Wednesday, September 21, 2011

Dividend Models -- A nice read

Found this to be interesting

http://seekingalpha.com/article/294338-10-commandments-for-dividend-growth-investors
The article gives the commandments for identifying stocks for investing on a safer footing.

for example one of the rules is,
1. Thou shall seek and identify companies that have a committment to paying dividends and have done so for long periods of time.

4. Thou shall invest in companies that can sustain those dividends by having the earnings growth to continue paying them.
What this really mean is it keeps the CFO's busy to come up with good numbers all the time-- Keeps the management on the target based outlook. Also maybe speaks a lot about the sustainability of the business model as the article rightly identifies.

6. Thou shall only invest in companies that have great fundamentals.
Essentially means only invest in Power, Rail etc.
Seems to bank on the age old rule of "In uncertain times, investors seem to flock to solid companies in a steady industry"

Makes for a very interesting concepts and to the best of my understanding its hard to debate the logic behind the safe stocks and dividend growth model.

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