In the past couple of months, there were many economic events that have dominated various headlines, probably those economic news would have clouded an investor's judgment.
We have US stock market scaling new high on the optimism brought by Trump's administration, noises in Europe election, foreign selling in our domestic government bond space, albeit foreign inflows into domestic equity market seems to have intensified in recent weeks. You see, market or economic events will always be in the system that we are living in.
These events might be relevant to an income investor if these events impact the listed companies that we are investing in, for better or worse.
In times of market noises or euphoria, the following are the criterion that I will always hunt for in a listed company because these are the companies' characteristic that would deliver long term and growing shareholder returns.
The non-negotiable criterion are:
a) Proven companies with plenty of cash on their balance sheet, low debt, growing sales, good cost management and decent profitability track record. The companies must be able to generate healthy operating cash flow, not some companies that rely on asset sales or one-off gains to ensure its survival (operating cash flow is king)
b) Companies that are defensive plus healthy growth prospect. Regardless of the state of the economy, there will always be demand for the company's products or services. I could think of healthcare business and some quality companies in the consumer sector.
c) Proven track record of its management and no prior poor treatment of minority shareholders. I will usually check Minority Shareholder Watchdog Group (MSWG) website if the companies I invest into or planning to invest into run into any issue with MSWG.
d) The services or products must carry STRONG brand name or brand equity. When people want to have happy hour, perhaps Tiger or Carlsberg may appear in their mind.
The next time you are hunting for a dividend stock, the above criterion could offer a quick idea on the filtering process, before we look into its valuation.
Happy hunting for your dividend paying companies!
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