Eudividend Investing System
Eudividend investing system is the tool for income seeking investors with long term time horizon. We believe that certain portion of individual investors’ assets should be invested in 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 dividend stock portfolio, we apply top-down investment decision making process.
- Consider business cycle and market conditions. Over longer term real economic growth has the major effect on stocks. Over medium term business cycles are important since they lead to industry rotations and have effect on stock prices.
Diversify by industries. There are 10 major industries of 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 current stage of business cycle.
- When decision on 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 safer side, 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
Individual stocks within each industry are analyzed using Eudividend stock valuation system.
To investigate a stock, we should analyze fundamental stock data and evaluate how reasonable is a stock price at the time of analysis.
Past experience of company is evaluated within industry context. We look for companies which are amongst the best within their industry.
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 Buy Rules article.
Future growth potential
Then the future growth potential of company is evaluated using information from various sources. You need to know what are:
- Competitive strengths;
- Business model a company would rely on;
- Future growth kickers of a company.
Collect other information from company financial reports, news, articles, etc.
Stock price analysis
Stock price is projected to see what kind of price growth could be expected in the future in addition to dividend income. We evaluate what could be a stock price in the future and compare it with a current stock price. To make a 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 a stock’s P/E is equal to the average historical P/E and future earnings are as estimated. If you make on the Stock Screen page your estimates of future sales, earnings and dividend growth, then stock price estimate would be calculated automatically.
All the information about past, present and future of company activity is used to assess whether stock is suitable for investment. An investor should evaluate what is the level of risk of investing in company versus return that could be expected from such an investment.