down to these two important cash-based dynamics. Due to the nature of their business models, most REITs have lofty net debt positions, and many are investing in real estate at a pace that is faster than that which they are generating operating cash flow. One good example of the trouble brewing on many a REIT’s cash flow statement … Read more

Use Both the Dividend Cushion Ratio (Probability of a Dividend Cut) and the Qualitative Dividend Ratings in Your Assessment of the Payout

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The Dividend Cushion ratio is one of the most powerful financial tools an income or dividend growth investor can use in conjunction with qualitative dividend analysis. The ratio is one-of-a-kind in that it is both free-cash-flow based and forward looking. Since its creation in 2012, the Dividend Cushion ratio has forewarned readers of approximately 50 dividend cuts. We estimate its efficacy at ~90%. By Brian Nelson, CFA Dividend investing has probably never been as popular as the past couple years. Remember, however, the dividend is capital appreciation that otherwise would have been achieved had the dividend not been paid. If you had a stock that was $10, and it paid a $1 dividend, you don’t have a $10 stock and … Read more

ICYMI: Questions for Valuentum’s Brian Nelson

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Valuentum’s President Brian Nelson, CFA, answers your questions. Q: What Is Valuentum? A: In short, it is a strategy that combines the concepts of value and momentum within individual stocks. We measure value through the cash-based sources of intrinsic value – net cash on the balance sheet and future expected free cash flow. We measure momentum rather simply, generally via relative strength or other technical and momentum indicators. We like stocks with strong net cash positions on the balance sheet, ones that are generating tremendous free cash flow, and have strong secular growth prospects such that the prospect for expectations of free cash flow can continue to be ratcheted higher. Today, most Valuentum stocks are included in the stylistic area … Read more

ICYMI: Let’s Play Devil’s Advocate: What’s the Bear Case for Realty Income?

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By Brian Nelson, CFA We like Realty Income Corp. (O) a lot, but it’s not hard to see that the REIT could potentially have all the makings of a black swan. For one, the stock is loved by almost everyone–REIT investors, income investors, and dividend growth investors alike. Many are simply enamored by its monthly dividend, which it has raised nearly 120 times since it was listed on the NYSE in 1994. Over its 54-year history, the REIT has paid 632 consecutive monthly dividends, too. There’s a ton of things to like about Realty Income, but for this note, let’s build and examine the bear case, one that can be broken into three pillars: 1) its retail exposure, 2) its … Read more

ICYMI: The Impact Rising Interest Rates Have on Equity REITs

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Image: REITs have not performed as well as one might have thought. The Vanguard REIT ETF has underperformed the broader market considerably since 2015, while dividends per share have not grown much, if at all, since 2005. Source: Vanguard By Brian Nelson, CFA The question on most everyone’s minds: How will equity real estate investment trusts (REITs) fare in the current rising interest-rate environment? The topic has long been debated and studied, and there are myriad opinions on the subject. From where we stand, however, there are two main moving parts consisting of fundamental and investment dynamics that investors should be aware of. Let’s have a look. Fundamental Considerations In the discounted cash-flow (enterprise) valuation context, a rising nominal interest rate (real + inflation) … Read more