This is the final installment in my series of articles on fairly valued mid-cap selections. My inspiration to produce these articles was at the request and suggestion from regular readers who were frustrated at the lack of coverage and/or articles on mid-caps. To accommodate those requests, I screened through the S&P 400 mid-cap index with the assumption that it represented a credible universe of high-quality mid-caps. The fact that I was only reviewing the S&P 400 index was missed based on many comments received on my previous articles in this series. In other words, I only included fairly valued research candidates that are members of the S&P 400 index in this series.

Mid-cap stocks are often overlooked by investors and not widely covered on Wall Street or many financial websites and blogs. However, I consider it a mistake because there are many mid-size companies that are attractive long-term investment opportunities.

In part 1 of this series on fairly valued mid-cap investment opportunities I primarily focused on non-dividend paying growth oriented mid-caps. In part 2 of this series I turned my focus to finding fairly valued dividend paying mid-caps. However, as I was evaluating dividend paying mid-caps in the S&P 400 mid-cap index, it became clear to me that the differences between dividend paying mid-caps were more important than the similarities. Therefore, I have grouped the dividend paying mid-caps I found into 3 separate offerings focusing on sectors. In this, part 2A, I will be exclusively covering fairly valued mid-sized regional banks.

Small and mid-sized companies are often overlooked by many or even most investors. That’s unfortunate, because there are many excellent investment opportunities that can be found in these equity classes. However, an argument could be made that between the small and mid-cap equity classes, the best and perhaps less risky investment opportunities are found in mid-caps.

Investing in small-cap stocks is not for everyone. My definition of small-cap is a company whose market is $5 billion or less. However, for those brave souls that are willing to assume a little more risk, they can, under the right conditions, be a very profitable choice. Nevertheless, and in the general sense, small caps offer both advantages and disadvantages that I believe should be clearly understood before utilizing this asset class.

In recent years, dividends’ contribution to total return has been one of the most heavily-studied topics in the investment world. Several conclusions about the contribution that dividends make to total return have been claimed. However, these conclusions vary greatly. I have seen studies claiming that 90% of returns are attributed to dividends, several claiming 50% or more, and others arguing for a 30% contribution. Ironically, they all seem to be correct depending on the data-sets and/or timeframes being measured.

There is a long running feud between investors who believe in investing for total return versus those who believe in investing for current income. Both camps are fervent advocates of their respective beliefs, and there seems to be no feasible middle ground or compromise. Unfortunately, I believe that the dogmatic positions of both groups create a roadblock to investing enlightenment. In truth, there are valid arguments supporting both sides of these hotly-debated subjects. On the other hand, there are also valid arguments supporting investing for income over total return, and vice versa.

I believe there is a critical piece of investment wisdom that all investors in common stocks should possess. Every common stock investor should have a clear understanding of where and how long-term common stock returns are generated or come from. When an investor does not possess this knowledge, they can be easily led towards drawing erroneous conclusions about their portfolios and/or the individual stocks that they own. Knowledge is power, and the knowledge of where and how long-term stock returns are generated is incredibly enlightening.

This article is directed to the individual investor concerned with achieving the highest possible total return. The highest total return will typically come from a true growth stock simply because a faster growing company is worth more than a slower growing company past, present and future. On the other hand, for that statement to be true, a high rate of earnings growth must be consistently achieved. Generating and sustaining a high rate of earnings growth is the tricky part, because although there are a few companies capable of generating higher earnings growth rates, they are rare.

Before investing in any common stock I believe it’s imperative to know as much about the business behind the stock as you possibly can. However, there are only so many businesses that an individual investor can know anything about. On the US stock exchanges alone, there are approximately 20,000 individual companies to choose from. Therefore, logic would dictate that every individual investor needs a process or system for separating the wheat from the chaff.

It appears that I have become caught up in a spirited discussion regarding holding cash in investment portfolios. However, I believe that my position on this important subject is being misrepresented. Therefore, I felt compelled to offer this article for clarification of my true position and beliefs on the utilization of cash in portfolios.

It would be an understatement to call the recent stock market activity turbulent. High stock price volatility makes investors anxious and some people even become downright frightened. These emotional responses are often exaggerated for people in or near retirement. Therefore, I contend that all investors need to find ways to keep their emotions in check in order to avoid panicking, which typically leads to the making of a devastating financial mistake.

One of the greatest challenges that authors face when posting articles on financial blogs is how much information they should include and how much they should exclude. Space is limited, and many readers prefer a short write-up over long dissertations. Therefore, most authors (yours truly included) attempt to summarize their positions in the fewest words possible. However, this approach implies that readers will fill in the blanks between what is said and what is left out. Unfortunately, that is not what always happens.

When the stock market turns bad, like it has been recently, investors find it extremely difficult to remain positive. As a result, people tend to be more cynical during bad times than they would normally be during better times. When this happens, it becomes all too easy to paint every stock in the stock market with the same negative brush. Since most stocks will, temporarily at least, experience falling prices during a bad market, the distinction between good stocks and bad stocks can become blurred.

