F.A.S.T. Graphs Come to Top 40

I am happy to announce that Top 40 Dividend Growth Stocks for 2013: A Sensible Guide to Dividend Growth Investing will contain a significant new enhancement: F.A.S.T. Graphs(tm).

In cooperation with Chuck Carnevale, the creator of F.A.S.T. Graphs, I will be using his graphs, along with Morningstar star ratings, to adopt a new approach to the important step of stock valuation.

F.A.S.T. Graphs visually represent a stock's valuation in comparison to its fair or intrinsic value. The idea is to buy stocks "on sale" when you can, and avoid them when they are overpriced. Here, a picture is worth a thousand words:

On the chart, Johnson & Johnson's fair value is represented by the orange line, what Chuck calls the "earnings justified" value. The black line is JNJ's actual price. As you can see, the black line is a little below the orange line. In other words, JNJ is a bit undervalued at the moment. That makes it more attractive.

F.A.S.T. Graphs have been gaining popularity with Seeking Alpha readers, and you can see why. They are so easy to interpret. In this chart, called the "Estimated Earnings and Return Calculator," Chuck uses the historically common Price/Earnings ratio of 15 to draw the orange fair value line. The year 2012 is based on actual earnings for JNJ. The projections forward for five years are based on consensus analyst estimates for the expected growth rate in JNJ's earnings. You see a slow and steady growth rate of about 7% per year.

Each of the Top 40 stocks will have an image like the one above on its Easy-Rate(tm) Scoresheet. But (as they say on TV), Wait, there's more! Beneath each image will be a link to the F.A.S.T. Graphs website. Throughout 2013, you will be able to click on that link and go view a chart that is up to date as of the moment you click the link. With Chuck's kind cooperation, these links will be open and live all year!

In the coming edition, I have reduced the valuation factors to two: Morningstar's stars, and F.A.S.T. Graphs' charts. Morningstar updates their star rankings throughout the year, and F.A.S.T. Graphs are updated daily. So with just a couple of clicks, you will be able to derive an up-to-date stock valuation throughout the year. That's why I am so excited about this enhancement.

The eBook is proceeding swimmingly. Tomorrow (Saturday) we leave for Florida, to arrive on Tuesday, January 1 (2013!). After we get settled, it will take me 2-3 weeks to update everything with full-year information, double-check the whole eBook, and load it up. So I expect publication some time between about January 15 and January 22.

As last year, the first place that the 2013 edition will be available is right here. I will install a "buy" button here a couple of days before I can update my SensibleStocks.com website.

I will post another brief article when the eBook is available, with instructions on how to order it right from here (the blog site). It will be in the upper-right corner.

Happy New Year everyone!

Dave

2013 Edition Update

I am still on track to publish the 2013 edition of Top 40 Dividend Growth Stocks in mid-January.

Here is the status of everything as of today:

Stocks: My original list of  >500 candidates has been winnowed to just under 100. In December, I will go through the remaining candidates, apply several Easy-Rate factors to them, and try to get the list down to 45-50. I will then fully rate those names in the first week of January (when full-year 2012 data is available) and select the final Top 40.

Text: During November, I worked my way through about 80% of the text, updating it and adding new features and information. The text grows every year. Even as I tighten it up, new subjects and more complete discussions make the overall size grow. Some of the new or expanded coverage this coming year will include:
>> More complete treatment of risk.
>> Better coverage of diversification.
>> Added emphasis on the importance of valuation.
>> Several new definitions in the glossary.
>> Addition of beta as a scoring factor. (Lower beta, meaning less volatility, is better.)

Every year, I agonize over the sub-title. The main title--Top 40 Dividend Growth Stocks--does not capture the full essence of the eBook. Sometimes I think that the most important content is not the Top 40 themselves (as important as they are), but rather the step-by-step investing guide along with the foundational discussions that support the whole dividend growth strategy. At the moment, I have two versions of the sub-title:
>> The Theory and Practice of Dividend Growth Investing
>> A Step-by-Step Guide to Dividend Growth Investing

Last year's sub-title was "How to Create and Maintain a Dividend Growth Portfolio."

Obviously, I want to convey that this eBook is far more than a list of 40 stocks. The text has more than twice as many pages as are used to cover the Top 40 stocks themselves.

If you have any thoughts about the best sub-title, please drop me an email. Thanks!

Regards,
Dave

 

THE 2013 EDITION IS COMING!

I have begun work on the 2013 edition of Top 40 Dividend Growth Stocks.

Actually, I have been working on it all year. As soon as the 2012 edition was published, I began collecting information for possible inclusion in the next edition. I maintain an ongoing file of items, including excerpts from my articles on Seeking Alpha, my comments there, and extracts from other sources that I find interesting or useful. I keep this file building all year, adding to it as time goes on. I make a "final search" for additional new material in October. I recently completed that updating operation. I have >150 pages of potential new stuff!

Also throughout the year, I collect ongoing information about not only the current Top 40 stocks, but also other likely candidates. This is my sixth year in writing this eBook, and I have learned that many of the same stocks turn up as legitimate candidates year in and year out, even if they do not make it into the Top 40. Then in October, I do an independent search for other candidates to add to the "starting universe" of potential Top 40 stocks.

This year's starting universe included more than 450 stocks. I have already culled that list by applying some simple basic requirements:

• Yield must be at least 3.0%. For utilities, yield must be at least 4.0%. For banks I use 3.8% and for MLPs 6.0%. (The latter requirements are there, because there are so many utilities, banks, and MLPs in the initial universe. Might as well eliminate the lower-yielding ones right from the beginning.)
• Stocks that are significantly overvalued (as shown by Morningstar or their P/E ratio) have been deleted.

