I like to invest in quality companies, with an established track record of dividend increases. I want to acquire these quality companies at an attractive entry price, and then see earnings per share, dividends per share and intrinsic values grow over time.
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The beauty of quality companies is that you need to get one decision right – that is the ability to identify their business model, and then buy those companies in the first place without overpaying for them.
I do not want to worry about buying at a low price, and then selling at a high price. I want to make one decision, and then let these quality companies do the heavy lifting for me. My favorite holding period is forever. While some may fail, I know that by building a diversified portfolio of dividend growth stocks, I will do just fine over time.
Speaking of quality companies, there are two I have my eye on, whenever they start to look attractively valued. The companies include:
S&P Global, Inc. (SPGI) provides independent ratings, benchmarks, analytics, and data to the capital and commodity markets worldwide. The company operates through S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices, and S&P Global Platts divisions.
The company is a member of the dividend champions index, and has managed to increase dividends for 45 years in a row. Over the past decade, S&P Global has managed to boost dividends at a rate of 7.20%/year. Earnings per share grew from $2.40 in 2006 to $6.35 in 2017. The company is expected to earn $6.65/share in 2018 I find the stock attractive on dips below $133/share.
Moody’s Corporation (MCO) provides credit ratings; and credit, capital markets, and economic related research, data, and analytical tools worldwide. It operates through two segments, Moody’s Investors Service and Moody’s Analytics.
The company is a member of the dividend contenders index, and has managed to increase dividends for 8 years in a row. Over the past decade, Moody’s has managed to boost dividends at a rate of 16.90%/year. Earnings per share grew from $2.58 in 2006 to $5.15 in 2017. The company is expected to earn $7.72/share in 2018. I find the stock attractive on dips below $154/share.
Both companies are market leaders in the market for credit ratings. Anyone who wants to sell debt, may have to pay for a credit evaluation from one of those two industry leaders ( with Fitch being third largest). Moody’s & Standard & Poors are essentially a duopoly, which charges a toll for anyone who wants to access credit markets. So both companies have a strong competitive position.
I also like that S&P Global has a strong line-up of widely followed indices, which can generate a lot of fees in the future, especially as everyone around is becoming an index investor. In fact, investing in Standard & Poor's ( the company) has been a better investment than Standard & Poor's 500 (the index) over the past quarter of a century ( when the SPY ETF started trading).
- Buying Quality Companies at a Reasonable Price is Very Important
- Market Declines: An Opportunity to Acquire Quality Dividend Stocks
- Diversified Dividend Portfolios – Don’t forget about quality
- Dividend investing timeframes- what's your holding period?
- Give your investments time to compound
Article by Dividend Growth Investor