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Ideas and Strategies on Investing.

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Eaton Vance Corporation

10/19/2014

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Eaton Vance Corp. is one of the oldest investment management firms in the United States, with a history dating back to 1924. Eaton Vance was formed by the 1979 merger of two Boston-based investment management firms: Eaton & Howard, Inc., founded in 1924, and Vance, Sanders & Company, organized in 1934. (Company History)

Eaton Vance and its affiliates offer individuals and institutions investment products and wealth management services and creation, marketing, and management of investment funds. It provides investment products to individuals, institutions and financial professionals in the US, including wealth management solutions, defined contribution investment only and sub-advisory services.
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The Company
Eaton Vance Corp. (EV), through its subsidiaries, engages in the creation, marketing, and management of investment funds in the United States. It also provides investment management and counseling services to institutions and individuals. Further, the company operates as an adviser and distributor of investment companies and separate accounts. As of October 31, 2004, the company provided investment advisory or administration services to approximately 150 funds; approximately 1,300 separately managed individual and institutional accounts; and participated in approximately 40 retail-managed account broker/dealer programs. It markets and distributes shares of funds through a retail network of national and regional broker/dealers, banks, insurance companies, and financial planning firms. Eaton Vance Corp. was founded in 1944 and is headquartered in Boston, Massachusetts. (Daily Chart) (Weekly Chart)

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19 October
Price $35.61
1yr Target $39.17
Analysts 12
1yr Cap Gain 10.00%
Dividend $0.88
Yield 2.47%
1yr Est Tot Return 12.47%

Market Cap $4.23 Bil
Beta 1.65
EPS (ttm) $2.26
Payout Ratio 38.93%
EPS next yr $2.62
P/E 15.76
PEG 1.35
Forward P/E 13.61
Debt/Equity 1.13
ROA 15.70%
ROE 50.70%
ROI 14.00%
Sales $1.44 Bil
Income $276.00 Mil
Profit Margin 19.16%

Eaton Vance offers a wide variety of investment strategies and wealth management to the following four areas:
  1. For Individual Investors. Mutual funds, closed-end funds and separately managed accounts that serve the retirement savings, lifetime income and other needs of individual investors. 
  2. For Institutional Investors. Equity, income and alternative strategies for corporate, public and Taft-Hartley Act retirement plans, foundations and endowments, settlement trusts, and sovereign wealth funds.
  3. For High-Net-Worth Families. Eaton Vance Investment Counsel (EVIC) offers customized financial guidance and wealth management solutions to high-net-worth individuals and their families, as well as to endowments and foundations.
  4. For Financial Professionals. Investment solutions, market intelligence and practice management tools to help national, regional and independent broker-dealer firms, registered investment advisors, banks, insurance companies and private wealth managers, build their businesses.

The Fundamentals
Year
2015 Est
2014 Est
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Revenues
$1.51 Bil
$1.45 Bil
$1.30 Bil
$1.15 Bil
$1.20 Bil
$1.08 Bil
$0.85 Bil
$1.09 Bil
$1.08 Bil
$0.86 Bil
$0.75 Bil
$0.66 Bil
$0.52 Bil
Earnings
$2.61
$2.44
$1.53
$1.72
$1.75
$1.40
$1.07
$1.57
$1.06
$1.17
$1.13
$0.99
$0.75
Dividends
$1.04
$0.91
$0.82
$0.77
$0.73
$0.66
$0.62
$0.60
$0.51
$0.42
$0.34
$0.27
$0.20
Payout Ratio
39.84%
37.29%
53.59%
44.76%
41.71%
47.14%
57.94%
38.21%
48.11%
35.89%
30.08%
27.27%
26.66%
Revenue Growth Rate
1 year = 13.04%
2 year = 4.08%
3 year = 6.30%
4 year = 11.20%
5 year = 3.58%
10 year = 9.59%
Earnings Growth Rate
1 year = -11.05%
2 year = -6.50%
3 year = 2.97%
4 year = 9.35%
5 year = -0.52%
10 year = 7.38%
Dividend Growth Rate
1 year = 6.49%
2 year = 5.98%
3 year = 7.42%
4 year = 7.23%
5 year = 6.44%
10 year = 15.15%

The Technicals
The technical indicators on the charts below are very interesting. While it's easier to see on the daily chart, it's obvious on both the daily and weekly charts that the stock is over sold and starting to turn up. Knowing from the fundamentals above that the beta is 1.65, this stock is one for the swing traders. And looking at the charts below, the daily chart is the swing trading chart. For those individuals disinclined to swing trade like the long term dividend growth investors, the chart to use for buys would be the weekly chart. In both cases, the momentum indicators will identify the turning points for buys and sells.

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Daily Chart
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Weekly Chart

The Competition
Eaton Vance Corporation is part of the Asset Management Industry which is part of the Financial Sector of the economy. Below are a few of the major corporations included in this industry. They each pay at least a minimal dividend and they are listed in the order of their market capitalization.

