Showing posts with label consumer products. Show all posts
Showing posts with label consumer products. Show all posts

Saturday, July 14, 2007

Puplava on value investing

Jim Puplava's Financial Sense Newshour, July 7: to get rich slowly but surely, invest in companies that pay high dividends.

Puplava quotes research showing that over 100 years, the stockmarket has grown by 5.4% per annum, but reinvesting the dividends raises the return to 10.1% p.a. Over a long period, this margin compounds up impressively.

Features he suggests you look for:
  • a low P/E ratio (i.e. a high dividend proportionate to share price)
  • essential industries - companies that make things people need constantly or frequently (e.g. energy, consumer staples)
  • companies that have a record of increasing dividends over the years
  • larger, more mature companies - ones that have gotten past the stage of having to plough back most of their profits into R&D
  • strong cash flow and earnings growth
  • good management and solid corporate governance

In response to a listener's question, Puplava opines that the utility sector is currently "grossly overvalued", but says there may be reasonably-priced shares available in oil and consumer product companies.