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Sorry I hide my true identity but I'm a physicist/engineer, native contrarian and idea generator. I am an eclectic dividend investor with motto "In God We Trust, All Others Pay Cash" applied to companies I invest in. I like to read /and read a lot - did you look on my SA photo 8-)? /... More
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  • Where can small dividend growth investor find alpha?
    Where can small dividend growth investor find "alpha"?
    Initially posted 7/30/2011

    A small investor (i.e.person who handle own money without a financial advisor) competes with big investors such as mutual and pension funds, investment companies, etc. This competition is usually not fare because big investors have better access to information (direct contacts with firms and trade assocciations), non-free analyses (buy- and sell-side analysts), and usually computing power.

    So there is the edge (or alpha using this WWW site terminology, although alpha of finance science is quite different animal) for a small investor?
    I think the answer is - small companies without extensive analysts coverege. It is interesting that small companies (in terms of capitalization) often outperform big firms according to numerous studies.

    A small dividend growth investor can rely on free gem - David Fish's list of U.S. Dividend Champions (see dripinvesting.org/Tools/Tools.asp and recent update at seekingalpha.com/article/272663-101-divi...), known as CCC list. Unfortunately the list does not have information about number of analysts for each company. In order to fill this gap I collected data from Yahoo.com and MSN.com which are summarized in the table below. Both mentioned WWW sites provides quartely and annual analyst estimations of future earnings and other financial data. In each case I used the maximum number analysts for each company.

    Table: Analysts coverage for CCC companies (Data on 7/29/2011)

