Building a Rising Income Stream
The AMM Dividend Letter is a monthly e-newsletter focused on building a rising income stream through dividend growth investing. A new issue is sent out at the beginning of each month to the email address you provide below. Each issue will focus on 3 main types of dividend growth companies.
- Dividend Stalwarts: Companies that have strong dependable market positions, that pay a reasonable dividend (~2-3%), and have shown an ability to grow their dividends over a long period of time at a pace far faster than inflation.
- Restructuring/Special Situations: Companies undergoing a restructuring, spin-off, or other special situation. If we see value in the restructuring and the parent company pays a reasonable dividend we will invest.
- New Dividend Payers: Companies that have recently initiated a dividend policy. While these companies do not have the long history of paying and growing their dividend like the stalwarts, they do have a strong market position and the cash flow to become a stalwart in the future.
Each issue will include an analysis of a current position’s dividend history, its ability to continue to pay its dividend, and potential catalysts for further price appreciation and dividend growth. For example with Visa (V), the subject of The AMM Dividend Letter #11, we stated buying Visa Europe would be a positive catalyst for Visa.
Heightened European bank regulation and the need to maintain higher capital ratios could force the consortium of European banks to sell Visa Europe sooner than expected. Plus, it is rumored that the banks believe they could set-up and better run their own payment network. The cost of the purchase has been estimated from as low as $3 billion to as high as $11 billion. Visa has sufficient room on their balance sheet to fund the majority of the purchase with debt which could explain why Visa has not issued any during this period of low interest rates.
Integrating the two systems and transferring Visa Europe users over to Visa’s network would take time but the profits are worth it. Europe is seeing the same type of growth in the use of debit cards, credit cards, and smartphones as discussed above and payment volumes are expected to reach $3.73 trillion by 2016. Visa would greatly benefit by having this growing transaction volume over its network and not on a licensee’s. Also, Visa Europe’s operating margin is around 23% compared to Visa’s 62%. Even though European financial regulations will make it tough for an integrated Visa Europe to reach 62% operating margins there is still a lot of room for margin improvement and increased profits for Visa.
When you sign up for the AMM Dividend Letter you will also receive periodic portfolio updates when we sell a position, when a corporate restructuring occurs, or when a position merges with another company or is bought.
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