Do I Need to Hire a Fundamental Analyst?

drcha said:
Some of these types of stocks were down 50% or more in 2008. Holding through a period like that only makes sense if you buy high quality names at a discount and hold them for a very long interval (much longer than 3 years). The stocks you are talking about are not high in quality. Healthy companies with long-term, modest, growing dividends usually recover from things like 2008, while other companies may not.

However, there is no way to know which industries will get hammered in a downturn. Even supposedly good companies (think FNM, BAC) have never recovered from 2008. IMO, it's best to be out of the market at those times. A dividend is just not a good enough hedge against bear markets.

Personally, I would choose more stable companies with lower dividends and excellent dividend growth over many years, and also consider exiting stocks during bear markets. Any simple method for identifying a bear market will do--since you are considering long holding periods, it does not have to be perfect (for example, the SPX falls below its 10-month moving average). Check out this piece about the dividend "sweet spot." http://seekingalpha.com/article/646801-the-dividend-sweet-spot
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drcha, i have another post on identifying bear market that iam gonna start a separate thread on any ways,,,, which carries on what were talking about here,,,,

as far as lower dividends, now isnt it with my strategy timing the dividend,,, to make sure i get across, when u saying to me chose with lower dividend, for me that would me drop my required dividend rate from 6% to 5% which means more companies would qualify, but then i must enter a screener to weed out the weak ones ur referring to, r we on same page or ur recommendation is different? i want to make sure iam absorbing ur advice on how to implement
 
drcha said:
Some of these types of stocks were down 50% or more in 2008. Holding through a period like that only makes sense if you buy high quality names at a discount and hold them for a very long interval (much longer than 3 years). The stocks you are talking about are not high in quality. Healthy companies with long-term, modest, growing dividends usually recover from things like 2008, while other companies may not.

However, there is no way to know which industries will get hammered in a downturn. Even supposedly good companies (think FNM, BAC) have never recovered from 2008. IMO, it's best to be out of the market at those times. A dividend is just not a good enough hedge against bear markets.

Personally, I would choose more stable companies with lower dividends and excellent dividend growth over many years, and also consider exiting stocks during bear markets. Any simple method for identifying a bear market will do--since you are considering long holding periods, it does not have to be perfect (for example, the SPX falls below its 10-month moving average). Check out this piece about the dividend "sweet spot." http://seekingalpha.com/article/646801-the-dividend-sweet-spot
More...


drcha, bear with me a moment, i read the article in its entirety, but it poses a serious question i dont undestsand, it ranks stocks based on their dividend yield, what when is dividend yield set? what i mean a stock like chevron that meets my criteria was both a 6% dividend stock this past year two times when it dropped to the 71 level and is a 3-5% dividend stock now where its at,,,


the dividend strategy here iam deploying is not so much value investing, but more so a timing mechanism on WHEN to buy the stock where if forced to hold then worse case scenario is 6% dividend, 6% from the very stock that was 3% at one point simply cuz its price was higher,,,

i appreciate it
 
drcha said:
The types of stocks he is recommending have probably rarely or never had yields of 6%. He is saying that stocks with lower dividends are safer.
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theoretically speaking couldnt they have the yield if the price drops far enough? or does it become more of a warning then than an opportunity? like when GE cut their dividend back in 2009
 
Yes, if you think you can pick that stuff. I can't. I wouldn't have touched GE in 2009. Anyway, I don't think this is the kind of stock we are talking about. GE cut their dividend in 2009 and is still paying a lower dividend than they did back then. Presumably, if you are a dividend investor, you are going to unload anything that cuts its dividend, right?
 
Sorry, I see I misunderstood your question--did not read carefully enough. It's helpful to know something about the historical yield of the stock, I suppose, to determine whether the yield is out of line.

However, I'm primarily making the argument that dividend growth is more important than the level of the dividend. The dividend protects the stock price somewhat, but only to the extent that investors believe the dividend will continue to be paid. Although history is not a guide to the future, it's the only thing we have. Show me a stock with a sky-high dividend and I will show you a stock that does not have an impressive history of dividend growth. There are very few exceptions. The history of dividend payment and growth, the payout ratio, and the company's level of debt are good indicators of the safety of the dividend. When you have a stock with a high dividend that does not meet these criteria, you have a recipe for not sleeping at night. It is no good collecting 6% when your stock is tanking 20%.
 
drcha said:
Yes, if you think you can pick that stuff. I can't. I wouldn't have touched GE in 2009. Anyway, I don't think this is the kind of stock we are talking about. GE cut their dividend in 2009 and is still paying a lower dividend than they did back then. Presumably, if you are a dividend investor, you are going to unload anything that cuts its dividend, right?
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Thats the idea here, except iam still researching the effects of that because if the cut takes place while iam down 50% its gonna take three winner to make it up since my exit is 18% for any of them, today for example MAT dropped 16% and dropping my account with it about 1600 wince i allocate each stock a flat 10k
 
drcha said:
Sorry, I see I misunderstood your question--did not read carefully enough. It's helpful to know something about the historical yield of the stock, I suppose, to determine whether the yield is out of line.

However, I'm primarily making the argument that dividend growth is more important than the level of the dividend. The dividend protects the stock price somewhat, but only to the extent that investors believe the dividend will continue to be paid. Although history is not a guide to the future, it's the only thing we have. Show me a stock with a sky-high dividend and I will show you a stock that does not have an impressive history of dividend growth. There are very few exceptions. The history of dividend payment and growth, the payout ratio, and the company's level of debt are good indicators of the safety of the dividend. When you have a stock with a high dividend that does not meet these criteria, you have a recipe for not sleeping at night. It is no good collecting 6% when your stock is tanking 20%.
More...

I see the point now on div growth, this makes good screener and merging with my strategy, i can consider modifying the list from what it currently has which is all div stocks with 10b cap to a list of stocks with solid div growth as recommended by u and then apply my timing mechanism on it
 
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