    Symbol# Analysts
    AAN12
    ABC19
    ABM5
    ABT21
    ACE20
    ACI22
    ACN18
    ACO4
    ACU1
    ADI22
    ADM13
    ADP25
    AFG4
    AFL20
    AFSI7
    AGL8
    AHGP4
    AIN4
    AIZ10
    AJG12
    ALB11
    ALE4
    ALNC2
    ALOT0
    ALTE9
    AM1
    AMP13
    ANDE6
    AOS8
    APD19
    APOG7
    APU7
    ARG16
    ARLP9
    AROW1
    ARTNA4
    ASBC14
    ATNI5
    ATO9
    ATR9
    ATRI1
    AUBN1
    AVA6
    AVP16
    AVY8
    AWH10
    AWR6
    AXS15
    AZN8
    BA28
    BAC27
    BANF2
    BBL3
    BBT35
    BBY24
    BCR22
    BDMS0
    BDX19
    BEC0
    BEN19
    BF-B10
    BG14
    BGH0
    BHB2
    BHP4
    BKE11
    BKH7
    BMI7
    BMRC7
    BMS11
    BOBE7
    BOH15
    BOKF9
    BPL10
    BRC8
    BRO15
    BUD10
    BWL-A0
    BWP12
    BXS13
    CAH21
    CASS1
    CASY7
    CAT19
    CB22
    CBRL9
    CBSH11
    CBU7
    CCNE3
    CEO4
    CFR18
    CHCO8
    CHD17
    CHEV1
    CHFC3
    CHH20
    CHK30
    CHL5
    CHRW28
    CINF6
    CIZN0
    CL23
    CLC6
    CLX17
    CMA25
    CMI15
    CMLP5
    CMP7
    CNI24
    CNP15
    CNQ12
    COL21
    COLM14
    COP20
    COST26
    CPB19
    CPK3
    CPKF1
    CPNO6
    CPO10
    CR6
    CRR14
    CRRC1
    CRS9
    CSL6
    CSS1
    CSVI0
    CSX29
    CTAS14
    CTBI4
    CTL17
    CTWS6
    CVS24
    CVX22
    CWCO2
    CWT8
    CZFS0
    D17
    DAKT5
    DBD9
    DCI11
    DCM2
    DE18
    DEP7
    DFG6
    DGAS1
    DGICA1
    DGICB0
    DHR20
    DLR17
    DNB10
    DOV10
    DPL6
    DPM8
    DRI31
    DUK19
    DV22
    EBTC0
    ECL18
    ED19
    EEI1
    EFSI1
    EGAS1
    EGN10
    EGP14
    EIX14
    ELS6
    EMR21
    ENB7
    ENSI0
    EOC5
    EOG29
    EPD12
    EPE0
    EPHC1
    ERIE1
    ESS24
    ETE5
    ETP12
    EV14
    EVEP7
    EXLP6
    EXPD20
    FAST12
    FCAP0
    FDO24
    FDS8
    FDX28
    FELE2
    FFIN10
    FII11
    FITB31
    FIX5
    FL15
    FLO11
    FLS11
    FMER14
    FNB10
    FPU0
    FRT18
    FUL7
    FULT15
    FUN5
    GBCI11
    GCI12
    GD24
    GE15
    GEF5
    GEL5
    GGG7
    GIS20
    GKSR8
    GMT7
    GNTX12
    GOLD8
    GPC12
    GPS33
    GRC4
    GTY2
    GWW18
    HARL0
    HAS16
    HB7
    HBOS2
    HCBK18
    HCC11
    HCP18
    HCSG6
    HEP7
    HGIC5
    HIFS1
    HNBC0
    HNI5
    HNZ18
    HOC0
    HON20
    HP25
    HRB9
    HRL15
    HRS17
    HSC10
    HSY15
    HWKN1
    IBM25
    IFF13
    IMO4
    INDB6
    INFY17
    INTC49
    IPCC6
    IRET5
    ISCA7
    ITC9
    ITT18
    ITW16
    JBHT30
    JCI24
    JCS0
    JJSF4
    JKHY9
    JNJ23
    JOYG13
    JW-A3
    K22
    KEY27
    KFT19
    KIM19
    KMB17
    KMP15
    KNX25
    KO19
    KOF8
    KR21
    LANC5
    LARK0
    LCNB0
    LDR4
    LECO7
    LEG6
    LG2
    LKFN4
    LLL19
    LLTC23
    LLY21
    LM14
    LMT25
    LNC19
    LNN5
    LNT10
    LOW27
    LSBK0
    LSTR25
    LZB6
    MAS17
    MATW3
    MCD26
    MCHP16
    MCY6
    MDP8
    MDT29
    MDU8
    MEOH6
    MGEE1
    MGRC2
    MHP10
    MI0
    MKC12
    MLM20
    MMLP6
    MMM19
    MMP14
    MNRO7
    MO12
    MO12
    MOCO0
    MOLX15
    MON17
    MPR2
    MSA6
    MSEX3
    MSFT31
    MSM10
    MTB20
    MUR13
    MWE9
    MXIM27
    MYE3
    NAL0
    NATI6
    NATL5
    NBL24
    NBTF0
    NC1
    NDSN8
    NE37
    NEE23
    NEU5
    NFG10
    NGLS10
    NHC2
    NHC2
    NHI5
    NJR6
    NKE21
    NKSH2
    NNN10
    NOC22
    NPBC11
    NPK1
    NRCI2
    NRGP0
    NRGY11
    NRP8
    NS14
    NSC29
    NSH7
    NSM21
    NST11
    NTRS22
    NTT1
    NU14
    NUE17
    NUS10
    NVO4
    NVS6
    NWFL0
    NWN7
    O14
    ODC1
    OFC11
    OGE8
    OHI7
    OKE8
    OKS14
    OMI11
    ONB11
    ORI4
    ORRF3
    OSG16
    OTTR3
    OVBC0
    OXY22
    OZRK10
    PAA16
    PAYX23
    PBCT18
    PBI5
    PCG20
    PEBO2
    PEG15
    PEP19
    PFE21
    PG22
    PGN19
    PGR20
    PH16
    PII12
    PLL11
    PNNT14
    PNR16
    PNY6
    POOL10
    POR10
    PPDI13
    PPG9
    PPL14
    PRE17
    PRGO13
    PRK7
    PRSP19
    PVR5
    PX20
    QCOM36
    QNBC0
    R15
    RAI10
    RAVN1
    RBA15
    RBC12
    RBCAA2
    RBN8
    RDS-A7
    RDS-B7
    RF21
    RGCO0
    RGLD6
    RHI17
    RLI11
    RNR12
    ROH0
    ROL1
    ROP12
    ROST21
    RPM6
    RSG8
    RTN22
    SAFM10
    SBSI1
    SCG11
    SCHW21
    SCL2
    SEIC5
    SEP9
    SFG12
    SHEN2
    SHPGY17
    SHW15
    SIAL12
    SJI4
    SJM13
    SJR7
    SJW3
    SKT13
    SLGN10
    SNH10
    SNN8
    SNV26
    SO22
    SOMH1
    SON12
    SPAN0
    SPH7
    SRCE0
    SRE10
    STBA9
    STE7
    STFC4
    STI28
    STON3
    STR9
    STRA19
    STT21
    SU12
    SUSQ15
    SVU16
    SWK9
    SWX6
    SWY20
    SXL10
    SXT5
    SYBT5
    SYK35
    SYY10
    T32
    TAC5
    TCLP9
    TDS8
    TE19
    TEF2
    TEG7
    TEVA22
    TFX4
    TGH10
    TGP8
    TGT28
    THFF2
    THG6
    THI9
    TIF24
    TJX24
    TK9
    TLP4
    TMK15
    TMP4
    TNC3
    TOO6
    TPL0
    TPP0
    TR1
    TRH7
    TRI12
    TRMK10
    TRN6
    TROW20
    TRV22
    TSH2
    TWGP6
    TXN39
    UBA4
    UBCP0
    UBSI9
    UBSI9
    UCBA1
    UDR23
    UFPI4
    UGI3
    UHT2
    UL4
    UMBF3
    UN3
    UNP31
    UNS4
    USB29
    UTX23
    UVV1
    VAL12
    VFC18
    VGR0
    VIVO12
    VLGEA1
    VLY11
    VMC15
    VMI8
    VSEC3
    VVC7
    VZ37
    WABC9
    WAG20
    WASH3
    WEC17
    WEYS0
    WFC28
    WFSL14
    WGL7
    WL0
    WLK8
    WM8
    WMB10
    WMT31
    WPC1
    WPZ7
    WR12
    WRB13
    WRE9
    WSBC7
    WSC0
    WSFS5
    WSH16
    WSM25
    WSO11
    WST5
    WTR11
    WWW10
    WWY0
    XEL16
    XLNX27
    XOM22
    XRAY11
    YORW4
    YUM22

