The FALCON Method: A Proven System for Building Passive Income and Wealth Through Stock Investing by David Solyomi

Author:David Solyomi [Solyomi, David]
Language: eng
Format: epub, mobi
Publisher: TCK Publishing
Published: 2017-12-19T23:00:00+00:00

The serious mistake many dividend investors make is chasing yields: going for the highest yields available and losing sight of all other important criteria (like the safety of the dividend, for example).

Let me repeat that the FALCON Method aims to provide the best possible total return (a completely different “objective function” than maximizing the current yield) while also targeting reliable and growing dividend income. Strategies that focus on maximizing the current yield often embarrass investors, since your significant other who looked attractive before the wedding can show his or her true colors after the ceremony (in the form of a huge dividend cut) and the marriage will either turn into a long agony or an extremely expensive divorce where the other party takes most of what you put into the relationship.

So on one hand, the FALCON Method does not accept ridiculously low dividend yields (compared to the prevailing market averages), but it also will not push this criterion to the limits. The falcon is wise enough to know that it will have further opportunities to weed out the surviving stocks in the latter phases of the process.

Free cash flow yield: This indicator is just as important as the dividend yield, although many dividend investors do not really consider it when allocating their capital. Free cash flow is a category that Warren Buffett made popular with the Appendix of his Letters to Shareholders in 1986. (I’m not going into details here, as Buffett himself does not suggest doing so: “I know that among our 6,000 shareholders there are those who are thrilled by my essays on accounting—and I hope that both of you enjoy the Appendix.” Feel free to check out the 1986 letter online if you belong to this minority.)

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