I uncover a high-quality dividend growth stock that appears to be undervalued each week for Daily Trade Alert, which is a site that focuses on dividend growth investing, stocks, and unique investment opportunities. I’ve been writing for them for years now, and they’re just great over there. Each week, I publish an excerpt of my work, when it’s fresh off the press. That way, you readers are given the opportunity to check it out. The content is totally free. I hope you enjoy!
With the stock market seemingly getting more expensive by the day, it’s never been more important to focus on value.
While price is simply what something costs, value tells you what something is worth.
As such, it’s really value that’s the far, far more meaningful piece of information. Value gives context to price.
Just imagine that you’ve been shopping at a certain grocery store for the last five years. And imagine, much like the stock market, the prices of a lot of merchandise in that store rose somewhat substantially over that time frame.
You’d be particularly vigilant to grab the sales flyer at the front of the store, wouldn’t you?
Of course.
Well, that’s what today’s article is all about.
Image courtesy of: Stuart Miles at FreeDigitalPhotos.net.
Jason,
I always follow your Undervalued Div Growth Stock series. Love your work!
The companies you report on often show higher EPS growth than revenue growth, with share buybacks often playing a large role.
With QCOM it was the opposite – you cited how it has dealt with some margin shrinking over the last 10 years resulting in slower EPS growth – but what has happened with the share count? Have they also been buying back vast gobs of shares like many other companies? Because if they did, that could potentially be masking margin shrinkage even more..
Guy
Guy,
Thanks. I’m glad you enjoy the series!
Qualcomm has repurchased a rather modest number of its shares over the last decade, especially relative to a lot of other major tech companies. As always, business does not exist in a vacuum. Qualcomm’s margins have gone from very impressive to still-impressive-but-less-so. If this were a margin compression story about, say, Target, one’s level of concern should be far more elevated.
Best regards!
Hi Jason,
I really enjoy these weekly articles and appreciate the detailed analysis of each stock.
However, I had a question regarding the math used in the dividend discount model. If I have it correct, to determine the fair value of a stock, one must:
(Dividend($))/(Discount Rate(1.xx)-Anticipated Dividend Growth(1.xx))
If one is to factor in a discount rate of let’s say 10%, how then would we account for any double digit increase in dividend growth? Because any dividend growth greater than the 1.10 discount rate, would lead to a negative figure.
Am I seeing something wrong here?
Keep up the good work,
Joe
Joe,
You would use a two-stage dividend discount model analysis in that case. So you’d account for the double-digit dividend growth for the first period of time. And then you’d move into the lower dividend growth as the terminal rate.
Thanks for stopping by. So glad you enjoy the weekly series! 🙂
Best regards.