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Saunders Learning Group, LLC May 2012 How Dividend Growth Stocks Can Secure Your Financial Future What a history of dividend growth means to you Use Dividend Reinvestment Program or Mutual Funds to build a solid portfolio of investments.

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This seminar is intended to introduce potential investors to the value of including dividend growth stocks in their mix of investments. It is a valuable introduction and highlights several stocks with a 15 year (or better) record of increasing dividends. Also covers dividend reinvestment plans and mutual funds that focus on dividend stocks. Contact me if you would like a custom developed seminar. [email protected]

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Page 1: Dividend growth stocks

Saunders Learning Group, LLC May 2012

How Dividend Growth

Stocks Can Secure Your Financial Future

What a history of dividend growth means to you

Use Dividend Reinvestment Program or Mutual Funds to build a solid portfolio of investments.

Page 2: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

All About Figuring Out Wall Street ...

Everything has changed in the financial services industry and it effects your financial well-being.

From bank failures, to record unemployment, home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone from first time investors to veterans of banking understand what to do to persevere and restore our faith in our financial systems.

2

This presentation is from Chapter Eight of Figuring Out Wall Street

Page 3: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

As Albert Einstein observed about, money compounding:

“It is the most powerful force in

the universe.” – Albert Einstein

Page 4: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Summary of BookSummary of Book

Book summary: From bank failures to home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone understand how this latest crisis happened, who was responsible and what to do now to restore our financial systems. Written in an easy to understand manner, even the most complex financial concepts are easy to digest. This book provides help to monitor investments with a review of investment products, financial regulators and economic indicators. Learn how the stock market exchanges work and the world of investment banking, hedge funds, venture capital and private equity. Every chapter includes action plans for investing.

Figuring Out Wall Street Consumer’s Guide To Financial Markets By Floyd Saunders Publisher: Saunders Learning Group

ISBN: 978-0-9824019-0-3

available from Amazon, B&N, and http://www.figuringout wallstreet.comor www.floydsaunders.com

Author Contactemail: [email protected]

Blog: www/money/floydsaunders.com

Twitter @floydsaunders

LinkedIn: http://www.linkedin.com/profile/view?id=14740656&trk=tab_pro

Facebook: Figuring Out Wall Street

Sideshare: http://www.slideshare.net/FloydSaunders

Page 5: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Saunders Learning Group provides a variety of training programs, workshops and seminars targeted to the financial services industry.

Programs are available in a wide range of topics, and we are specialists in developing custom programs that are targeted to your needs.

Contact the founder, Floyd Saunders at 316-680-6482 or at [email protected] for more information.

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Training from Saunders Learning Training from Saunders Learning GroupGroup

Page 6: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Which is better a 14% return or a 6% return?

Dividend payers have outperformed non-payers in both bull and bear markets.

This trend is even more pronounced in firms that have grown or initiated their dividends.

Stocks that decreased or eliminated their dividend have historically been punished by investors and declined.

Dividends are typically taxed at the lower 15% rate.

What happens if the 14% return is tax favored?

Page 7: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Why Dividends Matter

Page 8: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Five Reasons Why You Want Dividend Stocks

Page 9: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

A Few Terms You Need to be Familiar With

Page 10: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Selecting Stocks With Solid Record of Dividends

Current dividend yield of 3% or higher

Dividend to free cash flow ratio (five-year average) of less than 55%

The lower this ratio the better, as that would indicate a higher denominator [FCF].

Dividend to free cash flow (trailing twelve months) of less than 60%

Payout ratio of less than 65%

Page 11: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Leading Stocks with a 15 years of increasing

dividends

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Saunders Learning Group, LLC, Andover, KS

Genuine Parts (GPC)Founded in 1928, Genuine Parts Company (GPC) is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. Five year stock chart:

Free Cash Flow (FCF) payout ratio: 50% 15-year avg. annual dividend increase: 5% Dividend yield (1/17/11): 2.84% Stock price data: 1-year change: 27% 52-week high: $64.55 52-week low:

$46.10 Latest Earnings (April 2012): Reported sharp uptick in Q1 earnings, beating

expectations. First quarter net income of $146.3 million, or 93 cents per share, compared with

$126.5 million, or 80 cents per share, in the year-ago period.

Page 13: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Becton Dickinson (BDX)

FCF payout ratio: 48% 15-year avg. annual dividend increase: 17% Dividend yield (1/17/11): 2.38%

Stock price data: 1-year change: -7.95% 52-week high: $89.75 52-week low: $69.59

News: 5/1/12 Quarterly revenues of $1.991 billion for the second quarter an increase of 3.6% from prior-year period. Earnings per share of$2.59, compared with $2.72 in the prior-year period. A decrease of 4.8%. 

BD is a leading global medical technology company that develops, manufactures and sells medical devices, instrument systems and reagents. BD is focused on improving drug delivery, enhancing the quality of diagnosing infectious diseases and cancers, and advancing research, discovery and production of new drugs. Five year chart:

Page 14: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

3M (MMM)

FCF payout ratio: 46% 15-year avg. annual dividend increase: 6% Dividend yield (1/17/11): 2.60%

Stock price data: 1-year change: -2.58% 52-week high: $98.19 52-week low: $68.63

Q1 2012 sales of $7.5 billion, up 2.4% Earnings Per Share of $1,59 up 7% 54th consecutive annual dividend increase.

