Rights Issue increases Shareholder Equity and dilutes NAV per share and Dividend per share.

The Power of Increasing Dividends

How can increasing dividends build phenomenal wealth?

By harnessing the power of compound interest...

Reinvested dividends magnify an investment's typical return by making use of the power of compound interest.

Need an example?

Let's look at a traditional savings vehicle which takes advantage of compound interest...

A savings account.

Let's say your savings account pays 2.0% annually on a $34 initial deposit (in a moment, you'll see why I chose $34 as an example). Here's what that looks like...

Now, imagine how much money you would've earned in year ten if the 2.0% rate also increased on an annual basis along with the principal balance...

You would have a lot more. Right?

Well, that's typically what happens when you invest in a great company with consistent and increasing dividend payouts.

Need an example?

Below is a chart of actual dividends paid by PepsiCo, Inc. from 1999 to 2008. $34 would have purchased 1 share of Pepsi (PEP) in 1999 (this is why I used $34 in the savings account example).

In this case, PepsiCo stock is the perfect illustration of the power of compounding dividend returns...

Notice the "dividends paid" figure in year ten?

Also notice the yield in year one is substantially less than the year one savings account rate in the previous example. But the 2% savings account rate doesn't change, while the dividend yield on the initial investment in PepsiCo stock more than triples. By year six, it eclipses the yield on the savings account and keeps growing and growing.

From 1999 to 2008, the effective dividend yield for PepsiCo stock increased on an annualized basis of 13.57%...! That means, on average, your dividend yield just about doubles every five years. Now, imagine if you continue to hold your PepsiCo stock for another ten years while the dividend payments increase and increase and increase...

In the initial years, you do better with a savings account. But in the long term, you do far, far better with a great company's dividends.

That's the power of compound interest, and you can harness and amplify that power by investing in great companies with a history of consistent and increasing dividends.

So if you want to substantially increase your odds of beating the market and building a successful Roth IRA portfolio, find companies with a track record of increasing dividends...


http://www.your-roth-ira.com/dividend-payout-ratio.html

Graphic representation of Cash Flows

Strong Cash Flows




Competitive Dividends


http://www.faqs.org/sec-filings/091210/NORTHWESTERN-CORP_8-K/ex99-1_westcoastpres.htm

Income investing, especially when coupled with a dividend reinvestment strategy, is an effective way to generate income from and also grow a portfolio.

How to Earn 26.5% on $20,000


Boost Your Income from $1,400 to $5,299 in Just a Few Years

Even the younger generation is paying heed to the wisdom of diversifying with income investments. They are starting to realize that income investing, especially when coupled with a dividend reinvestment strategy, is an effective way to not just generate income from -- but also grow -- a portfolio.


The chart above shows your potential annual income stream assuming a $20,000 initial investment in stocks with an average yield of 7%. Thanks to the power of reinvested dividends and dividend growth, after 10 years your portfolio could be generating $5,299 in annual income -- that's +278.5% more income when compared to an investor who doesn't reinvest. In fact, it could be generating an effective yield of 26.5% based on your initial $20,000 investment.

If you have even a little bit more time on your investment horizon (or more money to invest, or additional dollars to invest each year), then the numbers only get better. And keep in mind that these are conservative estimates.

http://www.streetauthority.com/a/how-earn-265-20000-1029

A look at a great dividend growth company JNJ

APRIL 06, 2010

JNJ Dividend Hike Could be Substantial

Johnson & Johnson (JNJ) raises its dividends like clockwork, and it's that time of the year.  As you can see in the chart below (data provided by Intrinsic Reseach), dividend growth at JNJ has grown at a compounded 14% over the past two decades, though it has tailed off over the past couple of years:

It is worth noting that over the past 7 years, the payout ratio (dividends relative to earnings) has increased rather steadily from 34% to 42%, which is still a rather low number for such a mature company.  It is in line to slightly lower than most of the large-cap pharma names. 

