My favorite saying is that "The best time to plant a tree is 20 years ago. The second best time is today." This is why I am carefully planting each dollar seed into carefully chosen portfolio of quality dividend growth stocks available at attractive valuations. I then enjoy the increase in dividends per share from those companies, and further magnify the compounding process by reinvesting the dollars into more dividend paying companies. Thus, I am creating a positive loop, that keeps on delivering results for me.
The power of compounding is said to be one of the 8th wonders of the world. A dollar that compounds at 10%/year today turns into $1.61 in 5 years, $2.59 in 10 years and $17.45 in 30 years and $117.39 in 50 years. [more]
The process of identifying a great company, and purchasing it at an attractive price is part art, part science. While I have tried to narrow it down to a few quantitative factors, mydetailed analysis of each company could bring an unexpected turn of events in determining qualitative nature of things. [more]
Most consumer staples are also called defensive companies, because their earnings and dividends do not decline by much during recessions. During economic recoveries however, their earnings and dividends tend to increase also. Because they are mostly mature and large companies, growth expectations are low, which usually leads to low valuations.
The thing that truly appeals to me in consumer staples includes the recurring nature of their revenues, which are generated from a wide number of products that customers love and buy regularly. Most consumer staples offer products with strong recognizable brands, for which customers are willing to pay a slight premium for. A customer, who is used to Gillette razorblades and shaving crème or foam for years, is not going to downgrade their experience merely in order to save a few dollars, but end up with cuts all over their faces. If you have used Colgate toothpaste for years, chances are very high that you would keep purchasing a tube every month or so. The nature of the products that consumer staple companies offer, satisfy basic human needs, which are satisfied only when the branded product is exhausted. Once it is all used up, the consumer needs to go ahead and purchase the product again, thus ensuring a repeatable stream of sales for the company for decades to come from each consumer it wins over. [more]