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  • Banco Santander Looks Healthier Than U.S. Banks [View article]
    Banco Santander (STD) and Citi (C) are among my stock recommendations for 2012: http://seekingalpha.co...
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    Feb 21, 2012. 01:32 PM | 1 Like Like |Link to Comment
  • 3 Dividend Growth Stocks Selling At A 20% Or More Discount [View article]
    Ingtrm:

    You may find this article helpful:
    http://seekingalpha.co...
    Feb 19, 2012. 11:26 PM | Likes Like |Link to Comment
  • A High-Dividend-Growth, Low-Payout-Ratio Portfolio [View article]
    Jeff,

    I'm sure you understand that I didn't spend so much time and effort developing and improving a stock picking system so that I can use it to write articles on SA. No, my own money is on the line since it is the primary source of ideas for my own stock purchases :)

    As I've mentioned, I'm well aware of correlated metrics and I've picked them methodically for maximum effectiveness. In the original version of the methodology which I published in October '11, I only used five metrics as you may remember (you commented on it).

    Since then I have published the system's monthly updated list and each time depending on my completed research I've added one of two additional metrics. I believe as I added more essential metrics and fine-tuned the weighting, the results have improved.

    I even published the first performance update for my original stock list, here: http://seekingalpha.co...

    I know three and a half months is way too short a time period for judging long-term dividend growth stocks, but the readers were asking for performance results, so I put it out. I'm planning on posting periodic performance updates. I believe in accountability, not to mention I'm the first who wants to know the performance, since my own money is on the line!
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    Feb 19, 2012. 08:39 PM | Likes Like |Link to Comment
  • A High-Dividend-Growth, Low-Payout-Ratio Portfolio [View article]
    (Meant to post here in response, showed up as a separate comment.)

    Jeff,

    What you are doing here is basically what I did in the article in which I introduced my methodology for picking the best dividend growth stocks (http://seekingalpha.co...), except you are dumbing it down by dropping some essential metrics and going only by yield and payout ratio. How can this improve the results?

    For instance, my methodology utilizes the P/E ratio, dividend to free cash flow ratio, payout ratio, EPS growth rate, ROE, revenue growth, and debt to equity ratio, which are crucial metrics for valuation, growth, and profitability, and essential in screening for the best companies.

    As for using too many metrics, I disagree. Chosen properly, every metric looks at a company from a different angle, and the more angles you look at, the better the overall picture of the company you will get. As you know, companies can get very creative with their reporting and can present certain metrics to be much better than they really are, and can do that for a long time. But they can not misrepresent all of these essential metrics for long.

    Regarding ROE, ROA, and debt to equity being correlated, yes, they are, and that's where careful fine-tuning of weightings of each metric towards the overall score comes in. I've spent a lot of time and research on the weightings and they are based on empirical data and time-tested theoretical concepts.

    Jeff, I don't mean to trivialize your effort since it is worthwhile for research purposes, and going only by yield and payout ratio will certainly weed out a lot of weak companies, but it will also leave in a lot of weak, expensive, or otherwise flawed companies. So we can only conclude that while the result of this methodology is bound to contain some fine stocks, overall it is unreliable and cannot be looked at with confidence.
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    Feb 19, 2012. 05:33 PM | 1 Like Like |Link to Comment
  • A High-Dividend-Growth, Low-Payout-Ratio Portfolio [View article]
    Jeff,

    What you are doing here is basically what I did in the article in which I introduced my methodology for picking the best dividend growth stocks (http://bit.ly/z8SRXt ), except you are dumbing it down by dropping some essential metrics and going only by yield and payout ratio. How can this improve the results?

    For instance, my methodology utilizes the P/E ratio, dividend to free cash flow ratio, payout ratio, EPS growth rate, ROE, revenue growth, and debt to equity ratio, which are crucial metrics for valuation, growth, and profitability, and essential in screening for the best companies.