Last year, the company hiked the dividend from an annual rate of 1.82 t0 1.96, just 7.7%.  I think that they can afford to be much more generous this year, as their balance sheet has improved as has their expected earnings.  At the end of 2008, the company had a small amount of net cash, with cash and short-term investments of $12.8 billion exceeding the total debt of $11.8 billion.  A year later, they had $19.4 billion in cash/s.t. investments and $14.5 billion in debt.  Looking ahead, the balance sheet should improve further given the large generation of FCF as well as the incoming payments from BSX.  What a great problem with which JNJ must contend:  how to spend all of that operating cashflow!

Historically, the company has reinvested in the business with capital expenditures and acquisitions, repurchased stocks and paid dividends.  Share repurchases dropped last year and account for the build-up in net cash. 

JNJ is expected to earn a record $4.91 in 2010.  Applying a 44% payout ratio, which is slightly higher than the current ratio but in line with the progression over the past several years, I get a dividend of 2.16. which would be a boost of 10%.   With the stock trading at about 65.00, that works out to what I consider a relatively attractive 3.3% dividend yield.

While perhaps I am too optimistic in my base-case assumption of a nickel-per-quarter add, I think that we should see an increase that at least matches last year's boost (so a hike to 2.11).  If I had to take the over or under, though, I will go with the over.  I think that it would be a great message to shareholders to raise the dividend in line with the 20-year historical growth rate of 14%, or to $2.24. 

http://ab.typepad.com/ab_analytical_services/2010/04/jnj-dividend-hike-could-be-substantial.html

A Company with Favorable and Continued Dividend Growth

http://seekingalpha.com/article/99644-china-mobile-looks-like-value-smells-like-growth

Dividend Growth Investing: A Look at 10 Year Dividend Growth Rates of some Companies

The screening criteria applied toward the S&P Dividend Aristocrat index was:

1) Current yield of at least 2.50%
2) Dividend payout ratio no higher than 60%
3) Price/Earnings Ratio of not more than 20
4) 25 years or more of consecutive dividend increases


http://www.dividendgrowthinvestor.com/2010/04/16-quality-dividend-stocks-for-long-run.html

Dividend Growth Investing: Acquire Great Franchises on Dips

13 dividend stocks to enter on dips

Aug 13, 2009 9:27 AM

Ever since the markets hit a multi year low in March, investors have been wondering how sustainable the advance is. Some claim that the bear market is over, while others believe that the worst is yet to come in the grand scheme of events.

Intelligent  dividend investors are not worried about short-term fluctuations in the markets however. They understand that if they follow a rigorous screening process and acquire a diversified mix of the best dividend paying companies in the world, their distributions would provide a positive return in any market. In a previous post I identified 12 attractively valued dividend stocks to acquire now. It is important however not to overpay for stocks, even those with exceptional moats, as this could lead to underperformance relative to their benchmark over time.

If the markets were truly overstretched, then a slight retracement from markets recent highs would be a welcoming sign for income investors, who are looking to exploit these conditions by acquiring great franchises on dips. Pockets of opportunity allow  dividend investors to buy solid businesses at reasonable prices, decent yields and acceptable dividend growth rates.

In order to capitalize on such opportunities, I have screened for companies, which have raised their dividends for more than 25 consecutive years. My criteria were are follows:

1) Stock has increased dividends for more than a quarter of a century
2) Price/Earnings Ratio of less than 20
3) Dividend payout ratio of less than 50%
4) Dividend yield is more than 2%, but no more than 3%

The companies, which I identified in the screen, are listed below:
                                            (Open as a spreadsheet)

I require a 3% initial dividend yield before initiating a position in a stock. Thus the above-mentioned stock list should be acquired only on dips below the target price. Another strategy for enterprising dividend growth investors is selling cash secured puts on the stocks below, with strike prices close to the target price mentioned above. I have provided some explanation why I require at least some yield below.


