Each month I update the Pocket Change Portfolio (PCP). The table below reconciles the PCP from beginning of period to end of period for October 2009, Year-To-Date (2009) and Life-To-Date. The Portfolio Returns line provides the calculated return for the three displayed periods.

Online Cash Receipts are the collected earnings from my online endeavors. Most of which is advertising on the my various blogs. The year-to-date $30.00 Online Expenses relates to registering 3 domains (DividendsValue.com, Dividends4Life.com and TheDiv-Net.com). October Dividends include $4.21 from Vanguard Long-Term Bond ETF (BLV), $9.02 from The Coca-Cola Company (KO), $11.20 from Genuine Parts Co. (GPC), and $9.60 from Sysco Corp. (SYY). The Interest Income line is interest earned on cash balances in an ING account I set up for the PCP. The Gain/(Loss) line is for market changes to the PCP (realized and unrealized).

The portfolio was down slightly in October, but is up for the year and since its inception. Online earnings in October once again surpassed the $2,000 mark for the second time. A large portion of the increase is related to the strong interest in D4L-Premium Services. The premium service continues grow each month. The subscriber retention rate is stays between 85-90%. Traffic on Dividend Value was at record levels in the month of October.

During the month of October, I purchased 26 shares of Emerson Electric Co. (EMR). This will provide me $34.32 in annual earnings at the current dividend rate. Including EMR, my annual PCP dividend income is now $432.62 at the current dividend rates. I ended the month with $2,964.06 in cash, enough to purchase my 11th and 12th PCP stock in November. Through October I have purchased eight stocks this year, including six in consecutive months since May 2009. I continue to believe the current cash balance and recent earnings will support the purchase of one stock each month.

My PCP holdings are always available by selecting the Holdings option from the menu in the header. The next PCP update will be mid-December.

(Photo: sanja gjenero)

Related Posts:

1. Weekly Links: October 4, 2009
2. Strategically Managing Your Dividend Portfolio In A Downturn
3. How Is Your Portfolio Doing This Year?

We all are looking for the perfect dividend stock. In an utopian world, the perfect dividend stock would be one that is both high-yield and provide a high dividend growth rate. Its share price would appreciate ratable with its increasing dividend. All of this would be driven by increasing earnings and cash flow.

Though they are not perfect, the stocks below did recently reward their investors with higher cash dividends:

Wynn Resorts (WYNN) is involved in the design, development, financing and construction of gaming projects in Las Vegas and Macau. November 9th the company declared a special cash dividend of $4.00/share. This dividend will be payable on December 3, 2009, to stockholders of record on November 19, 2009. The stock will begin to trade ex-dividend on November 17, 2009. The company’s Board of Directors also approved the commencement of a regular cash dividend program, beginning in 2010. This regular cash dividend will be $0.20 per share of common stock for the first quarter of 2010. The yield based on the new payout is 1.22%.

Baxter (BAX) is a global medical products and services company. November 10th the company increased its quarterly dividend 12% to $0.29/share. The dividend is payable on January 5, 2010, to shareholders of record as of the close of business on December 10, 2009. The ex-dividend date is December 8. The yield based on the new payout is 2.02%.

ADP (ADP) provides a broad range of data processing services. November 10th the company increased its quarterly dividend 3% to $0.34/share. The dividend is payable on January 1, 2010 to shareholders of record at December 11, 2009. The ex-dividend date is December 9. ADP is a Dividend Aristocrat and has increased its dividend for 34 years. The yield based on the new payout is 3.15%.

Tennant (TNC) designs, manufactures, and markets cleaning solutions. November 10th the company raised its quarterly dividend 8% to $0.14/share. The dividend is payable on December 15, 2009, to shareholders of record November 30, 2009. The ex-dividend date is November 26. The yield based on the new payout is 1.90%.

Cliffs Natural Resources (CLF) is a mining company produces iron ore pellets and supplies metallurgical coal to the steelmaking industry primarily in North America. November 10th the company boosted its quarterly dividend more than 100% to $0.0875/share. The dividend is payable on Dec. 1, 2009, to shareholders of record as of the close of business on Nov. 20, 2009. The yield based on the new payout is 0.90%.

