Dedicated to the success of the individual investor
FOR 201
How to
Create Wealth or Income from
-Growth Stocks

Table of Contents and Excerpt
CONTENTS                                  PAGE

1. Introduction…………
........…………………………..        4

2. A Look Back at 2010 and Forward to
2011......        6

3. Why Invest in Dividend-Growth Stocks? .......
.      13

4. What Are the Characteristics of
the Best
 Dividend-Growth Stocks?...............................      41

5. Creating and Managing Your Dividend
tock Portfolio.............................................       57

6. Top 40 Dividend Stocks for
2011……..............       70

7. Easy-Rate™ Scoresheets for the To
p 40………..       81

8. Dividend-Growth Stocks in

 Retirement Planning..…...........................…...    123

9. Disclaimer and Important
Information………….    136


Dividend Growth Investing As a Strategy for Profiting in
the Stock Market

There is no single correct strategy for investing in stocks. The spectrum
of methods is endless, ranging from high-frequency trading at one end
to rigid buy-and-holding at the other. Some investors use options
profitably, others lose their shirts. Any approach can make money,
especially over short terms. All can lose money.

But some strategies are better suited to individual investors, especially
those who don’t have the time, personality, or interest to stare at a
computer screen all day and try to out-trade hedge funds and other
participants whose tools and expertise simply swamp what is available
to most individuals.

Dividend Growth Investing is a time-tested, solid strategy that works.
Its three basic elements involve good stock-picking, buying at
favorable prices, and sensible portfolio management. Its success
comes from the simple but relentless mathematics of rising dividends.
For those in their wealth-accumulation years, the profits can be
amplified by reinvesting the dividends. For those in their retirement
years, the dividends can be used as rising income for living expenses.


Dividends have several unique characteristics that are of interest to
the Dividend Growth Investor.

First, dividends are real: Cash is sent to shareholders. There are no
questions about how to count it, when to “recognize” it, and so on.
Dividends are completely transparent and immune from accounting

Second, dividends are always positive. Even if a company cuts its
dividend, the remainder is still sent along to you. Only if a company
suspends its dividend does it drop to zero. It never drops below zero.

Third, dividend policies tend to persist. A company with a history of
paying dividends will rarely abandon that policy. The executives in a
dividend-committed company work hard to preserve their firm’s
dividend practices.    

Fourth, companies that pay dividends often increase them annually.
Companies such as Coca-Cola, Johnson & Johnson, and many others
have increased their dividends every year for decades. It is logical to
expect that they will continue to do so if they possibly can.

Fifth, increasing dividends usually indicates that management has
confidence in the company’s prospects, possibly based on information
that is not available outside the company. Most companies with long
streaks of consecutive annual dividend increases do not want those
streaks to end. Such a company is unlikely to “super-size” its dividend
in a particular year so much that they might need to freeze or cut it a
year or two later. So a company that declares a sizable dividend
increase is sending a powerful signal that business looks pretty good.
The McDonalds’ press release quoted earlier went on to say, “Today's
[10 percent] dividend increase demonstrates our confidence in the long-
term strength of our brand."

Sixth, dividend-paying companies tend to have well-established and
well-protected cash flows that fund the dividend. They tend to be
larger, older, stabler, safer, and less volatile than their non-dividend-
paying brethren. Many are cash-generating machines. (Not always:
Many banks that used to fall into this category “blew up” in 2008-09
and slashed or eliminated their dividends. The same thing happened to
GE in 2009 and BP in 2010. But those are the exceptions rather than
the rule.)

Seventh, at the current maximum Federal tax rate of 15 percent,
dividends are the least-taxed form of income you can get outside of
low-paying jobs or tax-free municipal bonds.

Eighth, the best dividend-paying companies often provide significant
potential for stock price growth on top of their dividends. That said, the
main focus of the Dividend Growth Investor is on reliable and
increasing dividends, not on share price growth.


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