  1. BlackRock, Inc.  (BLK)
  2. The Bank of New York Mellon Corp.  (BK)
  3. The Blackstone Group LP  (BX)
  4. Franklin Resources Inc.  (BEN)
  5. State Street Corp.  (STT)
  6. Ameriprise Financials, Inc.  (AMP)
  7. T. Rowe Price Group, Inc.  (TROW)
  8. Kohlberg Kravis Roberts and Co. LP.  (KKR)
  9. Invesco LTD.  (IVZ)
  10. Northern Trust Corp.  (NTRS)
  11. The Carlyle Group LP  (CG)
  12. Voya Financial, Inc  (VOYA)
  13. Oaktree Capital Group, LLC  (OAK)
  14. Lazard LTD.  (LAZ)
  15. SEI Investments Co  (SEIC)
  16. Legg Mason Inc.  (LM)
  17. Eaton Vance Corp  (EV)
  18. Waddell and Reed Financial, Inc.  (WDR)
  19. Ares Management, Inc.  (ARES)
  20. Prospect Capital Corp.  (PSEC)

Conclusion
I'm constantly interested in the financial aspects of investing so it's not too surprising that companies that operate in either the Asset Management or Diversified Investment space have always intrigued me. Eaton Vance is one of quite a few companies that operate in this space. 

I like how they've been able to increase their revenues fairly consistently over the years even though these have been difficult years for the financial sector. Going forward the economy may face additional challenges and it's nice to know that a company like Eaton Vance has the professionals to keep the revenues increasing in a relatively consistent manner. The earnings give me pause because they haven't been as consistent as the revenues but estimates going forward show improving earnings as well as revenues. 

For dividend growth investors like myself, the increasing dividend is reassuring. In fact just this week the company declared a $0.25/share quarterly dividend (this is just one more reason I review dividend increases each week). This increased dividend means that Eaton Vance has now increased its dividend annually for 33 years and remains once again on the list of Dividend Champions. This dividend is a 14.0% increase from the prior dividend of $0.22. The current yield going forward is 2.83% and is payable Nov. 12 for shareholders of record Oct. 31.

I intend to start a position in this security in the next few weeks as funds become available. I don't expect to own a large position in this stock but I do expect to own a large position in this sector of the market through the ownership of a number of companies in this space. I believe that exposure to this area of the stock market is important for any portfolio. Wise investors will spend time analyzing a number of these companies to find those companies that fit in with their investing philosophy. 

Good Luck and Good Trading.

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A Put-Call Strategy

10/19/2014

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Occasionally while screening stocks on the weekend I come across a security with a relatively high beta that exhibits a lot of up and down movement in the short term but little if any movement in the long term. These two relative degrees of volatility can often be recognized by viewing volatility on the daily chart versus volatility on the weekly chart. When I identify a stock I would like to own that has these characteristics, I consider putting in place a strategy of entering and exiting the stock using puts and calls. Specifically I use cash secured puts and covered calls. It's a cash intensive strategy but it's also a very lucrative strategy. 

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The gist of the strategy is simple. First I always identify a stock that I wouldn't mind owning just in case the strategy doesn't work and I end up owning the security. This step is important because I wouldn't want to end up buying a security I would not have wanted to buy outside this strategy. I would then use the daily and weekly charts to determine the stock's support and resistance areas. I would then sell cash secured puts at or just above the support level to collect the put premium and increase the probability of having the stock "put" to me. Once I own the stock, I'd sell covered calls on the stock at or just below resistance to collect the premium and increase the probability of having the stock "called" from me. 

In the full turn of the trade I would have collected a put premium, a call premium, and the capital gain on the security as it rose from the support level to the resistance level. If the stock continues to reverse up and down over time, this trade can be repeated over and over again. 

This is obviously a trading strategy and not an investing strategy. Investors that are not familiar with technical analysis, put and call options, or investors that are not nimble enough to trade in this type of timeframe, should not attempt this type of strategy. However, a trader that is, can make a nice income using this stately. I generally use the income generated using this strategy to buy dividend growth stocks, which is a much more conservative investing strategy.

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Ares and Main Street

10/18/2014

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Positioned squarely between Venture Capitalists and the Big Banks is a type of company known as the Business Development Company (BDC). BDCs were initially created to help grow small companies that had outgrown their need for Venture Capital and entered into the realm of publicly traded companies. These small companies were usually in their initial stages of development or expansion. These small companies are often too small for the Big Banks to consider doing business with them so they generally turn to the BDCs for help. BDCs are generally set up much like closed-end investment funds and are actually public companies that are listed on the NYSE, AMEX and Nasdaq.

To qualify as a BDC, companies must be registered in compliance with Section 54 of the Investment Company Act of 1940. A major difference between a BDC and a venture capital fund is that BDCs allow smaller, non-accredited investors to invest in startup companies. Some of the reasons why BDCs have become popular is that they provide permanent capital to their management, allow investments by the general public and use mezzanine financing opportunities.