DeVry (DV) offers career-oriented degree programs, preparatory coursework for the CPA and CFA exams, and medical, veterinary, and nursing education. November 11th the company increased its dividend 25% to $0.20/share. Payable semi-annually, the next dividend payment of $0.10/share will be made on Jan. 7, 2010, to common stockholders of record as of Dec. 11, 2009. DV also announced that its board of directors authorized a third share repurchase program of $50 million to commence upon completion of the existing $50 million program. The yield based on the new payout is 0.37%.

Span-America Medical (SPAN) manufactures and distributes a variety of polyurethane foam products for the medical and custom products markets. November 11th the company raised its quarterly dividend 11% to $0.10/share. The dividend is payable December 4, 2009, to shareholders of record on November 20, 2009. The yield based on the new payout is 2.47%.

MDU Resources (MDU) is involved in electric and natural gas distribution, natural gas storage, gathering and transmission, construction materials and mining, and oil and natural gas production. November 12th the company increased the quarterly dividend to $0.1575/share. The dividends are payable January 1, 2010 to stockholders of record December 10, 2009. The ex-dividend date is December 4, 2009. MDU is a Dividend Achiever and has increased its dividend for 18 consecutive years. The yield based on the new payout is 2.87%.

AmerisourceBergen (ABC) is a distributor of pharmaceutical products and related health care services. November 12 the company raised it’s quarterly dividend 33% to $0.08/share. The dividend will be payable December 7, 2009, to stockholders of record at the close of business on November 23, 2009. The yield based on the new payout is 1.33%.

The first step for a stock to become a perfect dividend stock is to raise its dividends each and every year. For a list of stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: Long ADP.  See a list of all my income holdings here.

(Photo Credit)

Related Posts:

1. 4 Stocks With Higher Dividends
2. 10 Stocks Taking Their Dividends Up A Notch
3. 15 Hot Dividend Increases
4. 3 Dividend Stocks Rewarding Their Shareholders
5. 7 Dividend Stocks Paying More Cash

Recently, I looked at the sample D4L-Dashboard report on the Overview and Subscribe page and was amazed at all the changes and improvements that have occurred since that report was posted.  I knew then it was time to update the Sample Report. Below are some of the enhancements that have occurred since the first report was posted:

Column

Tier – Added a tier column. The three tiers that are currently defined are as follows, Tier 1: Four and five Star stocks that are trading below my calculated fair value with a yield above my preset minimum. These are the stocks I categorize as “buy” stocks. Tier 2: Four Star stocks that are trading less than 5% above my calculated fair value with a yield above my preset minimum. These are my “wonderful stocks at a fair price.” Tier 3 stocks are like Tier 2, but instead of 5% above calculated fair value the percentage defaults to 10% and can be changed.

Symbol – Added a light green shading if the stock would have been a buy other than having a “-” in the note column. Light yellow is a Tier 2 buy when the maximum tier is set to 1.

Stars – Color codes now indicate a change in Stars from the prior week. An increase in Stars will show as green, a decrease will show as red and no change will continue show as white.

Note – Added a new Debt/fcf flag in this column. Debt/fcf is an alert when the sum of the Debt and FCF columns are > 100% or FCF is a negative number.

Days – Added note for stocks On The Shelf due to not raising their dividends that displays estimated month and year when the dividend declaration will occur that ensures a year over year flat dividend. At that time, the stock is a strong candidate for a sell.

Other enhancements include:

• Added an Allocation section that includes my income ETF/CEF holdings along with their % Port and % Inc weightings.
• Greatly expanded the Commentary section.

The D4L Premium Services are designed for the serious dividend investor. If you have not yet subscribed, please see the Overview and Subscribe page for more information on the benefits of these services, sample reports, pricing and subscription information. The premium section can always be accessed via the Premium menu option on the top-left of the menu bar above.

Related Posts:

1. Instant Access To Premium Services Now Available
2. New Premium Feature
3. Introducing The D4L-Dashboard
4. Asset Allocation Model
5. Stock Analysis: MCD

Driven by computers that cost more than the average person will earn in their lifetime the investment markets move at light speed. To keep pace hedge funds, mutual funds, institutional investors and multi-billion dollar money managers spend large sums of money on high-tech tools to give them an edge. Throw in some illegal insider trading from big names in the industry and it leaves you wondering what chance does a small individual investor have?