Investors often overpay for stocks because of the recency phenomenon, where they discount double-digit growth indefinitely. This leads to purchasing stocks with unacceptably low dividend yields, high P/E ratios and rosy predictions for strong dividend growth for eternity. Such conditions are simply unsustainable.


Thus by buying a stock with a dividend yield of at least 3% an investor’s income is relatively well covered in a scenario where the company stops growing its distributions. With this margin of safety the investor still generates some dividend income until they manage to sell the stock and re-invest the proceeds in a more promising dividend growth stocks. With a 1%-2% yielder, it would take forever for our enterprising dividend investor to earn a reasonable dividend income if distribution growth slows down or grinds to a halt.


http://seekingalpha.com/instablog/152225-dividend-growth-investor/22570-13-dividend-stocks-to-enter-on-dips

High Dividend Payout Ratio = High Earnings Growth Rate (??)

I have always been under the impression that a dividend payout ratio must not be too high because it can limit the ability of the company to grow.  I look for a dividend payout ratios that are at least below 60%, preferably even lower.  I have selected this target because I have believed that the lower payout ratio will provide the company with a sizable chunk of earnings to grow the business and with a lower than 60% dividend payout ratio a company can continue to grow its dividend even during time of economic slowdowns or reduced earnings.

It appears that this theory and fundamental analysis principle has been refuted in a study by Robert D. Arnott and Clifford S. Asness (pdf document). Their theory is that higher dividend payouts actually have lead to higher earnings growth. And with higher earnings growth, share prices tend to go up over time which is better for all of us investors. Let’s have a look at their research and findings.

But First a Definition of the Payout Ratio


The payout ratio is the percentage of a company’s earnings that are paid out as dividends. In a nutshell, the payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio.

The crux of the Arnott and Asness research really boils down to one chart. Have a look and it is clear that there is a trend happening here.



As you can see, for a high number of companies, the higher the payout ratio is the better earnings growth the companies experienced. Here are some comments from the authors:

• In general, when starting from very low payout ratios, the equity market has delivered dismal real earnings growth over the next decade; growth has actually fallen 0.4 percent a year on average–ranging from a worst case of truly terrible –3.4 percent compounded annual real earnings for the next 10 years to a best case of only 3.2 percent real growth a year over the next decade. 
• From a starting point of very high payout ratios, the opposite has occurred: strong average real growth (4.2 percent), a worst case of positive 0.6 percent, and a maximum that is a spectacular 11.0 percent real growth a year for 10 years.

So what do we, the average investors do with this data?

My view is that I am going to continue to use my 60% payout ratio benchmark, but will not scoff at a higher dividend payout ratio as quickly. I still believe that it is the average historical payout ratio that an investor must be concerned with – any recent jumps in the payout ratio need to be examined to determine why the change occurred.

http://www.thedividendguyblog.com/high-dividend-payout-ratio-high-earnings-growth-rate/

But, do read the article below which contradicts the above findings.

----

High Yields and Low Payout Ratios

The above post has covered high dividend stocks and the fact that they have been better market performers than low yield stocks. However, it has not been simply buying all the high dividend stocks that has been the most powerful. A study conducted by Credit Suisse Quantitative Equity Research looked at high yields and payout ratios. Their study found that it is high yields coupled with low payout ratios that have provided the best gains over lower yield investing. Although the study used a shorter time frame (1980 – 2006) than many of the other studies we have looked at, the data is pretty clear in its messaging. Take a look at the chart below:



It is interesting to see that the stocks that had a high payout ratio as a whole produced worse gains than the S&P 500, but the stocks that either paid no dividends, had a low yield, or had a high yield did better than the S&P 500. That payout ratio is certainly more important than I thought it was based on this study. A high payout ratio can certain indicate trouble in a company and must be watched closely.

http://www.thedividendguyblog.com/day-5-the-dividend-key-high-yields-and-low-payout-ratios/

Biscuit and Sweets Counters in KLSE.