    As for using too many metrics, I disagree. Chosen properly, every metric looks at a company from a different angle, and the more angles you look at, the better the overall picture of the company you will get. As you know, companies can get very creative with their reporting and can present certain metrics to be much better than they really are, and can do that for a long time. But they can not misrepresent all of these essential metrics for long.

    Regarding ROE, ROA, and debt to equity being correlated, yes, they are, and that's where careful fine-tuning of weightings of each metric towards the overall score comes in. I've spent a lot of time and research on the weightings and they are based on empirical data and time-tested theoretical concepts.

    Jeff, I don't mean to trivialize your effort since it is worthwhile for research purposes, and going only by yield and payout ratio will certainly weed out a lot of weak companies, but it will also leave in a lot of weak, expensive, or otherwise flawed companies. So we can only conclude that while the result of this methodology is bound to contain some fine stocks, overall it is unreliable and cannot be looked at with confidence.
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    Feb 19, 2012. 05:26 PM | Likes Like |Link to Comment
  • A System For Picking The Best Long-Term Dividend Growers [View article]
    ScottHB,

    If you look at my monthly update articles (with Potency Score in the title) you will see that the system has been progressively enhanced and more essential metrics have been added, including free cash flow metrics, ROE and ROA, revenue growth, and others. Also the metric weightings have been fine tuned to have the most accurate impact based on empirical data.

    I'm also working on adapting the methodology so that it can be applied to REITs, MLPs, and BDCs with more accurate results.

    Thanks for your continued interest.
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    Feb 19, 2012. 01:52 PM | 1 Like Like |Link to Comment
  • A High-Dividend-Growth, Low-Payout-Ratio Portfolio [View article]

    Not bad for a screen that is based on only two metrics. Of the 30 stocks, 17 are on the top 30 list in my article, here:

    http://seekingalpha.co....

    The list is produced by a methodology that uses over a dozen metrics including ROE, ROA, dividend to free cash flow ratio, EPS growth, revenue growth, debt to equity ratio, and more, in addition to dividend yield and payout ratio. It is a scoring system that assigns different weightings to each metric and calculates a final score for each stock (Potency Score).

    The original methodology was published here:

    http://seekingalpha.co....

    You can also check out the monthly updated lists.
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    Feb 18, 2012. 10:09 PM | Likes Like |Link to Comment
  • Performance Results Of The Potency Score System [View article]
    Herbert:

    Thanks for your interest. Here are some clarifications.

    > It would also be helpful to show how these stocks were ranked in your system at the beginning of the reporting period.

    The second word in the article is the link to the original rankings. Also, the order I have listed the stocks in this article is according to the original rankings.

    As for calculating the performance of each 10 separately, we would have had a little more stats- not sure how useful.

    Agreed as far as the self-congratulatory remark :) But I also did say repeatedly that such short term results don't mean a whole lot, and that we have to wait to see if the system can withstand the test of time. Cheers...
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    Feb 10, 2012. 04:17 PM | Likes Like |Link to Comment
  • Performance Results Of The Potency Score System [View article]
    Chris:

    Thanks for your interest. Back when I published the original article one of the readers (username: thisbusiness) did a backtest of the top 50 and posted it in comments section. You can go to the article (link below) to see the comment, but for convenience I copy/paste it here as well.
    As for BBL and BHP, although its the same company, since it's dual listed in Australia and the UK, for various reasons, including currency differences, the performance, dividend, etc, come out different. As for replacing BHP I think is a little nit picking for a 30- stock evaluation.

    The original article link:

    http://seekingalpha.co...