Not much of a chance if you let the Wall Street players define the rules. However, you might just slay the giant if you define the rules. In a recent Wall Street Journal article, Jason Zweig noted that:

From the point of view of an investor, all this frantic trading is just noise. In 1976, the great financial analyst Benjamin Graham declared that “the stock market resembles a huge laundry in which institutions take in large blocks of each other’s washing … without rhyme or reason.” Mr. Graham died that year, but today he would laugh at the speed of the spin cycle. He would then ignore the momentary vibrations in a company’s stock price and go right back to analyzing the value of its business.

As an investor, you are free to choose your own time horizon. If other people want to try earning a few fractions of a penny a few thousand times a day, you should wish them well — and refuse to join them.

Contrary to what many are now saying, buy-and-hold and investing in quality blue chip stocks is not dead. Consider the following stocks:

Abbott Laboratories (ABT) is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products including: drugs, nutritional products, diabetes monitoring devices and diagnostics. The company has a strong new product pipeline, with possible significant launches in both the medical device and pharmaceutical areas. ABT has increased its dividend for the last 37 years and the stock is currently yielding 3.10%. See the most recent Analysis.

Emerson Electric Co. (EMR) primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors. The company has a strong competitive position in several major product categories. EMR has increased its dividend for the last 52 years and the stock is currently yielding 3.20%. See the most recent Analysis.

Johnson & Johnson (JNJ) engages in the manufacture and sale of various products in the health care field worldwide. The company enjoys competitive advantages and has products that are largely immune from economic cycles. JNJ has increased its dividend for the last 47 years and the stock is currently yielding 3.20%. See the most recent Analysis.

3M Co. (MMM) is a diversified technology company with a presence in various businesses, including industrial & transportation, healthcare, display & graphics, consumer & office, safety, security & protection services, and electro and communications. The company has a leading position in many of the markets it serves and a strong balance sheet with a relatively little debt. MMM has increased its dividend for the last 51 years and the stock is currently yielding 2.71%. See the most recent Analysis.

PepsiCo, Inc. (PEP) is a global snack and beverage company. The Company manufactures, markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods. The company enjoys relatively stable end markets, strong cash flows, leading global market positions and trend-setting product innovations. PEP has increased its dividend for the last 37 years and the stock is currently yielding 2.87%. See the most recent Analysis.

SYSCO Corporation (SYY), through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for foodservice industry in the United States and Canada. The company operates in a relatively stable industry, in which it has the largest market share. SYY has increased its dividend for the last 39 years and the stock is currently yielding 3.57%. See the most recent Analysis.

Wal-Mart Stores, Inc. (WMT) is the largest retailer in North America. The company operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam’s Club, and International. The company enjoys dominant market share positions, price leadership and strong cash flows. WMT has increased its dividend for the last 35 years and the stock is currently yielding 2.13%. See the most recent Analysis.

If your goal is to build an ever-increasing revenue stream from income investments, the above seven dividend stocks will give your income a boost over time. The key is to wait for the right entry point and let time take care of the rest.

Full Disclosure: Long ABT, EMR, JNJ, MMM, PEP, SYY, WMT. See a list of all my income holdings here.

(Photo Credit)

Related Posts:

1. 8 Dividend Stocks With The Right Stuff
2. 10 Best U.S. Dividend Stocks
3. Dividend Stocks Are My Conviction
4. Elite Dividend Stocks
5. Dividend Stocks: Confident and Secure

This article originally appeared on The DIV-Net November 2, 2009.

Linked here is a detailed quantitative analysis of Johnson & Johnson (JNJ). Below are some highlights from the above linked analysis:

Company Description: Johnson & Johnson engages in the manufacture and sale of various products in the health care field worldwide.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

JNJ is trading at a discount to 1.) and 3.) above. The stock is trading at a 5.3% discount to its calculated fair value of $62.33. JNJ earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

JNJ earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45% and earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1944 and has increased its dividend payments for 47 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

JNJ earned a Star in this section for its NPV MMA Diff. of the $935. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as JNJ has. If the stock grows its dividend at 7.5% per year, it will take 3 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. JNJ earned a check for the Key Metric ‘Years to >MMA’ since its 3 years is less than the 5 year target.

Other: JNJ is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.

Conclusion: JNJ earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks JNJ as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $70.95 before JNJ’s NPV MMA Differential fell to the $500 that I like to see for a stock with 47 years of consecutive dividend increases. At that price the stock would yield 2.72%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.7%. This dividend growth rate is less than the 7.5% used in this analysis, thus providing a margin of safety. JNJ has a risk rating of 1.00 which classifies it as a low risk stock.

