I like to invest in quality companies, with an established track record of dividend increases. I want to acquire these quality companies at , and then see earnings per share, dividends per share and intrinsic values grow over time.
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 .
My favorite holding period . 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 ones that are beginning to look attractively valued.
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 ÃÛÌÒ´«Ã½ Intelligence, S&P Dow Jones Indices, and S&P Global Platts divisions.
The company is a member of , and has managed to increase dividends for 43 years in a row. Over the past decade, S&P Global has managed to boost dividends at a rate of 7.20% per year. Earnings per share grew from $2.40 in 2006 to $4.21 in 2015.
The company is expected to earn $5.27 per share in 2016 and $5.83 per share in 2017. I find the stock attractive on dips below $105 – $106 per 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 21% per year. Earnings per share grew from $2.58 in 2006 to $4.63 in 2015.
The company is expected to earn $4.71 per share in 2016 and $5.11 per share in 2017. I find the stock attractive on dips below $94 per 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 Group, Inc. 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.
Full Disclosure: Long MCO