There are quite a few publicly traded BDCs and many of them are listed on this site in the section labeled "Business Development Companies" which can be found in the Investing drop down menu above or by clicking here. While there are many great companies listed there and I own stock in a number of these companies, two of my favorites are Ares Capital Corporation and Main Street Capital Corporation. 
Ares Capital Corporation

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Ares Capital Corporation (ARCC) specializes in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors. The fund will also consider investments in industries such as restaurants, retail, oil and gas, and technology sectors. It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office. The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million The fund invests through revolvers, first lien loans, warrants, unitranche structures, second lien loans, mezzanine debt, private high yield, junior capital, subordinated debt, and non-control preferred and common equity. The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically considers the purchase of stressed and discounted debt positions. The fund prefers to be an agent and/or lead the transactions in which it invests. The fund also seeks board representation in its portfolio companies. (Daily Chart) (Weekly Chart)
18 October
Price $15.91
1yr Target $18.40
Analysts 13
1yr Cap Gain 15.65%
Dividend $1.52
Yield 9.55%
1yr Set Tot Return 25.20%


Market Cap $5.00 Bil
Beta 1.01
EPS (ttm) $1.87
Payout Ratio 81.28%
EPS next yr $1.56
P/E 8.51
PEG 1.06
Forward P/E 10.17
Debt/Equity 0.68
ROA 6.50%
ROE 11.20%
ROI 5.50%
Sales $945.20 Mil
Income $534.50 Mil
Profit Margin 56.50%
Main Street Capital Corporation

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Main Street Capital Corporation (MAIN) is a business development company specializing in long- term equity, equity related, and debt investments in small and lower middle market companies. The firm focuses on investments in warrants, PIK (Payment in Kind) interest, convertible securities, junior secured or unsecured, subordinated loans, private equity, venture debt, mezzanine investments, mature, mid venture, industry consolidation, later stage, late venture, emerging growth, management buyouts, ownership transitions, recapitalizations, strategic acquisitions, business expansion, growth financings, and other growth initiatives primarily for later stage businesses. It does not seek to invest in start-up companies or companies with speculative business plans. It seeks to invest in traditional or basic businesses. The firm primarily invests in companies based in the Southern, South Central, and Southwestern regions of the United States but also considers other domestic investment opportunities. It invests between $2 million and $15 million in companies with revenues between $5 million and $300 million, enterprise values between $3 million and $50 million, and EBITDA between $1 million and $20 million. The firm seeks to charge a fixed interest rate between 12 percent and 14 percent, payable in cash, in case of its mezzanine loan investments. The firm typically invests in the form of term debt with equity participation and/or direct equity investments. It prefers to maintain fully diluted equity positions in its portfolio companies of 5 percent to 50 percent, and may have controlling interests in some instances. The firm also co-invests with other investment firms. It seeks to exit its debt investments through the repayment of the investment from internally generated cash flow and/or refinancing within a period of three to seven years. Main Street Capital Corporation was founded in 1997 and is based at Houston, Texas. (Daily Chart) (Weekly Chart)
18 October
Price $29.96
1yr Target $35.40
Analysts 5
1yr Cap Gain 18.15%
Dividend $2.04
Yield 6.80%
1yr Set Tot Return 24.95%

Market Cap $1.34 Bil
Beta 0.85
EPS (ttm) $2.60
Payout Ratio 78.46%
EPS next yr $2.40
P/E 11.52
PEG 1.65
Forward P/E 12.50
Debt/Equity 0.59
ROA 7.70%
ROE 12.80%
ROI 5.80%
Sales $128.70 Mil
Income $106.40 Mil
Profit Margin 82.81%
My Perspective

I have owned stock in both of these companies and will continue to monitor them and add to my positions on dips. While there may be BDCs listed on the exchanges that pay higher dividends or have a greater one year estimated capital gain, I still want to own these two. I'm very comfortable owning these shares and I've found them to be conservative growth companies that are also growing their dividends over time. I expect each of these to remain as core holdings in my accounts.

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Three Stocks I'm Currently Avoiding

10/17/2014

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Despite the fact that the markets have pulled back significantly over the last six weeks, there are still a few companies that appear to be over valued at their current price. While I wouldn't short any of these stocks, I definitely wouldn't be putting any money into any of them either. Below are three companies that are expected to distribute a very nice growing dividend but their prices are estimated to fall faster than their dividend will increase. 
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While some dividend growth investors may admire the growing dividends that these companies distribute, the overall loss in owning these stocks is not very appealing to me. I am currently avoiding these stocks with the intention of reevaluating them once again in 2015.
Data as of 16 October 2014
Family Dollar Stores
Price $76.37
1yr Target $72.76
Analysts 17
1yr Cap Gain -4.73%
Dividend $1.24
Yield 1.62%
1yr Est Tot Return

 -3.11%

Market Cap $8.70 Bil
Beta 0.40
EPS (ttm) $3.07
Payout Ratio 40.39%
EPS next yr $3.73
P/E 24.88
PEG 6.14
Forward P/E 20.45
Debt/Equity 0.47
ROA 9.00%
ROE 22.00%
ROI 20.80%
Sales $10.38 Bil
Income $352.30 Mil
Profit Margin 3.39%
The Clorox Company
Price $96.13
1yr Target $87.73
Analysts 15
1yr Cap Gain -8.74%
Dividend $2.96
Yield 3.07%
1yr Est Tot Return