As noted in the “10 Best U.S. Dividend Stocks“, JNJ has a history of making good decisions and executing on them. The stock is currently trading below my buy price of $62.33 and it is one that I will continue to accumulate as my allocation allows. For additional information, including the stock’s dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in JNJ (4.4% of my Income Portfolio). What are your thoughts on JNJ?

Related Posts:

1. Chubb Corp. (CB) Dividend Stock Analysis
2. Johnson & Johnson (JNJ) Dividend Stock Analysis
3. Stock Analysis: Johnson & Johnson (JNJ) Still Buying At This Price
4. Stock Analysis: Johnson Controls (JCI)
5. Stock Analysis: Johnson & Johnson (JNJ)

Each Sunday I highlight the Carnivals I participated in over the past week, along with any notable articles that I came across. For those readers not familiar with carnivals, it’s where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.

Articles I enjoyed reading included (in no particular order):

The DIV-Net Featured Articles

• Dividends4Life presented Stock Analysis: Johnson & Johnson (JNJ)
• The Dividend Guy presented Broker Options for Canadian Investors
• Barel Karsan presented Earnings Revert To The Mean
• Dividend Tree presented Kimberly-Clark : Stock Analysis for Dividend Portfolio
• Dividend Growth Investor presented Grouping Dividends for Current Income
• Buying Value presented Book Review : Benjamin Graham on Investing

Articles From DIV-Net Members

• The Dividend Guy presented Dividend Stock and ETF Holdings
• Dividend Growth Investor presented The Dividend Investment Journey
• Barel Karsan presented Don’t Be Fooled By High P/E Values
• Dividend Tree presented Kelloggs Company– Stock Analysis for Dividend Portfolio
• the moneygardener presented Telus fails to raise dividend
• The Div Guy presented Top 20 Stock Holdings
• Disciplined Approach to Investing presented Dividend Aristocrats Performance Update
• Old School Value presented Warren Buffett’s BNI Intrinsic Value Calculation
• Triaging My Way To Financial Success presented Mail Bag: CML Healthcare (CLC.UN)
• Everyday Finance presented Why do Pharmas Call Themselves Biotechs? You May be Surprised
• 40percent 20years presented The main disadvantage of Dividend Investing
• Value Investing Pro presented 4 Warren Buffett Quotes On Burlington-Northern Acquisition
• EPIC INVESTOR presented Dividend Discount Model in Action — LLY Stock Analysis

Other Articles

• Motley Fool presented These Dividend Stocks Won’t Let You Down
• ModernGraham presented 10 Dividend Companies for the Enterprising Investor
• Seeking Alpha presented The Top 4 Healthcare Dividend Stocks: Covered Call Trades
• SmartMoney presented 3 Stocks With Dividends and Growth Potential
• Stockerblog presented 290 Stocks That Pay Dividends Monthly

There are some really good articles here, please take time and read a few of them.
(Photo: Sachin Ghodke)

Related Posts:

1. Weekly Links: October 4, 2009

Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income rose in October, extending the streak to 8 months after February 2009’s decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 22 of the last 23 months.

My goals were defined in this December 1, 2007 Investing Goals post and updated in my 2009 Investing Goals post. Below is an updated version of the table found in the original post.

The above information covers the current month and year-to-date through the current month.

Click here for a Detailed Historical Progress Table.

For the month, annualized dividend income increased $169, and Yield on Cost (YOC) decreased (0.06%). This month’s changes were a net of new purchases, dividend changes and sales. Let’s examine each of the these categories:

Purchases: The $359 increase in annual dividend income and (0.04%) decrease in YOC related to the following purchases (yield at the time of purchase):

• $84 Emerson Electric Co. (EMR) 3.34%
• $77 Procter & Gamble Co. (PG) 3.04%
• $198 PowerShares Emerging Mkts Sovereign Debt (PCY) 6.15%

All the purchases, except PCY, lowered my YOC. As noted in earlier updates, I generally expect YOC to drop each month since most new investments will yield less than my current YOC, and dividend increases will not be sufficient to offset it.

