The Perfect Portfolio: The Dividend Yield Point Metric And How It Works In Our Portfolio

Introduction:
One of my favorite investment gurus was a woman named Geraldine Weiss. You might have heard of her as she wrote a book that she titled, "Dividends Don't Lie: Finding Value in Blue Chip Stocks."
Weiss believed that the key to investment success was finding the "value" in the stocks she purchased for her portfolio. In an interview with Forbes Magazine, back in 2002, Weiss had this to say about valuations:
So what determines value? Most people believe earnings, but they can be manipulated, which we are seeing with Enron.
Dividends are real money. That's the hallmark of a blue chip stock. If a company doesn't pay a dividend, it's a speculation.
So, hanging my hat on that theory, I studied a number of stocks, went back in the history of these stocks, and I realized that each of these stocks had its own individual profile of value, its own criteria for high and low dividend yield.
Weiss believed that when investors looked at the historic yield of individual blue chip stocks and compared that historic yield to the current yield point, they would be able to determine if a particular stock was overvalued, undervalued, or fairly valued.
But that was not her "only" criteria for discovering valuations. It was a "starting point" and from that starting point, she applied a number of additional metrics to determine if the company was truly priced at a value or if there was something fundamentally wrong... Read more