My reader posted in the chat box:

"oub: overweight biscuit and sweets guanchg,hwatai, kheesan, lonbisc..singapore oub is buying"

Earnings in this group of companies are volatile.  Their earnings are better in recent years.

Over the last 5 years, the prices of their stocks have either been flat or tending downwards.

Their dividends have been cut in recent years compared to the earlier years.

Well, what has changed in this sector that is exciting my reader 'oub'?

Financial Ratios for Management, Owners and Lenders

Scamming, Arrogance and Guilt

How to make your child a millionaire

Set up a pension at birth and take advantage of tremendous tax breaks.

 

By Kara Gammell
Published: 10:40PM BST 26 Jul 2010

Make your child a millionaire Photo: GETTY

Parents could make their baby an adult millionaire by starting a pension pot when they are born. While it may be hard to imagine your children reaching retirement, by contributing just £88 per month to a child self invested pension plan (SIPP) until the age of 18, the fund should easily top £1 million by the time they reach 65.

For most parents, saving regularly is an integral part of securing their child's financial future and with the abolition of Child Trust Funds, parents could consider pensions as an alternative way to provide financial stability.

 

Related Articles

• Investing in a recession: 10 tips

• University fees: how to fund your child's education

• Fame & Fortune: Opera singer Lesley Garrett

• Last-minute Isas: Where to buy this weekend

• Financial tips for mums for Mother's Day

• Joan Bakewell: 'My tenant was a professional con artist'

Making regular contributions to a child's pension may not seem like the obvious choice. However, given the flexible nature of SIPPs and the tax relief offered by the Government, they can provide a very simple way of securing children's financial future in retirement.

While they won't have the money until they are 55 at the earliest, knowing that there are pension plans in place will give them greater choice over what they spend their money on when they are younger.

Steve Latto, head of pensions at Alliance Trust Savings, said: "Financial planning for children is always a high priority for parents who wish to safeguard their children's financial future. We have a significant number of parents already using an Alliance Trust Savings SIPP for their children in order to take advantage of the tax relief and flexibility that SIPPs offer."

HOW DOES IT WORK?

You can put a maximum of £2,880 into a personal pension for a child each year. The Government will add £720 in tax relief, boosting the value to £3,600. Put another way, this equates to 25 per cent growth on your money on day one. The investments then grow free from income and capital gains tax.

Better still, the £2,880 yearly contribution falls below the £3,000 annual gift limit for inheritance tax (IHT). This removes the money from your estate for tax purposes even if you die before the normal seven-year threshold, potentially saving your heirs 40 per cent in tax.

This would take the effective cost of the £3,600 pension investment down to £1,728 a year, or a total of £31,104 over 18 years. This tax-efficient way to give money to your relatives while you are still alive is sometimes known as "giving with warm hands".

Tom McPhail, pensions expert at Hargreaves Lansdown, said: "Setting up a pension for a child is one of the most efficient financial gifts you can make. You get tax relief on the contribution and the child benefits from tax-free growth. Because the money is invested over such a long term – up to 55 years or more, you have the luxury of taking a unique long view on the investment strategy which presents the opportunity to really go for maximum returns."

BUT WHY IS IT SO IMPORTANT TO START AT AS SOON AS THE CHILD IS BORN?

This is largely thanks to the miracle of compound interest. If, instead of starting the pension at birth, your child starts contributing once he or she starts work and saves the same £3,600 every year from the ages of 25 to 65, they will end up with a pension pot worth only £590,600 before taking inflation into account, rather than £1.8 million. This is despite them saving for 40 years instead of 18.

Ian Naismith, head of pensions at Scottish Widows, said: "Setting up a pension plan for a child gives them a head-start in saving for retirement and allows plenty of time for their pension funds to grow.