Dividend Changes: The $37 decrease in annual dividend income and (0.04%) decrease in YOC related to the following dividend changes (a=dividend stated in annual terms, q=quarterly, m=monthly):

• $3 Canadian National Railway Company (CNI) $0.217q>$0.236q 0.00%
• ($3) Vanguard Intermediate-Term Bond ETF (BIV) $3.46a>$3.41a 0.00%
• ($15) Vanguard Long-Term Bond ETF (BLV) $3.46a>$3.90a -0.01%
• ($6) iShares iBoxx $ Invest Grade Corp Bond (LQD) $5.79a>$5.72a -0.01%
• ($17) Eaton Vance Tax-Adv. Global Dividend Fund (ETO) $1.59m>$1.53m -0.02%
• $1 Realty Income Corp. (O) $0.14237m>0.14268m 0.00%

Sales: The ($153) decrease in annual dividend income and 0.02% increase in YOC related to the following sale:

• ($153) Vanguard REIT Index ETF (VNQ) 0.01%

In October I continued the process of trimming back my ETFs/CEFs income holdings with the sale of VNQ and have now sold all the ETFs that currently I plan to sell.  I will continue to evaluate the performance of the ones I continue to hold.

Based on year-to-date results, I am on target to meet or exceed my revised estimate of annualized dividend income on December 31, 2009 of $7,000. This is $1,000 below my original goal of $8,000.

That’s it for this time. The next monthly progress update will be early December.

(Photo: sanja gjenero)

Related Posts:

1. Weekly Links: October 4, 2009
2. D4L-PreScreen.xls Model – August 2009 Update
3. How Is Your Portfolio Doing This Year?
4. iStar Financial Inc. (SFI) Update
5. Dynamic Dividend Investing – Feb/08 Update

Investing in Dividend Stocks is a long-term strategy. Frequent buying and selling of dividend stocks can significantly increase your expenses and taxes, thus lowering your returns. A growing dividend is a strong indication of a company’s increasing intrinsic value. Great companies that increase dividends tend to have rising share prices over time. Holding only first-rate businesses protects your dividend streams and helps ensure you’ll also get steady price appreciation.

Below are four companies rewarding their shareholders with higher cash dividends:

Middlesex Water (MSEX) provides regulated water utility service in parts of New Jersey and Delaware; and also operates waste water systems. October 30th the company increased its quarterly dividend to $0.18/share. The dividend is payable December 1, 2009 to shareholders of record as of November 13, 2009. The ex-dividend date is November 11, 2009. MSEX is a Dividend Champion and has increased its dividend for 36 consecutive years. The yield based on the new payout is 4.62%.

Aaron’s (AAN) rents and sells residential and office furniture, consumer electronics and household appliances, and also manufactures furniture for rental and subsequent sale. November 4th the company raised its quarterly dividend 5.9% to $0.018/share. The dividend is payable January 4, 2010 to shareholders of record as of the close of business on December 1, 2009. The ex-dividend date is November 27. The yield based on the new payout is 0.27%.

Microchip (MCHP) supplies microcontrollers and analog and other semiconductor
products for a wide variety of high-volume embedded control applications. November 4th the company increased its quarter dividend to $0.34/share. The yield based on the new payout is 5.56%.

Universal Corp. (UVV) is the world’s largest independent leaf tobacco dealer. November 5th the company raised its quarterly dividend 2.2% to $0.47/share. The dividend is payable February 9, 2010, to common shareholders of record at the close of business on January 11, 2010. The yield based on the new payout is 4.33%.

Great companies that raise their dividends each and every year often make the best income investments. For a list of stocks with a long string of consecutive dividend increases, see this list.

Full Disclosure: No position in the aforementioned stocks. See a list of all my income holdings here.

(Photo Credit)

Related Posts:

1. 9 Dividend Stocks Sending More Cash To Shareholders
2. 10 Stocks Taking Their Dividends Up A Notch
3. 9 Stocks Increasing Their Dividends
4. Dividend Stocks: Lowering Risk By Increasing Dividends
5. Five Stocks Raising Their Dividends

Those that have read this space for any period of time are well aware of my enthusiasm for using dividend growth stocks as a vehicle for building long-term wealth and income. However, with that said, a successful investor must do more that just buy stocks that pay a growing dividend, or more that focusing on a single metric such as dividend yield. Not all dividend stocks are created equal – there is a discipline to selecting good dividend growth stocks.

