Tuesday, May 17, 2011

Dividend Machine criteria; a high hurdle! Look at ETN

                Finding a dividend machine is so difficult; the hurdle is high.
  For instance, I still believe that over time industrial stocks will prosper.  I like to invest in companies in industries that prosper.  I have considered EATON, symbol ETN, as a dividend machine.  ETN it is an excellent example of how high a hurdle our dividend machines must master. 

                Today ETN softened to $49.50.  The dividend yield is 2.74 percent a touch short of our three percent criteria.  It meets our solid company criteria with only a .44 debt to equity (D/E) ratio.  While the dividend has increased over 5 years from $.195 to $.34 per share, that dividend was steady from February, 2008 through May, 2010.  Not increasing dividends for 27 months means ETN cannot qualify as a dividend machine.  We require a company to increase the dividend every year for at least five years.  This criterion is to assure that the companies in which we invest can weather the inevitable ups and downs of capitalism and still increase our income.

                ETN split two for one in February.  The split means that had you owned ETN before the split, you now own two times as many shares.  Therefore, I think ETN should be a consideration for your income portfolio.  Remember we want to invest in good companies that increase our income every year.  Occasionally you find a company just misses dividend machine criteria but it is still a good income instrument.

                If you can buy ETN at $45.00 you will have a 3% yield; you will have a good investment that is almost a dividend machine.

Very Truly Yours,
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