"Money in a pension is also guaranteed to be available for retirement, with no temptation to fritter it away." Remember parents and grandparents can still pay into existing Child Trust Funds, but Mr Naismith says, contribution limits are lower (£1,200 a year compared with £3,600 into a pension, including tax relief) and CTF money is likely to be spent in early adulthood.

While anyone can pay into a pension for a child, the plan has to be arranged by their parent or legal guardian, who will be responsible for it until they reach 18. There is a special declaration to complete, but the application is straightforward and can be done through a financial adviser or direct with an insurance company.

Enlist the help of grandparents and other relatives to put as much as possible into the pension fund as well as in their CTF. You may have to coordinate the payments, but with a maximum CTF contribution of £1,200 a year and a maximum pension contribution of £2,880 a year there's plenty of scope for several people to make gifts that the child will be really grateful for in the future.

SO, DOES THIS MEAN THAT THE CHILD WOULD NOT NEED TO MAKE THEIR OWN PENSION CONTRIBUTIONS AS AN ADULT?

Unfortunately not, said Mr Naismith. "It's unlikely that contributions made for children will be enough for them to retire on, given that the maximum is currently £3,600 a year including tax relief," he said.

"It should be thought of more as a foundation for retirement planning, and one the child will hopefully build on when they start earning."

Mr McPhail said that the beauty of starting a pension for your children means that they will have more financial freedom when they reach adulthood, allowing them to concentrate on housing and education costs.

"At a time when we are all looking at having to work longer, starting a pension early for your children removes a financial burden, which will leave them free to concentrate on more immediate needs without having to work until they are 70 as a consequence."

http://www.telegraph.co.uk/finance/personalfinance/pensions/7911550/How-to-make-your-child-a-millionaire.html

My 1st Million At 33 – yes, you can do it too

Asset Allocation Pyramid


Time frames and reliance on TA
In the pyramid diagram I labeled the progression in the reliance on technical analysis as the time frame (intended holding period) shortens. My short term trading is momentum based and generally has holding periods of days. On the other hand, the passive accounts are for buy-and-hold with annual rebalancing. The trench in the middle lies in between the extremes. The “income on steroids” group, PM and resource stocks I’m quite happy about holding long term (i.e. years), while others I may look at weekly charts for good entry and exit points so that the holding period may be months. Naturally, as reliance on TA wanes, reliance on fundamental and big-picture analysis waxes.




http://www.1stmillionat33.com/2007/06/new-portfolio-composition/

A Visual Guide to the Financial Crisis

Share Price: The Key Factors

http://zetafund.com/page2.htm

Cramer's Star Outshines His Stock Picks

MONDAY, FEBRUARY 9, 2009

And why not? An earthquake has hit Wall Street, and the 53-year old broadcaster has spent more time there than most any TV journalist. The guy is a hardworking genius with a word of advice for everyone...many words of advice, actually. He dispenses thousands of Buy/Sell recommendations a year and has declared that those stock picks will help you get rich.

The only regrettable thing about any of this is that CNBC and Cramer won't meaningfully discuss how his advice pans out.

Cramer's recommendations underperform the market by most measures. From May to December of last year, for example, the market lost about 30%. Heeding Cramer's Buys and Sells would have added another five percentage points to that loss, according to our latest tally.

These facts don't mean that viewers should avoid his informative and entertaining show -- they should just be wary of his stock picks.


Our research reveals that the stocks Cramer picks as Buys have been rising versus the market for several days in advance of his show, while his Sells have been falling. This doesn't prove there is a leak in the tight security surrounding CNBC's show. It could merely mean that Cramer and his staff are heavy-footed in their research. Or it could mean that his stocks are primarily momentum plays. That is the network's explanation. "Jim likes to recommend 'what is working'," said CNBC communications vice president Brian Steel in a written response Friday. "So it is no surprise there would be movement in these stocks prior to Jim mentioning them."