Understand Your Goal

What is your portfolio trying to accomplish? As odd is it may seem, many investors never define this and their overall goal. Are you buying stocks like First Industrial Realty Trust, Inc (FR) with a 22% yield, Capstead Mortgage Corporation (CMO) with a 17% yield, Annaly Capital Management, Inc. (NLY) with a 16% yield or Apollo Investment Corp. (AINV) with a 12% yield? If your goal is short-term income these might work, and then again they might not.

Before buying buying any stock you should write down your investing goal and determine if purchasing that stock will bring you closer to your goal or take you further away. My goal is to generate an ever-increasing income stream from dividends. Thus, I will sacrifice some current income in favor of future growth and income stability.

Understand and Measure the Risk

No stock is 100% safe. Each stock has its own set of risks that need to be considered. The stocks listed above are considered high risk. In exchange for above average current income, you may encounter above average dividend cuts and/or loss of capital.

Gauging the relative risk of one stock compared to another is important when deciding which stock to buy or how much to weight a stock within your portfolio. I prefer lower risk stocks such as Johnson & Johnson (JNJ) [Analysis], Procter & Gamble Co. (PG) [Analysis]and Wal-Mart Stores, Inc. (WMT) [Analysis].

A Disciplined Approach

For me and my income portfolio, I have have chosen to follow a conservative and disciplined approach. This means I will seek out dividend stocks with a proven track record and good future prospects. These stocks will have a long history (10 or more years) of consecutive dividend increases, low debt, low free cash flow payout and excellent other dividend metrics. In addition, I will follow time proven valuation techniques to select an entry point that will provide a good value.

Stay The Coarse

There is always a temptation to stray from a disciplined approach of selecting good dividend stocks. Often I receive questions like, ‘AT&T Inc. (T) is making a fortune off the iPhone, why aren’t you buying it?’ or ‘Kraft Foods Inc. (K) is a great consumer staple, why aren’t you buying it?’ The short answer is that neither currently can pass the entry exam to gain access to my income portfolio.

It is easy to become caught up with the current hot stock that everyone loves. The key to success is to buy before everyone else falls in love with it. Selecting good dividend growth stocks is not difficult, being disciplined enough to do it is difficult for many investors.

Full Disclosure: Long JNJ, PG, WMT. See a list of all my income holdings here.

(Photo Credit)

Related Posts:

1. High-Yield Dividend Stocks: A Safer Approach
2. 10 Best U.S. Dividend Stocks
3. Three Dividend Stocks With A Perfect Risk Score
4. Warren Buffett’s Dividend Stocks
5. Dividend Stocks: Confident and Secure

This article originally appeared on The DIV-Net October 26, 2009.

Linked here is a detailed quantitative analysis of Courier Corp. (CRRC). Below are some highlights from the above linked analysis:

Company Description: Courier Corporation publishes, prints and sells books. Founded in 1824, Courier has two lines of business: full-service book manufacturing and specialty publishing.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

CRRC is trading at a discount to 1.), 2.) and 3.) above. The stock is trading at a 40.2% discount to its calculated fair value of $25.24. CRRC earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

CRRC earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years and it earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The stock earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (1999-2002, 2000-2003, 2001-2004, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1950 and has increased its dividend payments for 16 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

CRRC earned a Star in this section for its NPV MMA Diff. of the $56,158. This amount is in excess of the $1,900 target I look for in a stock that has increased dividends as long as CRRC has. The stock’s current yield of 5.57% exceeds the 3.9% estimated 20-year average MMA rate.

Other: CRRC is a member of the Broad Dividend Achievers™ Index.

Conclusion: CRRC earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks CRRC as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $45.05 before CRRC’s NPV MMA Differential increased to the $1,900 that I like to see for a stock with 16 years of consecutive dividend increases. At that price the stock would yield 1.86%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $1,900 NPV MMA Differential, the calculated rate is 4.7%. This dividend growth rate is significantly less than the 15.0% used in this analysis, thus providing a margin of safety. CRRC has a risk rating of 1.50 which classifies it as a low risk stock.

In 2008, CRRC’s EPS was a loss of $0.03/share. For the trailing twelve months the loss has expanded to $0.17/share. Although the stock is trading well below my buy price of $25.24, concerns about is current business prevents me buying. For additional information, including the stock’s dividend history, please refer to its data page.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I held no position in CRRC (0.0% of my Income Portfolio). What are your thoughts on CRRC?

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