One of the most asked questions I get is, 'When should I start investing?' The implication is that now is not a good time. Either the market is too high after the recent run up, or the market is too scary after the recent declines. There are always reasons for not investing today. What's the secret to picking the right time to start investing?
If you are a trader, peaks and troughs are very important. You want to sell at the peak and buy back into the market at the bottom and wait for the next peak. The problem is peaks and troughs are much easier to identify in hindsight. An alternative to this market timing approach is a long-term buy-and-hold strategy that focus on dividend growth stocks selected using a value oriented approach.
It seems you can always find stocks trading at a discount to their calculated fair value. Bad news about good companies is a bargain hunters best friend. The beauty of an income focused long-term, buy-and-hold strategy is the future declines are not necessarily a bad thing. This allows you to buy more shares at a lower price which in turn will provide you with a higher yield.
This week week, I screened my dividend growth stocks database for companies that are:
- Trading below their calculated fair value
- Yield is greater than 2.5%
- EPS is greater than $0
- Free Cash Flow Payout is between 0 and 70%
- Debt to total capital is less than 50%
Below are the results presented here in ascending rank based on yield:
Microsoft (MSFT), the world's largest software company, develops PC software, including the Windows operating system and the Office application suite. The company has paid a cash dividend to shareholders every year since 2003 and has increased its dividend payments for 9 consecutive years.
Fair Value: $38.29 | Yield: 2.7% (more)
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