 -5.67%

Market Cap $12.42 Bil
Beta 0.42
EPS (ttm) $4.27
Payout Ratio 69.32%
EPS next yr $4.72
P/E 22.51
PEG 3.75
Forward P/E 20.38
Debt/Equity 15.02
ROA 12.90%
ROE 502.70%
ROI 22.80%
Sales $5.59 Bil
Income $562.00 Mil
Profit Margin 10.05%
Consolidated Edison
Price $60.92
1yr Target $57.93
Analysts 14
1yr Cap Gain -4.91%
Dividend $2.52
Yield 4.13%
1yr Est Tot Return

 -0.78%

Market Cap $17.84 Bil
Beta 0.18
EPS (ttm) $4.32
Payout Ratio 58.33%
EPS next yr $3.90
P/E 14.10
PEG 5.18
Forward P/E 15.63
Debt/Equity 1.02
ROA 3.10%
ROE 10.30%
ROI 7.20%
Sales $13.05 Bil
Income $1.27 Bil
Profit Margin 9.73%
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Redesigning the Home Page

10/15/2014

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I've finally redesigned the Home Page on my website. It's something I've wanted to do for quite some time. The old one just wasn't working for me. It wasn't as useful as I wanted it to be. The Home Page now contains a teaser for each of the last few articles making them more accessible and hence, more usable to the reader. My expectation is that visitors will take these articles as a starting point for their own individual research.

I've also placed a "TRANSLATION" button near the top of the page for those readers that feel more comfortable reading this site in another language.  
 
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At the top of the main section are two buttons that will take the visitor to the two main parts of the websites - investing and photography. Below that is a listing of the most recent articles on investing. Each listing includes an initial except from the article including a hot spot link to the entire article. This allows the reader to see recent additions to the site. After the last article listing there's also a button that will take the reader to a list of all of the previous articles.  

Below that is a realtime interactive chart of the Dow Jones Industrial Average. It's an extremely useful chart because it allows for different time intervals, different time periods, the ability to add technical indicators, the ability to add additional symbols, different types of price bars, and a set of drawing tools to individually annotate the chart. Finally the chart can be saved as a photo for use in other programs. 
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Finally at the bottom the visitor will find any recent photographs I may have taken recently. 

All in all this may not be a radical change in the format of the site, but it is enough of a change to make the site more valuable for just about anyone. I hope you find the redesign a nice improvement and a helpful change. And I wish everyone the best on their individual journey toward financial freedom and independence.

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Using Momentum Indicators

10/14/2014

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Watching the Dow Jones Industrial Average (DJIA) over the last few months has been a perfect example of why I use charts and momentum indicators to identify entry and exit points in stock price patterns. As can easily be seen in the 4 month price chart of the DJIA below, the market has gone up and down several times over this period. This is not an unusual event and the DJIA will continue to go up and down in the future as it always has in the past. It's the nature of the stock market.
PictureJ. Welles Wilder, Author
Notice how the momentum indicators clearly pointed out when the price became extended into overbought and oversold territory. In early August the market was clearly bottoming out and in late August the market was in the early stages of topping out. The market is currently heading south once again and looking for another bottom. A chart of the price alone will always flash the first signal that the market is turning back upward but a chart of the price alone will also flash many false signals. The only way that an investor can have a high probability that they're on the right side of the trade is by looking for confirmation from other sources. For me, these are why momentum indicators were invented in the first place. 

Downward price movements ultimately end and reverse only when the market runs out of sellers and buying begins. At that point it is often referred to as a change in the market's sentiment. People suddenly change their ideas and opinions about the market or a particular stock and start buying instead of selling for any number of personal reasons but once the buying starts, greed take over. And when the opposite conditions occur and the market becomes over bought and selling starts, fear takes over. It's the theory of crowd behavior and this theory has been documented and talked about for decades.
"You cannot teach a man anything. You can only help him to find it within himself."
--Galileo Galilei, Physicist, Mathematician, Astronomer and Philosopher. 

What I hear on television or read in the news on a daily basis is that the market went up or down that day for a reason relevant only to that particular day. And as I've pointed out before, the reasons are given because generally the media has no idea why the market goes up or down but they don't want you to know that they don't know, so they make up something. This is the type of information I tend to disregard first.

As I turn to the charts I begin to see the ebb and flow of the markets - the periods when it's fashionable to be buying in the market or selling in the market. Once buying or selling starts it seems to continue until the market runs out of buyers or sellers and it starts to level off as the number of buyers and sellers equalize. At that point the market tends to reverses and volume starts to increase as fear or greed begins to set in. 
As I spend more and more time reviewing and analyzing price charts I begin to see the ebb and flow of the markets as they happen in real time. It becomes easier and easer to discover those periods when it's financially beneficial to be buying or selling the market. Once the buying or selling begins, it tends to continue until the market runs out of buyers or sellers. It then starts to level off as the number of buyers and sellers approach parity. At that point the market tends to level off and reverse, and volume starts to increase as fear or greed begins to set in. 
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Daily Chart of the Dow Jones Industrial Average
In the chart above, the RSI is telling me when fear and greed are getting overdone by moving below the 30 level or moving above the 70 line. The RSI is a great tip-off to the trader that things have moved to an extreme level. 