    As a reader can see the range for number of analysts is from 0 (for 41 companies) to 49 (for Intel - INTC).

    I think that a small dividend growth investor should pay more attention to 168 companies with 0-5 analysts than to big firms with 6-49 analysts. Of course, the "5 analysts" boundary is arbitrary because it is also important how closely the analysts follows the specific company. It should be noted also that capitalization of many companies with zero or moderate analysts coverage is not big enough to be considered by institutional investors. Some correlations between number of analysts and stocks parameters (taken from FinViz.com) are shown in the figure below:

    Unfortunately Finviz doesn't provide data for BGH CPKF CSVI CZFS EFSI ENSI EPE FPU HNBC LCNB NRGP QNBC ROH TPP WSC WWY and I excluded these stocks from the picture. Also CCC list doubles info about 3 stocks (e.g. MO) and I excluded these duplications from the graph. As the results I got

    Log (Market Cap)y = -0.0032x + 3.472R^2 = 0.7719Right Y axis
    Log (Trade Volume)y = 0.1x + 4.3653R^2 = 0.4805Right Y axis
    Log (Shares Outstanding)y = 0.0566x + 1.3439R^2 = 0.4467Left Y axis
    Institutional Ownership %y = 0.0122x + 0.4895R^2 = 0.1602Left Y axis

    i.e., correlation between number of analysts and market cap is quite strong and other parameters show also positive slope.

    Therefore (to contribute in this WWW site title), I think that a small dividend growth investor can find so-called alpha in relatively unknown for Wall Street stocks. I should point that I didn't estimate risk (and for dividend growth investors the main risk, in my mind, is dividends cut), so the "alpha" here is a bit naive.
    Nevertheless I think dividend growth investors should not ignore small cap companies. See also A Note About Smaller Risk Of Small Public Companies at
    seekingalpha.com/instablog/725729-sds-se...