The application of those basic tests brought the candidate list under 85. Then I added back some of those I had just eliminated, because I want to take a closer look. Among those added back were any members of 2012's Top 40 that failed the initial tests. The remaining group of candidates, which I call the Semi-Finalists, number 94. I will put those through rigorous testing and winnowing right up until a day or two before publication of the 2013 edition.

This morning, I turned my attention to updating the text. This will take most of the rest of the year. The 150 pages of potential new material exceeds last year's size of the entire eBook! I need to integrate it wherever possible, eliminate duplicate information, and create new sections (or even a new chapter) to incoporate the new information. Every year, the text gets tighter and tighter, yet contains more information than the year before. The text will probably grow by several pages; that has been the pattern from the beginning.

I am aiming for publication around mid-January, 2013. Waiting until January allows me to incorporate full-year 2012 data for the stocks. As soon as the new edition is available, I will announce it in this newsletter first.

Regards,
Dave

Web Site Updated

The total publication process for 2012 is complete. I finished updating my Web site today. Practically every page in the site is new, if for no other reason than to update links pertaining to the new edition, TOP 40 DIVIDEND GROWTH STOCKS FOR 2012: How to Create and Maintain a Dividend Growth Portfolio.

If you would like to see the new description page for the eBook (aka the "landing page"), please click here. Also, if anyone finds a broken link or other error anywhere on the site, I'd appreciate it if you would let me know.

In its first week of publication, the new edition has set sales records. I appreciate so much your support, encouragement, and purchases.

Now I can turn my attention back to catching up with my email and writing articles for Seeking Alpha. I have published only one article since the end of October, but I have a lot of ideas in the pipeline. I hope that I run into you there!

Dave

TOP 40 DIVIDEND GROWTH STOCKS FOR 2012 IS NOW AVAILABLE!

The new edition of TOP 40 DIVIDEND GROWTH STOCKS FOR 2012 was published on January 14. For the next few days it will ONLY be available from this Newsletter. It will take a few days to update my main website.

If you know that you want to purchase the new edition without reading a complete description of it, click the "Buy Now" button that appears to the upper right. This is the only button that will work at the present time. The buttons on my main website have been disabled.

If you are reading this as an email subscription version of my newsletter, you cannot see the "Buy Now" button. Click on the blue title at the top of this article. That will take you to the online version of this Newsletter, and you can purchase the new edition from there.

Thanks to everyone for all your support! I hope that you find the new 2012 edition to be helpful in your investing!

NOW AVAILABLE!

2012 Edition -- Progress Report

I have received many inquiries about Top 40 Dividend Growth Stocks for 2012. Here is the latest news.

First, to answer the most basic question. Yes, there will be a 2012 edition. It will be available in a week or two.

I have been working on the 2012 edition since October, when I first began to update, add new material, and reorganize the text. When I needed a break from that, I turned my attention to the Top 40 stocks themselves. Beginning with a starting list of over 450 candidates, I used a series of preliminary tests to knock out obvious non-contenders. After that, the analysis became more detailed. I got the pile down to about 60 "Finalists" in December. Further study has reduced that number to 48. About 32-33 of those are "in," and the rest will be selected after further study.

The eBook's subtitle this year will be How to Create and Maintain a Dividend Growth Portfolio. I have received numerous comments from readers that the text--the investing guide--is more important than the Top 40 stocks themselves. I considered flipping the title, emphasizing the guide and dropping the Top 40 to subtitle status. Like this: 2012 Edition: How to Create and Maintain a Dividend Growth Portfolio featuring Top 40 Dividend Growth Stocks for 2012. But I rejected that because the ongoing Top 40 title has built up an identity of its own. A subtle change in the title this year is to drop the hyphen between DIVIDEND and GROWTH. I want to convey that in this strategy of investing, not only do dividends grow, but generally the stock values grow too.

I am making several improvements and upgrades to the text this year:

• The chapters have been expanded so that there is one full chapter for each "phase" of stock investing: (1) finding excellent companies; (2) valuing them so that you can buy them at attractive prices; and (3) portfolio management. The discussions of all these topics have been enhanced.
• I am adding a "Resource and Article Guide" chapter. This will collect in one place the various resources that I use in writing the eBook, and which I suggest that you use when you are evaluating companies. Plus it will contain a complete guide to the many articles that I have written on dividend growth investing, with direct links to the articles.
• Other new features this year include: a table of all stocks that have ever made a Top 40 list by year; a new chapter on the conceptual and theoretical foundations for dividend growth investing; and a new valuation metric using Morningstar’s "star" stock ratings.
• I decided to opened the Top 40 list to tobacco stocks this year. I had not done that previously, because smoking killed both of my parents. But I decided that I was allowing personal considerations to influence business decisions. People can decide for themselves what companies they do or don't want to invest in based on personal beliefs. I will also cap the number of MLPs (to around 6-8) in order to get a wider variety of stocks into the Top 40.

Publication of the new eBook may be delayed into the third week of January, because we will be having houseguests, and I will not be able to work on the manuscript for a few days. It's always something! Some of you may recall that last year, I had a hard-drive crash at the worst possible time. (And thanks for all of you who told me to get an online backup sytem. Several suggested Carbonite, and I use it now.)

When it is first available, I will announce the 2012 release in this newsletter only. That's not because I'm being coy, but rather it's because I can get an announcement in here almost immediately, including a "Buy" link for those who know they want the eBook without further information. It will take me 2-3 days to update my website to reflect the new edition, which will include a new "description page" about the eBook.

Thank you to everyone for your encouragement and suggestions throughout the year! The encouragement helps keep me going, and several of your suggestions have been implemented in this year's edition.

Stay tuned!