A second indicator, the MACD, is telling me several simultaneous things and is my favorite momentum indicator. The MACD Histogram portion provides me with an the early warning signal about the chart's changing directions. The Moving Average crossing the Signal Line portion becomes the first visual confirmation of this directional change. Finally the Moving Average and the Signal Line crossing the zero line is the final confirmation that the stock has reversed direction and is well on it's way. This final confirmation warns me that the trade is well under way and if I'm not in this trade already, I'm already too late to get in. Instead I should start watching the MACD Histogram in anticipation of a subsequent reversal. 

The third indicator, the ADX at the bottom of the chart, tells me where the pressure is on pricing. The green line reflects buying pressure while the red line reflects selling pressure. By noticing which line is on top I can determine if there is more buying or selling pressure on the stock. The black line doesn't measure buying or selling pressure but instead measures the intensity or fervor of the buying or selling pressure. It helps me understand the amount of "force" that is pushing the stock up or down. 

And finally, I will, at times, add a Stochastics indicator to the above chart if the market or stock seems to be simply drifting without direction (the Stochastics Indicator is best used in a stagnant market so for me it has a very specialized use). 

These are the three or four indicators I tend to use on a fairly consistent basis to support my trading. There are certainly dozens of indicators available for the average trader to use but these are the ones I personally feel give me the most confidence to trade. Every trader needs to understand all of the momentum indicators and oscillators available to them in order to become a better trader. Eventually each and every trader will settle on the ones that work best for them. 

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You Bought It For The Dividend

10/13/2014

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When the market's pulling back like it has for the last few weeks, it's important to remember why a particular stock was bought in the first place. If you're a Dividend Growth Investor then more than likely one of the reasons you bought it was because of its dividend consistency and predictability. As long as that dividend is intact and increasing,  minor fluctuations in the stock market shouldn't shake you out of your holdings. 

I spend an inordinate amount of my free time researching companies to find just the right dividend growth company to buy stock in. I look at a company's fundamentals over a period of years to ensure that it’s sales, earnings and dividends have increased on a regular basis. That's essential for a healthy growing company. I spend even more time looking at the company’s technicals and its stock chart to determine the point at which I think I can get the best possible price. Finally when I feel that the situation is in my favor I execute the transaction. At this point I am more or less committed to owning the stock for as long as the conditions merit. Hopefully this is for a very long time. 

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My free time is spent looking for that one great company.

Once I own this dividend growth stock my primary concern becomes the continuation of the dividend well into the future. I understand that the company's sales and earnings may be volatile from quarter to quarter and that earnings estimates may even be missed at times, but I expect the dividend to be maintained and even increased at least once per year or I no longer have a desire to maintain ownership. For the most part the dividend is the reason that I bought the stock in the first place and it’s the continuation and increase of that dividend that tells me to continue to hold that company’s stock. If a company has the ability to continue to raise its dividend, then the stock price will eventually rise and my personal wealth will rise also.

Dividend coverage is also essential for a company to continually increase its dividend. I expect the company's earnings to be consistently greater than the company's dividend so that the payout ratio is less than 100%. In fact, a payout ratio of less than 50% is ideal for any company. At the 50% level there is sufficient retained earnings to grow the company's earnings in future years in order to increase the dividend, which is exactly what I want.
"I don't like stock buybacks. I think if a company has the money to buy their stock back, then they should take that and increase their dividends. Send it back to the stockholder. Let them invest their money again from the dividends."
-- T. Boone Pickens, American Businessman, Financier, and Hedge Fund Manager.

Over time individual stocks as well as whole stock sectors can become out of favor with investors. This often is the result of news articles, rumors, earnings reports, brokerage house projections, the overall economy in general, or any of a number of reasons. The result is that the company’s stock price can temporarily decrease with absolutely no relationship to the company's actual sales and earnings. The company's earnings are coming in and increasing and the dividend is increasing, but the stock price is falling. The result is that the Price per Earnings Ratio (P/E) is falling and the PEG (Price per Earnings relative to Growth) may even fall below 1. This condition results in a buying opportunity for the wise investor.  

This decreased stock price results in an obvious increase in yield for the stock. The increase in yield results in an increase in income for me. In the end this is exactly what I am trying to do -- increase my income to a sufficient level prior to retirement such that a comfortable retirement is possible. If the company is able to increase its dividend at a rate faster than inflation my standard of living will actually increase during retirement. This is the situation that all investors want to eventually find themselves in. 

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Re-Ordering those Stocks of Interest

10/12/2014

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The recent volatility in the markets are reordering the list of stocks that are currently of interest to me and my investing philosophy. I'm a firm believer in buying stocks that have demonstrated the ability to produce a consistent and increasing dividend over a number of years. I'm also a firm believer in looking at the mean consensus estimated one year price target as calculated by multiple brokerage houses and their analysts. 
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While dividends are not automatic and analysts can often be wrong, I believe that history often repeats itself and there is wisdom in numbers. Following these ideas will not guarantee success in the market, but diversification of investments and putting money in companies with the best available expectations will naturally increase the probability of success. 

