Eudividend Investing System
Eudividend investing system is the tool for income seeking investors with the long term time horizon. We believe that certain portion of individual investors’ assets should be invested in the high quality dividend stocks. Thus investor can enjoy both regular income and benefits of dividend growth.
Eudividend investing system consists of the following parts:
- General guidelines of dividend stock portfolio management.
- Eudividend stock valuation system.
Stock Portfolio Management Guidelines
When constructing and running a dividend stock portfolio, we apply the top-down investment decision making process.
- Consider a business cycle and market conditions. Over longer term the real economic growth has the major effect on stocks. Over medium term the business cycles are important since they lead to industry rotations and, thus, effect stock prices.
Diversify by industries. There are 10 major industries of an economy. We recommend investing at least in half of them at the same time. Home page of our website contains recommended mix of industries for the current stage of a business cycle.
- When decision on the industries is taken, look for the best dividend paying companies within each industry. Use Eudividend stock lists and other information to identify such companies.
- Pay attention to the size of company. If aiming to be on safe side, the majority of companies in your portfolio should be the large ones; for example, 2/3 large companies and 1/3 medium ones.
Eudividend Stock Valuation System
The individual stocks within each industry are analyzed using the Eudividend stock valuation system.
To investigate a stock, analyze the fundamental stock data and evaluate how reasonable is the stock price at the time of analysis.
The past experience of a company is evaluated within its industry context. We look for companies which are amongst the best within their industries.
Company’s performance indicators, used to assess how successful a company was in the past, are as follows: Dividend Growth, Dividend Yield, PayOut Ratio, Sales, Earnings Per Share, Profit Margin, Return On Equity, Debt to Equity Ratio, Cash Flow per Share, Share Price. They are discussed in detail in the Buy Rules article.
Future growth potential
Then the future growth potential of company is evaluated using an information from various sources. You need to know what are:
- The competitive strengths;
- The business model a company would rely on;
- The future growth kickers of a company.
Collect this information from company financial reports, news, articles, etc.
Stock price analysis
The stock price is projected to see what kind of price growth could be expected in the future in addition to a dividend income. We evaluate what could be the stock price in the future and compare it with the current stock price. To make the stock price projection, we use historical Price – to – Earnings ratio (P/E) of a stock. This projection shows what would be the price of stock if the stock’s current P/E is equal to the average historical P/E and the future earnings are as estimated. If you make on the Stock Screen page your estimates of future sales, earnings and dividend growth, then the stock price estimate would be calculated automatically.
All the information about past, present and future of company activity is used to assess whether the stock is suitable for investment. An investor should evaluate what is the level of risk of investing in company versus the return that could be expected from such an investment.