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Transcript of Dividend growth stocks
Saunders Learning Group, LLC May 2012
How Dividend Growth
Stocks Can Secure Your Financial Future
What a history of dividend growth means to you
Use Dividend Reinvestment Program or Mutual Funds to build a solid portfolio of investments.
Saunders Learning Group, LLC, Andover, KS
All About Figuring Out Wall Street ...
Everything has changed in the financial services industry and it effects your financial well-being.
From bank failures, to record unemployment, home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone from first time investors to veterans of banking understand what to do to persevere and restore our faith in our financial systems.
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This presentation is from Chapter Eight of Figuring Out Wall Street
Saunders Learning Group, LLC, Andover, KS
As Albert Einstein observed about, money compounding:
“It is the most powerful force in
the universe.” – Albert Einstein
Saunders Learning Group, LLC, Andover, KS
Summary of BookSummary of Book
Book summary: From bank failures to home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone understand how this latest crisis happened, who was responsible and what to do now to restore our financial systems. Written in an easy to understand manner, even the most complex financial concepts are easy to digest. This book provides help to monitor investments with a review of investment products, financial regulators and economic indicators. Learn how the stock market exchanges work and the world of investment banking, hedge funds, venture capital and private equity. Every chapter includes action plans for investing.
Figuring Out Wall Street Consumer’s Guide To Financial Markets By Floyd Saunders Publisher: Saunders Learning Group
ISBN: 978-0-9824019-0-3
available from Amazon, B&N, and http://www.figuringout wallstreet.comor www.floydsaunders.com
Author Contactemail: [email protected]
Blog: www/money/floydsaunders.com
Twitter @floydsaunders
LinkedIn: http://www.linkedin.com/profile/view?id=14740656&trk=tab_pro
Facebook: Figuring Out Wall Street
Sideshare: http://www.slideshare.net/FloydSaunders
Saunders Learning Group, LLC, Andover, KS
Saunders Learning Group provides a variety of training programs, workshops and seminars targeted to the financial services industry.
Programs are available in a wide range of topics, and we are specialists in developing custom programs that are targeted to your needs.
Contact the founder, Floyd Saunders at 316-680-6482 or at [email protected] for more information.
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Training from Saunders Learning Training from Saunders Learning GroupGroup
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Which is better a 14% return or a 6% return?
Dividend payers have outperformed non-payers in both bull and bear markets.
This trend is even more pronounced in firms that have grown or initiated their dividends.
Stocks that decreased or eliminated their dividend have historically been punished by investors and declined.
Dividends are typically taxed at the lower 15% rate.
What happens if the 14% return is tax favored?
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Why Dividends Matter
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Five Reasons Why You Want Dividend Stocks
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A Few Terms You Need to be Familiar With
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Selecting Stocks With Solid Record of Dividends
Current dividend yield of 3% or higher
Dividend to free cash flow ratio (five-year average) of less than 55%
The lower this ratio the better, as that would indicate a higher denominator [FCF].
Dividend to free cash flow (trailing twelve months) of less than 60%
Payout ratio of less than 65%
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Leading Stocks with a 15 years of increasing
dividends
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Genuine Parts (GPC)Founded in 1928, Genuine Parts Company (GPC) is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. Five year stock chart:
Free Cash Flow (FCF) payout ratio: 50% 15-year avg. annual dividend increase: 5% Dividend yield (1/17/11): 2.84% Stock price data: 1-year change: 27% 52-week high: $64.55 52-week low:
$46.10 Latest Earnings (April 2012): Reported sharp uptick in Q1 earnings, beating
expectations. First quarter net income of $146.3 million, or 93 cents per share, compared with
$126.5 million, or 80 cents per share, in the year-ago period.
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Becton Dickinson (BDX)
FCF payout ratio: 48% 15-year avg. annual dividend increase: 17% Dividend yield (1/17/11): 2.38%
Stock price data: 1-year change: -7.95% 52-week high: $89.75 52-week low: $69.59
News: 5/1/12 Quarterly revenues of $1.991 billion for the second quarter an increase of 3.6% from prior-year period. Earnings per share of$2.59, compared with $2.72 in the prior-year period. A decrease of 4.8%.
BD is a leading global medical technology company that develops, manufactures and sells medical devices, instrument systems and reagents. BD is focused on improving drug delivery, enhancing the quality of diagnosing infectious diseases and cancers, and advancing research, discovery and production of new drugs. Five year chart:
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3M (MMM)
FCF payout ratio: 46% 15-year avg. annual dividend increase: 6% Dividend yield (1/17/11): 2.60%
Stock price data: 1-year change: -2.58% 52-week high: $98.19 52-week low: $68.63
Q1 2012 sales of $7.5 billion, up 2.4% Earnings Per Share of $1,59 up 7% 54th consecutive annual dividend increase.