Since one year estimated capital gains changes with the stock price and the one year estimated target, and since dividend yield can change with any change in the most recent dividend as well as the daily change in the price of the stock, my list of stocks that I'm interested in changes daily (however slightly). Each week I prioritize and update the top ten to fifteen stocks that I'm interested in and list them in the right hand column under "Stocks of Interest". 

All things considered, I will invest any new money in companies higher up on the list than lower on the list because those companies have the highest estimated total one year gain (cap gain plus yield). 

Below are a few of the companies in this week's list and the numbers I'm looking at. Hopefully this will provide ideas for others who wish to do additional research before investing their own money. 

Good Luck and Good Investing.
Data as of 12 October 2014
Flowers Foods, Inc.
Price $17.67
Target $23.71
1yr Est Cap Gain 34.18%
Dividend $0.48
Yield 2.72%
Total 1yr Est Gain
36.90%

Daily Chart
ABM Industries
Price $25.32
Target $31.71
1yr Est Cap Gain 25.24%
Dividend $0.62
Yield 2.45%
Total 1yr Est Gain
27.69%

Daily Chart
PPG Industries
Price $183.55
Target $231.44
1yr Est Cap Gain 26.09%
Dividend $2.68
Yield 1.46%
Total 1yr Est Gain
27.55%

Daily Chart
Dover Corp.
Price $75.76
Target $94.00
1yr Est Cap Gain 24.08%
Dividend $1.60
Yield 2.11%
Total 1yr Est Gain
26.19%

Daily Chart
AbbVie Inc.
Price $54.97
Target $67.67
1yr Est Cap Gain 23.10%
Dividend $1.68
Yield 3.06%
Total 1yr Est Gain
26.16%

Daily Chart
General Electric Co.
Price $24.27
Target $29.36
1yr Est Cap Gain 20.97%
Dividend $0.88
Yield 3.63%
Total 1yr Est Gain
24.60%

Daily Chart
Comcast Corp.
Price $52.62
Target $63.80
1yr Est Cap Gain 21.25%
Dividend $0.90
Yield 1.71%
Total 1yr Est Gain
22.96%

Daily Chart
Fastenal Co.
Price $42.54
Target $51.29
1yr Est Cap Gain 20.57%
Dividend $1.00
Yield 2.35%
Total 1yr Est Gain
22.92%

Daily Chart
Chevron Corp.
Price $113.89
Target $135.24
1yr Est Cap Gain 18.75%
Dividend $4.28
Yield 3.76%
Total 1yr Est Gain
22.50%

Daily Chart
Nucor Corp.
Price $48.71
Target $57.88
1yr Est Cap Gain 18.83%
Dividend $1.48
Yield 3.04%
Total 1yr Est Gain
21.86%

Daily Chart
Emerson Electric Co.
Price $59.43
Target $70.64
1yr Est Cap Gain 18.86%
Dividend $1.72
Yield 2.89%
Total 1yr Est Gain
21.76%

Daily Chart
Aflac Inc.
Price $56.52
Target $67.27
1yr Est Cap Gain 19.02%
Dividend $1.48
Yield 2.62%
Total 1yr Est Gain
21.64%

Daily Chart
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Increasing Dividends Last Week

10/11/2014

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Below is a list of the companies that increased their dividend this past week. Additional information on each of these dividend increases can be found in the "Dividend Increases" section of this website. I suggest that you visit that area of this site to gain more information about these increases. Once there you will not only find this week's dividend increases but also previous week's dividend increases. I'm sure if you spend a few minutes looking at that section you'll find at least one, and probably many more, great dividend growth companies worth accumulating. 
  1. Ameren (AEE) 
  2. Pall (PLL) 
  3. RPM International (RPM) 
  4. PolyOne Corporation (POL) 
  5. Kraft Foods Group (KRFT) 

Alongside the announcement of $0.06 per share payouts in October, November, and December, Gladstone Investment (GAIN) announced that it will pay a special $0.05 per share distribution in December.

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The Other Timber Companies

10/10/2014

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Anyone who tells you that money doesn't grow on trees just doesn't understand the tree business. I like companies that are in the tree business. They're in the business of wood and lumber, plywood and particle board, wood chips, shavings, sawdust, and bark. Once you put those little saplings in the ground just sit and let nature do the rest. Wait a bunch of years, cut down the trees, sell them for a bunch of money, and plant some new saplings. Life couldn't be any simpler or any better.

Timber companies, unlike farmers, can control supply because trees don't have to be harvested at any particular time. If demand doesn't materialize that produces a sufficient profit for the companies, the timber companies can always withhold their supply to raise prices. 

They're also not making any more land. Timberland will continue to increase at a rate relative to inflation as long as it remains timberland. As population increases and cities begin to expand, timberland will be converted to other uses and land values will begin to increase exponentially. In the meantime, timberland will continue to throw off tons of money in the form of dividends from the timber itself as it's harvested.

