cabot investors conference 2013 how to pick safe, winning, dividend-paying stocks chloe lutts jensen...

Cabot Investors Conference 2013 www.cabot.net

How to Pick Safe, Winning, Dividend-

Paying StocksChloe Lutts Jensen

Editor, Dick Davis [email protected]


What Characteristics should you look for in a Dividend-Paying Stock? • Safety (Capital Preservation)• Dividend Safety• Dividend Growth • Capital Appreciation Potential


Indicators of Safety (of Capital)

• Low Volatility• Established Business in Growing

or Stable Industry– Red Flag Industries• Shrinking • Faddish • Very Cyclical


Indicators of Dividend Safety

• Dividend History–Many Years of Dividend Payments–Multiple Dividend Increases a Plus–No Dividend Cuts, Especially

Recently

• Low Payout Ratio– 20% to 50%


Indicators of Dividend Growth Potential

• History of Dividend Growth• Earnings Growth • Low Payout Ratio


Indicators of Capital Appreciation Potential

• Valuation• Technical Strength• Institutional Support• Earnings Growth


Procter & Gamble (PG)Capital Safety

Low Volatility Established Business

Dividend Safety Long Dividend

History Dividend Cuts? Payout Ratio

Dividend Growth Past Increases Cash Flow Growth Payout Ratio

Growth Potential Valuation Technical Strength etc.








Capital Safety • Beta: 0.45








Dividend Safety• Dividends Since 1890 (123 yrs)

• No Dividend Cuts in a Decade








Dividend Safety• Dividends Since 1890 (123 yrs)• No Dividend Cuts in a Decade

• Payout Ratio: 59%



Low Volatility Est. Business





Dividend Safety• Dividends Since 1890 (123 yrs)• No Dividend Cuts in a Decade• Payout Ratio: 59%

2004 2005 2006 2007 2008 2009 2010 2011 2012

40.2 38.7 43.6 42.1 39.8 45.8 51.0 50.1 68.5








Dividend Safety• Dividends Since 1890 (123 yrs)• No Dividend Cuts in a Decade• Payout Ratio: 59%

2004 2005 2006 2007 2008 2009 2010 2011 2012

40.2 38.7 43.6 42.1 39.8 45.8 51.0 50.1 68.5








Dividend Growth• Dividend Aristocrat








Dividend Growth• Dividend Aristocrat• Free Cash Flow/Share:

2004 2005 2006 2007 2008 2009 2010 2011 2012

2.63 2.40 2.65 3.07 3.85 3.70 4.20 3.31 3.15








Dividend Growth• Dividend Aristocrat• Free Cash Flow/Share• Payout Ratio

2004 2005 2006 2007 2008 2009 2010 2011 2012

40.2 38.7 43.6 42.1 39.8 45.8 51.0 50.1 68.5







Growth Potential Valuation Technical Strength Turnaround

Capital Appreciation (Growth) Potential• P/E: 20 (5-yr avg. = 17, industry avg. = 20)• Technical Situation: Mediocre+ Earnings: 3-yr Trend is Down but Turnaround is Helping YOY Comparisons in 2013

cabot investors conference 2013 how to pick safe, winning, dividend-paying stocks chloe lutts jensen...

Documents

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indicators of safety

capital safety beta

decade payout ratio

capital low volatility

decade slide

cyclical slide