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Income investments are another essential strategy for a well balance portfolio. Income stock provide investors with a steady stream of income through annual dividend payouts. Older more established firms are the focus of income investors. These companies are usually no longer in expanding industries and have reached a large size that can no longer sustain growth at high levels as their smaller more aggressive peers. So instead of reinvesting profits back into the company, they payout earnings profits to shareholders in the form of dividend payments.

Utility companies have historically paid a dividend to income investors. The dividend yield being the most important factor to investors. Dividend income investors demand a minimum yield of 5-6 percent to provide a steady stream of income over the long term.

When evaluating dividend stocks investors look at past dividend yield policy of a company to determine whether a company can not only continue paying it’s dividends in the future but also how much will companies increase their dividend payouts. Companies that have paid out dividends over a long period of time are more likely to continue future payments. Dividend paying stocks do not lower the risk stock investment. 

Investors should follow an investment philosophy, guideline or set of rules to help them stay disciplined and focused on building their net worth. Take emotions out of your trading decisions and always have a clearly defined objective before you make a trade.

It is importance to choose stocks whose earnings per share (EPS) are growing compared to the last quarter and the year ago period. Look for earnings growth of at least 20 percent.

Companies can sometimes try to manipulate earnings so astute investors should examine the quality of earnings carefully.

Investors should evaluate stock performance on the basis of a company’s earnings power.To make an accurate assessment, investors need a realistic estimate of future earnings per share. (EPS)

Management give earnings guidance about what it expects the company will do in the future. These comments are forward looking statements that set out sales and earnings expectations in consideration of industry and macroeconomic trends.

Management know it’s own business better than anyone elseand has more information than analysts. Investors must close attention to forward looking guidance anduse this information in combination with their own research to develop earnings forecasts.

Investment analysts evaluate management’s forecasts and expectations and try to determine if their expectations are in line with reality. Most investment fund managers rely heavily on consensus estimates in making investment decisions.

Earnings are what investors rely on to measure stock performance and make investment decisions. Investors look primarily at the earnings per share ratio (EPS). Which is a company’s net earnings less dividends divided by the number of outstanding shares. 

An effective way to evaluate a stock is to try to forecast the long term-term free cash flow of a company, discount those cash flows to today’s value and then divide by the number of share. Earning are a much better matrix than sales figures in determining an investment potential. Earnings forecast are determined from expectations of a company’s growth and profitability by predicting revenues less operating expenses.

An important factor effecting share-price performance is the difference between actual and forecasted earnings. Investors rely on earnings as its key indicator and stocks are guaged by their ability to increase earnings quarter over quarter, and by whether they are able to meet or beat consensus estimates. 

Quality earnings per share results means that the earnings are a factual representation of what the company actually earned. Evaluating a real EPS cuts through a lot of the accounting tricks limiting the risk that the financial statements are misrepresented.

To evaluate quality earnings per share (EPS) figures is to compare operating cash flow per share to reported EPS. A negative cash flow can only imply that there is a fundamental operating problem. Earning are of a high quality when operating cash flow per share is greater that reported EPS as the company is then generating more cash than reported on the income statement. A company increasing its operating cash flow consistently over time is considered a good investment. 

Investors should compare industry trends against earnings results to determine the level of success a particular company is having against its competitors. 

Companies that generate a growing stream of operating cash flow per share make sound investments. The ideal investment situation is a company reporting increased operating cash flow per share that exceeds EPS.

Compare similar companies in the same industry. Increasing earnings growth in the industry will reaffirm that the industry is gaining momentum.

Good companies worth investing should show annual growth (EPS) in each of the last five years.

Income investments are another essential strategy for a well balance portfolio. Income stock provide investors with a steady stream of income through annual dividend payouts. Older more established firms are the focus of income investors. These companies are usually no longer in expanding industries and have reached a large size that can no longer sustain growth at high levels as their smaller more aggressive peers. So instead of reinvesting profits back into the company, they  payout earnings profits to shareholders in the form of dividend payments.

Management gives earnings guidance about what it expects the company will do in the future. These comments are forward looking statements that sets out sales and earnings expectations in consideration of industry and macroedconomic trends.

Management know it’s own business better than anyone elseand has more information than analysts. Investors must close attention to forward looking guidance and  use this information in combination with their own research to develop earnings forecasts.

Compare similar companies in the same industry. Increasing earnings growth in the industry will reaffirm that the industry is gaining momentum.

Good companies worth investing should show annual growth (EPS) in each of the last five years.

Value investors will want to buy into companies with annual earnings growth between 20-50% range. Earnings growth should be both quarterly and annually

A company may be doing exceptionally well if it has recently undergone a change in management, has a new product or doing something different than the competition.

When a stock hits a new trading high it is often an indication that it will continue its upward trend.
By analyzing the entire industry investors can ascertain who the market leaders are and invest in those companies leading the pack.

The relative strength price of a stock ranges from 1 to 99 where a ranking of 99 means a particular stock has outperformed 99 percent of stocks in the group. Stock with a RPS indicator of 80 to 90 will likely be top performers.

Research if there are institutional investors holding shares in the company. Institutional investors are known as the smart money. Follow the smart money trail if you want to be successful.

Keep up with the financial markets and recognize which direction the market is moving in. Is it a bear market or a bull market? Invest with the market and don’t go against the trend. In a falling market you can make money by ‘shorting’ or selling stocks. This is a practice where you invest your money in the hopes that the stock market will go down.

Follow the daily prices and volume of shares being traded for indications of what the near term direction of the stock market is.

A simple stock investment strategy is buying the top 10 stocks of the Dow Jones Industrial Average with the highest dividend yields at the end of the year. Hold them until the following year and replace any laggards with any new stocks making it into the top 10 highest dividend yield. This is a long term strategy and requires a long period of time to see results. This strategy returned 15.8 percent annually from 1973 to 1996.

No investment strategy is fool proof. Investors should constantly monitor their investments and adjust their asset allocation mix to match changing risk profile due to life’s circumstances.

Investing in stocks entails risks and due diligence and caution is always advised. There are no guarantees. For new investors, it is advisable to invest in mutual funds where a professional investment manager and his/her team invest the funds money.

Only when a novice investor has acquired sufficient investment knowledge and fully understand the risks and rewards that come with equity investments should he/she venture into stock investing.

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Stocks Investment Basics
Value Stocks Investments
Growth Stocks Investments
GARP Stocks Investments
Income Stocks Investments


Finding Steady Income in Unsteady Markets