In any event, these pre-show moves are the probable cause of Cramer's underperformance. As the stocks revert to the market's trend in the weeks after the show, Cramer's followers get hurt [See chart below]. Like any active-investing strategy, Cramer's advice must always be measured against the market return that his viewers could get in an index fund.












http://online.barrons.com/article/SB123397107399659271.html#articleTabs_panel_article%3D1

Stock Picking Strategies of various Gurus

Stock Picking for Noobs

June 11, 2007 20076 12:06 pm | In Finanducation | Comments Off

Who best to learn but from the gurus themselves? Here's a brief list of gurus and their strategies:

1. Benjamin Graham – Value Investing Guru

Strategy: Buy shares at price well below company's intrinsic value!

Indicators:

• P/E < 15 for average earnings over last 3 fiscal years (or current P/E whichever is higher)
• No financial/technology stocks
• Annual Revenue > $340 million
• Liquidity: Current Assets/Current Liabilites > 2
• Industrial companies: Long-term debt < Net current assets
• EPS increases > 30% over 10-year period, must not be negative within last 5 years.
• (Price-to-book ratio)*(P/E) < 22

Source: NASDAQ, Kiplinger, Forbes

2. Peter Lynch – P/E Growth Guru

Strategy: Divide attractive stocks into different categories.

Indicators:

a. Fast Growers:

• Little debt, Debt to Equity Ratio < =1
• Annual EPS Growth Rate = 20 to 30
• Current P/E < = 1.75*Annual EPS Growth

b. Slow Growers:

• High dividend payouts
• Sales > $1 billion
• Low yield-adjusted PEG ratio
• Reasonable debt-to-equity ratio

c. Stalwarts:

• Moderate earnings growth
• Potential for 30-50% stock price gains over 2 year period if bought at attractive prices
• Positive earnings
• Debt-to-Equity ratio < 0.33
• Sales rates increasing inline with, or ahead of inventories
• Low yield-adjusted PEG ratio

Source: NASDAQ, MSN Money, AAII Journal

3. Martin Zweig – Conservative Growth Investor

Strategy: To be fully invested in the market when the indications are positive and to sell stocks when indications become negative.

Indicators:

• Quarterly earnings positive and growing faster than:

• –1 year ago
• –last 3 quarters
• –last 3 years

• Sales growing as fast or faster than earnings
• P/E > 5; BUT P/E < 3*Market P/E or 43, whichever is lower
• No high level of debt, below-average for industry

Source: NASDAQ,MartinZweig.org

4. Brothers David and Tom Gardner of Motley Fool – Small-Cap Growth Investor

Strategy: Search for stocks of small, fast-growing companies with solid fundamentals.

Indicators:

• Health profit margins
• Little debt
• Ample cash flow
• Respectable R&D budgets
• Tight inventory congtrols

Source: NASDAQ

5. Kenneth Fisher – Price-to-Sales Investor

Strategy: The lower a company's stock price is relative to its sales, the more attractive its stock is.

Indicators:

• Strong balance sheet with little debt
• Low Price-to-sales ratios

Source: NASDAQ

6. David Dreman – Contrarian

Strategy: Search for deep-discount value stocks.

Indicators:

• Good earnings growth
• Low P/E
• Low P/B Ratio
• Low Price-to-Cashflow Ratio

Source: NASDAQ, Investopedia

7. James P. O'Shaughnessy – Growth/Value Investor

Strategy: 2 investment strategies: "Cornerstone Growth" and "Cornerstone Value"

Indicators:

a. Cornerstone Growth

• Market value > $150 million
• Price-to-sales ratio < 1.5
• Persistent earnings growth, among market's best performers over prior 12 months

b. Cornerstone Value

• Market cap > $1 billion
• Revenue > 50% greater than mean of market's 12 month sales
• Cashflow per share > average publicly-traded company
• Yield Factor: Company which has highest dividend yield from 50 shortlisted using above criteria.

Source: NASDAQ, Forbes

http://boringest.blogasian.com/category/finanducation/