The 3 M company was formerly known as the Minnesota Mining and Manufacturing Company, founded in 1902. They produce more than 55,000 products. Now known as the global innovation company that never stops inventing. In 2004, sales topped $20 billion for the first time, with innovative new products contributing significantly to growth.
Saunders Learning Group, LLC, Andover, KS
Cintas (CTAS)
FCF payout ratio: 45% 15-year avg. annual dividend increase:13% Dividend yield (1/17/11): 1.32%
Stock price data: 1-year change: 33.45% 52-week high: $38.22 52-week low: $26.39
News: 2/29/12 Q3 revenues $1.01billion, 7.9% increase, EPS of $0.58, 41.5% increase
Cintas provides highly specialized services to businesses in North America. Cintas designs, and manufactures corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products, first aid, safety, fire protection products and services and document management services for 900,000 customers.
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WW Grainger (GWW)
FCF payout ratio: 43% 15-year avg. annual dividend increase: 13% Dividend yield (1/17/11): 1.32% Stock price data: 1-year change: 48.41% 52-week high: $197.05 52-week low: $124.33News:
W.W. Grainger, had sales of $8.1 billion in 2011 and is North America’s leading broad line supplier of maintenance, repair and operating products, with expanding global operations. In 2010, a healthy balance sheet and strong cash flow enabled Grainger to return $657 million to shareholders in share repurchases and dividends.
Saunders Learning Group, LLC, Andover, KS
Bemis (BMS)
FCF payout ratio: 41% 15-year avg. annual dividend increase: 7% Dividend yield (1/17/11): 3.19% Stock price data: 1-year change: -5.10% 52-week high: $34.40 52-week low: $27.21News: 5/3/12– Bemis declares a quarterly dividend of 25 cents per share. 4/26/12 - reported quarterly earnings of $0.42 per share for quarter ended 3/31/12.
Bemis Company, Inc. is a major supplier of flexible packaging used by leading food, consumer products, medical and pharmaceutical companies worldwide. Bemis also supplies pressure sensitive adhesive coated materials globally to label, signage, medical and graphics companies. Five year chart:
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Other examples
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“So, I can’t really afford to buy a bunch of stocks, you need to be rich to do that. What do I do to get started?”
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Good News, You can buy stock directly
from the leading companies and even buy fractional
shares, with limited monthly contributions.
It’s called a Dividend Reinvestment Plan or Drip
Saunders Learning Group, LLC, Andover, KS 21
Dividend Reinvestment Plan (DRiP) programs
Dividends are not paid to shareholder
Reinvested dividends buys additional shares
These dividends create additional shares
US Companies Paying Dividends Over 1,600 companies with DRIPs 40% have Dividend Share Plan
(DSPs) 60%, one share registered in your
name
Dollar Cost Averaging Fixed $$ amount each wk/mth/qtr Results in a lower overs cost to
purchase over a longer period
Result of Dividends & Capital Growth
Barron’s Article, April 1999
$100 invested in S&P 500 stocks in 1925
would be $9,600 by 1999
With DRIP $235,000
Dividend growth4% annually
Year Dividend
1 $5.50
2 $5.72
5 $6.43
10 $7.83
12 $8.47
A conservative, low-cost approach to investing in dividend-paying stocks is with dividend reinvestment plans (DRPs or DRIPs). With these plans, dividend immediately go to work for you with little transaction costs.
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DRIP Advantages & Disadvantages
Advantages Can invest small or large amount
Compounding dividend increases
Stock price appreciation
Dollar Cost Averaging (OCP)
Basically Fee Free (50% of US co)
Stable Shareholder Base
Inexpensive Source of Equity $$$
Disadvantages Can be Cancelled by Company
Inability to Time Market
Minimum OCP Amounts
Fees are Increasing (US)
Dividends are Taxable
Tracking Adjusted Cost Base
Odd Lots from mergers
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How to Start with Dividend Reinvestment Plan
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Ok, those ideas are great, but I don’t want to take the time to get all of those Dividend Reinvestment Plans set up, is there an easier way?
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More good news, There are a number of
leading mutual funds that do all the work for you . . .
Examples include . . . .
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Dividend Yield Mutual Funds
Three of the best mutual funds for high dividend yields:
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QuestionsQuestions
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Post Workshop Action PlanPost Workshop Action Plan
Complete the Post Workshop Action Plan
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Reference MaterialReference Material
Book summary: From bank failures to home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone understand how this latest crisis happened, who was responsible and what to do now to restore our financial systems. Written in an easy to understand manner, even the most complex financial concepts are easy to digest. This book provides help to monitor investments with a review of investment products, financial regulators and economic indicators. Learn how the stock market exchanges work and the world of investment banking, hedge funds, venture capital and private equity. Every chapter includes action plans
for investing.
Figuring Out Wall Street Consumer’s Guide To Financial Markets By Floyd Saunders Publisher: Saunders Learning Group
ISBN: 978-0-9824019-0-3
available from Amazon, B&N, and http://www.figuringout wallstreet.comor www.floydsaunders.com