Magic Aristocrats - Dividend Growth Stock Screeners to invest like Warren Buffet
Many investors try to earn money on the stock market. But very few succeed in beating the stock market on the long run. One of them is Warren Buffet, one of the world's best investors. Some of the keys to his success are his long term approach and his discipline. But more precisely, what are Warren Buffet's secrets ?
How does Warren Buffet do it ?
Valueinvestingstrategies.com has investigated in detail Warren Buffet's investing philosophy. Of course, such a talented investor cannot be reduced to a few simple recipes. Yet, there are a few patterns in Warren Buffet's investment decisions. We will disclose our findings in this article.
One of the biggest difficulties in investing, is to be able to forecast the value of an asset in the future. Many parameters, such as market conditions, competition, or inflation can influence the future value of an asset. And each of those parameters is very difficult, if not impossible to forecast. Actually, forecasting the future is impossible.
So, what should be the criteria to pick stocks with a predictable rate of success ?
Finding the best investment strategies among millions
ValueInvestingStrategies has tested millions of systematic quantitative strategies over long periods (more than 20 years). Those strategies use combinations of fundamental criteria (such as sales, earnings, dividends or debts) and valuation criteria to pick stocks systematically. Interestingly, the factors which tend to provide the best results for long term investment success are the criteria that match Warren Buffet's investment patterns.
ValueInvestingStrategies found indeed that some of the best criteria to select stocks are dividend growth, shares buybacks, an above average ROE and a reasonable valuation.
Those criteria make sense. Indeed, dividend growth and a high ROE (return on equity) are some of the factors that are predictable, according to many statistical studies. This means that a company with long history of dividend growth, is likely to keep growing its dividends on the long run. The same is true of ROE, but not for sales growth: companies which grow their sales very fast tend to slow down after a few years.
Get increasing cash flows, year after year with dividend growth investing
Investing in dividend growth stocks has a specific advantage: the investor does not need to predict the next level of the market, or of the stocks that he invests in. If the companies continue raising their dividends, the investor keeps getting a growing pay check, year after year.
The relationship between ROE and dividend growth is best explained by Warren Buffet in this article about dream investments.
How to find the best dividend growth stocks ?
The question is how to invest in the best dividend growing stocks, or how to find them among the 7000 traded stocks in the USA.
Value Investing developed the "Magic Aristocrats" stock screener, which provides a list of stocks that have a very high probability of raising their dividends under sound conditions. Click here to get more details about the "Magic Aristocrats" Dividend Growth Strategy.
The screening method is provided in more details in this article.
A good capital allocation strategy consists in choosing the 20 to 30 top ranking stocks, and allocating an even amount of one's portfolio to these stocks. One can repeat this process once a year, or every six months.
Basedig provides every month a dividend growth stock screener. The links below provide the latest results:
Links to the screening results
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