The 3 M company was formerly known as the Minnesota Mining and Manufacturing Company, founded in 1902. They produce more than 55,000 products. Now known as the global innovation company that never stops inventing. In 2004, sales topped $20 billion for the first time, with innovative new products contributing significantly to growth.

Page 15: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Cintas (CTAS)

FCF payout ratio: 45% 15-year avg. annual dividend increase:13% Dividend yield (1/17/11): 1.32%

Stock price data: 1-year change: 33.45% 52-week high: $38.22 52-week low: $26.39

News: 2/29/12 Q3 revenues $1.01billion, 7.9% increase, EPS of $0.58, 41.5% increase

Cintas provides highly specialized services to businesses in North America. Cintas designs, and manufactures corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products, first aid, safety, fire protection products and services and document management services for 900,000 customers.

Page 16: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

WW Grainger (GWW)

FCF payout ratio: 43% 15-year avg. annual dividend increase: 13% Dividend yield (1/17/11): 1.32% Stock price data: 1-year change: 48.41% 52-week high: $197.05 52-week low: $124.33News:

W.W. Grainger, had sales of $8.1 billion in 2011 and is North America’s leading broad line supplier of maintenance, repair and operating products, with expanding global operations. In 2010, a healthy balance sheet and strong cash flow enabled Grainger to return $657 million to shareholders in share repurchases and dividends.

Page 17: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Bemis (BMS)

FCF payout ratio: 41% 15-year avg. annual dividend increase: 7% Dividend yield (1/17/11): 3.19% Stock price data: 1-year change: -5.10% 52-week high: $34.40 52-week low: $27.21News: 5/3/12– Bemis declares a quarterly dividend of 25 cents per share. 4/26/12 - reported quarterly earnings of $0.42 per share for quarter ended 3/31/12.

Bemis Company, Inc. is a major supplier of flexible packaging used by leading food, consumer products, medical and pharmaceutical companies worldwide. Bemis also supplies pressure sensitive adhesive coated materials globally to label, signage, medical and graphics companies. Five year chart:

Page 18: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Other examples

Page 19: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

“So, I can’t really afford to buy a bunch of stocks, you need to be rich to do that. What do I do to get started?”

Page 20: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Good News, You can buy stock directly

from the leading companies and even buy fractional

shares, with limited monthly contributions.

It’s called a Dividend Reinvestment Plan or Drip

Page 21: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS 21

Dividend Reinvestment Plan (DRiP) programs

Dividends are not paid to shareholder

Reinvested dividends buys additional shares

These dividends create additional shares

US Companies Paying Dividends Over 1,600 companies with DRIPs 40% have Dividend Share Plan

(DSPs) 60%, one share registered in your

name

Dollar Cost Averaging Fixed $$ amount each wk/mth/qtr Results in a lower overs cost to

purchase over a longer period

Result of Dividends & Capital Growth

Barron’s Article, April 1999

$100 invested in S&P 500 stocks in 1925

would be $9,600 by 1999

With DRIP $235,000

Dividend growth4% annually 

Year Dividend

1              $5.50

2             $5.72

5             $6.43

10           $7.83

12 $8.47

A conservative, low-cost approach to investing in dividend-paying stocks is with dividend reinvestment plans (DRPs or DRIPs). With these plans, dividend immediately go to work for you with little transaction costs.

Page 22: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

DRIP Advantages & Disadvantages

Advantages Can invest small or large amount

Compounding dividend increases

Stock price appreciation

Dollar Cost Averaging (OCP)

Basically Fee Free (50% of US co)

Stable Shareholder Base

Inexpensive Source of Equity $$$

Disadvantages Can be Cancelled by Company

Inability to Time Market

Minimum OCP Amounts

Fees are Increasing (US)

Dividends are Taxable

Tracking Adjusted Cost Base

Odd Lots from mergers

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Page 23: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

How to Start with Dividend Reinvestment Plan

Page 24: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Ok, those ideas are great, but I don’t want to take the time to get all of those Dividend Reinvestment Plans set up, is there an easier way?

Page 25: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

More good news, There are a number of

leading mutual funds that do all the work for you . . .

Examples include . . . .

Page 26: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Dividend Yield Mutual Funds

Three of the best mutual funds for high dividend yields:

Page 27: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

QuestionsQuestions

Page 28: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Post Workshop Action PlanPost Workshop Action Plan

Complete the Post Workshop Action Plan

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Page 29: Dividend growth stocks

Saunders Learning Group, LLC, Andover, KS

Reference MaterialReference Material

Book summary: From bank failures to home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone understand how this latest crisis happened, who was responsible and what to do now to restore our financial systems. Written in an easy to understand manner, even the most complex financial concepts are easy to digest. This book provides help to monitor investments with a review of investment products, financial regulators and economic indicators. Learn how the stock market exchanges work and the world of investment banking, hedge funds, venture capital and private equity. Every chapter includes action plans

for investing.

Figuring Out Wall Street Consumer’s Guide To Financial Markets By Floyd Saunders Publisher: Saunders Learning Group

ISBN: 978-0-9824019-0-3

available from Amazon, B&N, and http://www.figuringout wallstreet.comor www.floydsaunders.com