This article originally appeared on The DIV-Net March 28, 2011.
Linked here is a detailed quantitative analysis of Microsoft Corporation (MSFT). Below are some highlights from the above linked analysis:
Company Description: Microsoft is the world’s largest software company, develops PC software, including the Windows operating system and the Office application suite.
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It is a great time of year! The Christmas music, decorations, family gatherings, holiday plays and stock picks. Stock picks? Yes, ’tis the season for stock predictions! Virtually every financial writer will pen an article selecting his or her top picks for the upcoming year. I enjoy reading them and the logic behind the picks. As a long-term buy and hold investor, generally most aren’t useful for me; nevertheless, I find them entertaining and sometimes there is a gem to be found. Here are some picks for 2011…
When evaluating a company as a potential income investment you look at its calculated fair value, ability to generate cash, debt position and the net present value of its dividend stream compared to alternative “safe” investments. The advantages dividend stocks have over “safe” investments are potential capital appreciation and dividend growth. Not only are your earnings compounding, but the rate of earnings is growing.
If income investing were as simple as picking the stock with the highest yield, everyone would be an expert. Most assume (rightfully so) that yield is heavily influenced by risk, but much more goes into determining yield. Below are several important factors that influence a stock’s yield, along with some illustrative examples:
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When you purchase individual stocks, risk is inherit. Sometimes bad things sometimes happen to good stocks such as the Chicago Tylenol murders of 1982. This shook Johnson & Johnson’s (JNJ) , but eventually it prevailed. Sometimes it is difficult when a strong leader leaves a company and creates a void that just can’t be filled. Consider the performance of General Electric’s (GE) after Jack Welch retired and Microsoft’s (MSFT) after bill Gates began relinquishing his responsibilities. So how do you guard against these situations and disasters similar to what BP (BP) and their shareholders are currently facing?
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I am a firm believer in keeping things simple. However, you can simplify things to the point they no longer have value. In my opinion, a lot of the commonly used financial metrics can be very misleading unless you understand what is behind them. I would put EBIT, EBITDA and Dividend Payout in this category. As an investor in dividend stocks, I see Dividend Payout used a lot, so let’s take a closer look at it.
If the goal of dividend investing is to find and buy dividend stocks that will continue to raise their dividends, it is not enough to only look at a company’s free cash flow. Many companies generate significant free cash flow, but often that cash is already spoken for in the form of debt obligations.
This last week was similar to each of the two prior weeks in that we saw another large bank slash its dividend by more than 80%. Last Friday, Wells Fargo & Company (WFC) cut its dividend by 85% to $0.05. The company said it would help them retain an additional $5 billion in common equity each year.
This article originally appeared on The DIV-Net November 3, 2008.
Linked here is a PDF copy of my detailed analysis of Microsoft Corporation (MSFT). Below are some highlights from the above linked analysis:
Company Description: Microsoft is the world’s largest software company. It develops PC software, including the Windows operating system and the Office application suite.
Read more…
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10 Under-Valued Dividend Stocks *
By many measures,
2010 was a great year for dividend growth stocks. There were far fewer dividend cuts and fewer companies that failed to raise their dividends at the expected time. From a valuation standpoint dividend stocks performed quite well, with many income portfolios outperforming the S&P 500.
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