    Comment by user "thisbusiness" is between the lines:

    ----------------------...
    Thanks for the article. I ran a backtest of your Current Top 50 at foliofn which accounts for dividends. Sorry for the rough formatting, but here are the results:

    Time Top 50 SP 500 SDY
    3 Mos -9.89% -7.49% -4.21%
    6 Mos -10.65 -7.01 -3.58
    1 Yr. -3.99 +3.45 +1.13
    3 Yr. +46.65 +36.51 +34.77
    5 Yr +24.79 -2.15 +2.75

    Here are the sector allocations:

    Sector Weightings Current Holdings S&P 500
    Consumer Staples 2.00% 9.17%
    Consumer Discretionary 12.00% 4.00%
    Retail/Wholesale 8.00% 9.31%
    Medical 8.00% 10.54%
    Auto/Tires/Trucks 0.00% 1.03%
    Basic Materials 6.00% 3.13%
    Industrial Products 4.00% 2.47%
    Construction 2.00% 0.49%
    Multi-Sector Conglomerates 0.00% 3.53%
    Computer/Technology 12.00% 19.33%
    Aerospace 6.00% 1.39%
    Oils/Energy 8.00% 11.39%
    Finance 10.00% 13.88%
    Utilities 14.00% 6.34%
    Transportation 2.00% 1.84%
    Business Services 6.00% 2.15%
    Unclassified 0.00% 0.01%
    Total 100% 100%

    Beta of Top 50 came out as 1 relative to s/p 500--that seems a little unlikely so not sure how accurate it is.
    Average PE of top 50: 10.38
    ----------------------...
    Feb 10, 2012. 03:57 PM | Likes Like |Link to Comment
  • Best Dividend Growth Stocks By Potency Score For February [View article]
    janehamber:

    I'm one of those millions :) and I buy to hold for the long term.
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    Feb 8, 2012. 03:15 PM | Likes Like |Link to Comment
  • Best Dividend Growth Stocks By Potency Score For February [View article]
    janehamber:

    Thanks for the comment. You are right that most net long portfolios go up during a market run up, but the key is by what margin. That's where the comparison with S&P 500 Index comes in (or another Index depending on the constituents of the portfolio.)

    The vast majority of analysts and fund managers live for 'beating the index', and about 90% of them underperform it. So doing better than the index, even by a tiny margin is a big accomplishment for them.

    And you are right about the recent interest in dividend stocks. Congratulations that you had the foresight to get into them ahead of the crowd. I believe the interest started out with the '08-'09 crash and the choppy, unnerving markets, plus the extended period of ultra low interest rates.

    In my view, some reasons that this interest could start to fade are: 1. a continuation of the recent bull market, which will keep pushing up cyclical stocks and take the shine off of the slow, steady, defensive ones. 2. A steady rise in the interest rates. 3. The dividend tax laws that are supposed to kick in starting 2013.
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    Feb 8, 2012. 03:08 AM | Likes Like |Link to Comment
  • Best Dividend Growth Stocks By Potency Score For February [View article]
    SDS:

    Yes, all public data. Agree that Edgar website has the best data submitted by companies, and hopefully no more than a few bad apples in there. Time-wise, I'm tight with a full time job and travel, but things should get better.
    Feb 8, 2012. 02:42 AM | Likes Like |Link to Comment
  • Best Dividend Growth Stocks By Potency Score For February [View article]
    JaxJaguar:

    How timely! In fact I submitted a performance results article to SA yesterday, which should be published anytime now. This is probably the earliest I could do it for any meaningful results since I introduced the system only last Oct.

    Thanks for your interest and keep the suggestions coming!
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    Feb 6, 2012. 06:11 PM | Likes Like |Link to Comment
  • Best Dividend Growth Stocks By Potency Score For February [View article]
    brandyjc:

    You didn't mention any specific names so I assume you are asking in general. Free cash flow is a critical metric for any stock, especially a dividend stock and it is a significant factor in the methodology. So companies with weak cash flow are unlikely to make it high up in the list.

    As for trading volume, it is not a factor the system considers. But again I doubt any stock with extremely low trading volume would rank very high in the list.

    I hope this answers your question.
    Feb 6, 2012. 01:19 PM | Likes Like |Link to Comment
  • Best Dividend Growth Stocks By Potency Score For February [View article]
    SDS:

    Yes, good, accurate data is everything. All the data I use are from public sites. When a piece of data looks suspect I try to double check it at other sites.
    Feb 6, 2012. 12:47 PM | Likes Like |Link to Comment
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