I've already review two of the largest timberland companies in the article "Tree Farms Are Farms Too", dated 24 September 2014. Those companies were Weyerhaeuser and Plum Creek Timber and the information contained in those articles are important and relative to the information below.  

The following are five more timber related companies that have a somewhat smaller market capitalization than Weyerhaeuser and Plum Creek Timber but sometimes smaller companies have advantages that larger companies don't have. These companies also are not strictly timber companies. They also have interests in timber related industries. In fact Rayonier, Inc., just recently spun off Rayonier Advanced Materiels, Inc., as a tax free dividend to its shareholders. 

A few minutes spent looking into these companies may just prove to be very beneficial to your financial health. 

Good Luck and Good Trading.  
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Rayonier, Inc. (RYN) engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia. The company operates in four segments: Timber, Real Estate, Performance Fibers, and Wood Products. Timber segment owns, leases, or manages timberlands and sells standing timber at auction to third parties, as well as sells delivered logs. Real Estate segment sells medium and large tracts of land with infrastructure. This segment holds development and rural properties primarily in the southeast United States. Performance Fibers segment manufactures cellulose specialties that are used principally in acetate textile fibers, cigarette filters, rigid packaging, LCD screens, photographic film, impact-resistant plastics, high-tenacity rayon yarn, pharmaceuticals, cosmetics, detergents, food casings, and food products; and absorbent materials that are used in disposable baby diapers, feminine hygiene products, incontinence pads, convalescent bed pads, industrial towels and wipes, and nonwoven fabrics. Wood Products segment primarily manufactures and sells dimension lumber used for residential and industrial construction applications. In addition, Rayonier involves in trading and exporting logs, lumber, and wood panel products. As of December 31, 2005, it owned, leased, or managed approximately 2.5 million acres of timberland and real estate. The company has a joint venture with RREEF Infrastructure to own and manage timber lands in New Zealand. Rayonier has elected to be treated as a real estate investment trust (REIT) for federal income tax purposes and would not be subject to federal income tax on its REIT income that it distributes to its shareholders. The company, formerly known as Rainier Pulp & Paper Company, was founded in 1926. Rayonier is headquartered in Jacksonville, Florida. 
(Daily Chart) (Weekly Chart)
9 October
Price $31.74
1yr Target $35.00
Analysts 6
1yr Cap Gain 10.27%
Dividend $1.20
Yield 3.78%
1yr Est Tot Return 14.05%
Market Cap $4.02 Bil
Beta 0.81
EPS (ttm) $1.22
Payout Ratio 98.36%
EPS next yr $0.95
P/E 26.02
PEG N/A
Forward P/E 33.48
Debt/Equity 0.48
ROA 5.80%
ROE 12.20%
ROI 11.50%
Sales $1.21 Bil
Income $158.10 Mil
Profit Margin 13.05%
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Potlatch Corporation (PCH) operates as a real estate investment trust (REIT) that owns and manages timberlands located in Arkansas, Idaho, Minnesota and Wisconsin in the United States. The Resource Management Division manages its timberlands, harvests timber, procures other wood fiber, sells logs and leases land for hunting and other recreational activity. The Real Estate Division develops and sells land parcels, as well as invests in timberlands. The Wood Products Division manufactures lumber, plywood, and particleboard in Arkansas, Idaho, Michigan, and Minnesota. This segment's products are sold to wholesalers primarily for use in home building and other construction activities. Potlatch was founded in 1903 and is headquartered in Spokane, Washington. 
(Daily Chart) (Weekly Chart)
9 October
Price $40.75
1yr Target $43.86
Analysts 7
1yr Cap Gain 7.63%
Dividend $1.40
Yield 3.43%
1yr Est Tot Return 11.06%
Market Cap $1.65 Bil
Beta 0.83
EPS (ttm) $1.78
Payout Ratio 78.65%
EPS next yr $2.29
P/E 22.89
PEG 2.69
Forward P/E 17.83
Debt/Equity 1.43
ROA 10.50%
ROE 36.00%
ROI 17.80%
Sales $581.30 Mil
Income $72.50 Mil
Profit Margin 12.47%
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Deltic Timber Corporation (DEL), a natural resources company, together with its subsidiaries, is engaged in growing and harvesting timber, and manufacturing and marketing lumber. The company’s Woodlands segment harvests pine and hardwood pulpwood for sale to third parties for use in the manufacture of paper products; and provides timberland management services, such as harvesting and thinning operations, reforestation, cull timber removal programs, and introducing seedlings. It also leases oil and gas, hunting land, and other rights on its timberlands; and provides harvest planning, silvicultural improvement, and maintenance works for timberlands owned by others under management contracts with one-year renewable terms. This segment owns approximately 458,600 of timberland in Arkansas and north Louisiana. Its Mills segment operates two sawmills that manufacture and sell various softwood lumber products, such as dimension lumber, boards, and timbers to wholesale