    Mar 17 1:42 AM | Link | 4 Comments
  • A Dividend Growth Investor Can Beat IRS (13 March 2012)
    IRA type accounts is a good velichcle for dividend investors because no taxes on dividends, but IRS required to have taxable distributions from such account after age 70.5 (IRS publ. 590 but I didn't read it because it is too early for me and IRS probably will change rules few times). IRS specified IRA Required Minimum Distribution (RDM). I took their table and calculated annual RDM growth rate:
    www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf
    AGEDISTRIBUTION% distributionRDM Growth %
    7027.43.6496 
    7126.53.77363.40%
    7225.63.90633.52%
    7324.74.04863.64%
    7423.84.20173.78%
    7522.94.36683.93%
    76224.54554.09%
    7721.24.71703.77%
    7820.34.92614.43%
    7919.55.12824.10%
    8018.75.34764.28%
    8117.95.58664.47%
    8217.15.84804.68%
    8316.36.13504.91%
    8415.56.45165.16%
    8514.86.75684.73%
    8614.17.09224.96%
    8713.47.46275.22%
    8812.77.87405.51%
    89128.33335.83%
    9011.48.77195.26%
    9110.89.25935.56%
    9210.29.80395.88%
    939.610.41676.25%
    949.110.98905.49%
    958.611.62795.81%
    968.112.34576.17%
    977.613.15796.58%
    987.114.08457.04%
    996.714.92545.97%
    1006.315.87306.35%
    1015.916.94926.78%
    1025.518.18187.27%
    1035.219.23085.77%
    1044.920.40826.12%
    1054.522.22228.89%
    1064.223.80957.14%
    1073.925.64107.69%
    1083.727.02705.41%
    1093.429.41188.82%
    1103.132.25819.68%
    1112.934.48286.90%
    1122.638.461511.54%
    1132.441.66678.33%
    1142.147.619014.29%
    115 and over1.952.631610.53%

    Until age 112 years RDM growth rates are below 10%.
    I presume (and this is usually incorrect) that the market value of portfolio in a year is equal to the market value of portfolio in a previous year plus collected dividends. If you invest in dividend growth stocks with dividend growth rate above 10% (and there are plenty of such stocks e.g. in David Fish CCC list) you can beat IRS in retirement game.
    Amen.
    Mar 14 11:56 AM | Link | 8 Comments
  • How To Build Dividend Growth Stock Portfolio? (11 March 2012)

    The dividend growth (DG) stock portfolio can be build by different principles. It seems interesting to compare performance of Div. Champions-like indexes (positive DGR for more than N years) from David Fish's data from 2007 or from early data as follows

    a) cap-weighted

    b) equal weighted

    c) dividend $$$ weighted [how much $$$ company distributed. It means investing more in companies that pay more $$$ i dividends in where ( dividends in $$$ )= (dividend per share) x (number of shares). ]

    with quarterly, semiannual and annual rebalances and dividends investments as

    i) DRIP-like in the same company

    ii) re-invest in accordance with weights a) b) c) above between different companies

    iii) keep for new div champs (how?).

    I invest almost equal amount of money (I got from dividends of other companies and I save from my salary) if different "new for me" (mostly DG) companies at right IMO price and consider it as invested capital. Then I almost don't care how market price "now my" company except two extremes - too high (above 2X -3 X in relatively short time) or too low (below 30%) - which force me to think (but not necessary to act).

    I'm not sure that this so-called quasi-equal weighted portfolio (again in terms of invested capital not in terms of current price) is the optimal way, so the bottom line questions are:

    a) is it optimal for individual investor to have equal- or dividend$$$- weighted portfolio? (I guess cap-weighted isn't optimal)

    b) Which option (cap- or dividend$$$-weighted) is better for ETF or mutual fund ( they cannot rely on equal-weighted - to much trading cost)?

    Mar 12 1:17 AM | Link | 4 Comments
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