Second Quarter 2011

“Today it appears that no asset class offers a margin of safety.” (James Montier, March 2011) When you invest with no margin of safety, permanent impairment of capital can result. James Montier.

If you are looking for dividend-growth stock ideas, check the four tables in Rob Carrick's Saturday June 25 2011 column:

  • If you are thinking of buying a stock, read what Albert Edwards of Societe Generale is saying. And you won't.
  • “a dividend-focused portfolio delivers a high share of its total return as a cash payment, which is not subject to timing or value determination” (p.60 Daniel Peris, The Stratigic Dividend Investor) ♣ The following is not proof that as the dividend grows so does the price, but from the same excellent book on dividend growth-investing (page 56) which is worth every cent of it's $22 American price, ponder this datum: for the last 48 years Colgate-Palmolive's dividend has grown at 9.1% a year. What has been the price growth of the shares? 9.6%

In the June 2011 Thirty Year Anniversary issue Connolly Report: If you buy a stock with a p/e over 20², your returns will most likely be poor, like very poor: how about one point one percent per year (median return for stocks with p/e over 20 for S&P 500 from 1926 to 1998). It's not which dividend growth stock you buy, it's the value at which you buy it. ² As a matter of historic interest, in 1929 the market peaked out at a p/e of 20.

Some thoughts on Power Corp by others and yours truly:

  “When analyzing investments”, Dimson, Marsh and Staunton, the authors of the 'Credit Suisse Global Investment Returns Yearbook 2011' say, “the key issue is to assess the company's potential to distribute cash to shareholders - not necessarily today, but over the long run. The value of a share is simple the discounted value of its future, long-term dividend stream.     How   do   these   three   from   the   London   Business   School   compute   returns?   Dividend   yield     plus   the   real   dividend   growth   rate     plus   the  change  in  price/dividend  ratio  will  be  your  return.

second_quarter_2011.txt · Last modified: 2011/06/27 20:59 by tom
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