distributors, large retailers, lumber treaters, industrial accounts, and truss manufacturers; and is used in residential construction, roof trusses, remanufactured products, laminated beams, cabinets, flooring, and door parts. This segment also produces wood chips, shavings, sawdust, and bark as by-products. The company’s Real Estate segment develops and markets residential lots for homebuilders and individuals; and commercial sites for developers and businesses, as well as sells undeveloped acreage. This segment also leases retail and office space to third parties; resells existing homes; and operates a country club. In addition, it manufactures and markets medium density fiberboard (MDF) under the Solidium trade name for use in furniture, kitchen cabinets, laminate flooring, store fixtures, door parts, and molding. The company sells MDF to wholesalers, retailers, and manufacturers. Deltic Timber Corp was founded in 1996 and is based in El Dorado, Arkansas. 
(Daily Chart) (Weekly Chart)
9 October
Price $62.58
1yr Target $81.00
Analysts 1
1yr Cap Gain 29.43%
Dividend $0.40
Yield 0.63%
1yr Est Tot Return 30.06%
Market Cap $787.26 Mil
Beta 0.83
EPS (ttm) $1.44
Payout Ratio 27.77%
EPS next yr $3.25
P/E 43.46
PEG 2.17
Forward P/E 19.26
Debt/Equity 0.78
ROA 3.80%
ROE 6.80%
ROI 7.40%
Sales $218.90 Mil
Income $18.20 Mil
Profit Margin 8.31%
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CatchMark Timber Trust Inc. (CTT) originally began life in 2007 as Wells Timber REIT, a private REIT formed by Wells REF, a private investment firm. Wells Timberland REIT, Inc., a real estate investment trust (REIT), focuses on the acquisition of timberland properties in the United States. It intends to acquire timberland properties throughout the timber-producing regions of the United States and, to a lesser extent, in timber-producing regions outside the United States. The company intends to qualify as a REIT under the Internal Revenue Code of 1986. Wells Timberland REIT was founded in September 2005. It was formerly known as Wells Real Estate Investment Trust IV, Inc. and changed its name to Wells Timber Real Estate Investment Trust, Inc. in November 2005 and changed to Wells Timberland REIT, Inc. in 2006. The company is headquartered in Norcross, Georgia. 
(Daily Chart) (Weekly Chart)
October
Price $10.73
1yr Target $14.00
Analysts 3
1yr Cap Gain 30.47%
Dividend $0.50
Yield 4.65%
1yr Est Tot Return 35.12%
Market Cap $422.33 Bil
Beta N/A
EPS (ttm) -$0.66
Payout Ratio N/A
EPS next yr $0.09
P/E N/A
PEG N/A
Forward P/E 123.33
Debt/Equity 0.41
ROA -2.60%
ROE -3.70%
ROI -2.60%
Sales $36.20 Mil
Income -$9.60 Mil
Profit Margin N/A
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Pope Resources (POPE), A Delaware Limited Partnership manages timber resources in the United States. It operates in three segments: Fee Timber, Timberland Management & Consulting, and Real Estate. The Fee Timber segment is involved in growing, harvesting, and marketing timber to domestic manufacturers and export brokers consisting of 201,000 timberland acres that it own or manage as tree farms. The Timberland Management & Consulting segment provides management, acquisition, disposition, and consulting services to third-party owners of timberland. This segment is also engaged in raising investment capital for the funds, as well as acquiring and managing properties on behalf of the funds. The Real Estate segment is involved in securing entitlements and/or infrastructure for the development; selling the entitled property to a party who would construct improvements; negotiating conservation easements; and leasing residential and commercial properties, as well as a commercial office building. This segment operates a portfolio of approximately 2,900 acres in the west Puget Sound region of Washington. Pope Resources sells its logs to lumber mills and other wood fiber processors located in western Washington and northwest Oregon, as well as to export intermediaries located at the ports of Longview, Tacoma, Port Angeles, and Olympia, Washington; and Astoria, Oregon. The company also leases cellular communication towers, as well as gravel mines and quarries. Pope MGP, Inc. and Pope EGP, Inc. operate as the general partners of Pope Resources, A Delaware Limited Partnership. The company was founded in 1985 and is headquartered in Poulsbo, Washington. 
(Daily Chart) (Weekly Chart)
9 October
Price $ 67.00
1yr Target N/A
Analysts N/A
1yr Cap Gain N/A
Dividend $2.60
Yield 3.88%
1yr Est Tot Return N/A
Market Cap $292.60 Mil
Beta 0.33
EPS (ttm) $3.95
Payout Ratio 65.82%
EPS next yr N/A
P/E 16.72
PEG N/A
Forward P/E N/A
Debt/Equity 0.98
ROA 5.70%
ROE 23.80%
ROI 9.20%
Sales $87.10 Mil
Income $17.30 Mil
Profit Margin 19.86%
Additional Articles of Interest.

"Tree Farms Are Farms Too" - dated 24 September 2014
"Betting On The Farm" - dated 22 September 2014
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    I am an Individual Investor with specific interest in long term growth and then enhancing my returns with income from dividends and derivatives. I don't recommend stocks to anyone (it's a good way to lose friends) and no one reading this should misinterpret my blog as a recommendation for any type of investment. I am writing this solely for myself and my kids.

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