Most everything I write about is based on my belief in value investing as a sound, prudent and profitable long-term investing strategy. At its core, value investing relates to getting value on your money with investing just as it would to getting value for anything you would purchase. I feel safe in saying that no one wants to pay more than they should for anything that they purchase. This would apply to the basic necessities of food, clothing and shelter, and everything else that we would want to buy. Consequently, I don’t think it should be any different when we are buying stocks.

I screened the Dividend Contenders list provided by fellow Seeking Alpha Author David Fish searching for attractive valuation. This article presents 10 Dividend Contenders that I considered most attractive based on valuation and forecast long-term earnings and dividend growth. I want to be clear that these selections are not offered as a portfolio. Instead, these are 10 individual selections with various degrees of safety, yield and valuation levels that prospective investors can choose from.

Dividend Champions/Aristocrats are the go-to dividend paying stocks for prudent investors desirous of a safe, predictable and growing stream of income on the common stock portion of their retirement portfolios. As most investors are aware, in order to be classified as a Dividend Champion/Aristocrat a company must meet the stern test of consecutively increasing their dividend for 25 years or longer. Of all the dividend paying stocks in the universe, only a select few make these prestigious lists.

Although getting valuation right before you buy a stock is critically important to the long-term oriented retired dividend growth investor, it is not a short-term market timing concept. My point is that short-term market movements are typically volatile and unpredictable. The reason is simple. Over short periods of time, which I define as less than a business cycle (3- 5 years), emotion has a major effect on stock prices.

In consideration of today’s low interest rate environment, fixed income securities offer little in the way of return. Moreover, the safety characteristics normally associated with fixed income are also potentially upside down. Since early 1982, the interest rates available with fixed income have been in a continuous freefall. This has presented both good and bad news for the conservative investor desirous of a high and safe income stream on their portfolios.

This article is the second in a two-part series on applying the principles of value investing. In part 1 found here my primary focus was on the benefits of investing in fundamentally strong dividend growth stocks when they are out of favor, and therefore, undervalued as a result. In this part 2, I will be turning my attention to determining the fair value of growth stocks. Although the underlying principles of value investing apply, assessing the fair value of a true growth stock differs greatly from valuing a dividend paying company.

Value investing produces safe, powerful long-term results, but it is often misunderstood. This is why most of the greatest investors that have ever lived have employed some form of value investing as an integral part of their overall stock investing strategy. However, the term, concept or strategy called value investing does not necessarily universally apply. Like many financial terms and concepts, there are many nuances that pertain to the general concept of investing for value in common stocks.

There are many investing strategies and principles that retired investors can utilize to reduce the risk associated with investing in equities (stocks) for their retirement portfolios. Choosing to invest in the highest quality stocks your mind can conceive sits at the top of the list. There are many components that investors can analyze and examine to determine whether a company is high quality or not.

Reinvesting your dividends received from high-quality dividend growth stocks is a great, relatively conservative and proven way to build wealth over the long term. This is especially true and appropriate for investors in the accumulation phase that are planning for future retirement. Accumulating additional shares of dividend growth stocks can, and will, provide an increasing and eventually larger stream of income available at retirement when income is needed most.

There is an undeniable fact that differentiates investing when in retirement versus investing while you are still working. When you are employed, you are working for your money. However, once a person truly enters their retirement years, the situation reverses itself. When in retirement you begin the stage in your life where your money must work for you. In my opinion, this changes the investing dynamic considerably.

I recently completed a 3 part series of articles offered to assist retired investors in designing the equity portion of their retirement portfolios. In part 1 of this series found here I presented Peter Lynch’s 6 broad categories of stocks (businesses) that he wrote about in his best-selling book “One Up On Wall Street.” The primary objective of this first article was simply to provide the reader a general idea of the various categories of common stocks that were generally available to choose among.

Managing an investment portfolio is a very personal matter. Consequently, the most important consideration is to design a portfolio that meets your own unique goals, objectives and risk tolerances. Everyone is different, and consequently, every investment portfolio can and should be appropriately different as well. Stated more straightforwardly, I do not believe in cookie-cutter or one-size-fits-all approaches to portfolio design.

Designing the common stock portion of your retirement portfolio is very challenging. For starters, there is no absolutely perfect or even best way to design a stock portfolio. However, there are many effective strategies that have produced successful long-term results. The key to success is to find and implement the strategy that best fits your own unique goals, objectives, needs, and most importantly - risk tolerances.

Choosing the most appropriate stocks for the common stock portion of your retirement portfolio is vitally important. In part 1 of this series found here I presented the 6 broad categories of stocks (businesses) that renowned mutual fund manager Peter Lynch presented in his best-selling book "One Up On Wall Street." I contend that the 6 categories that Peter Lynch wrote about establish a solid foundation of understanding of what’s generally available in the common stock universe.

What is the best way to design or construct a common stock portfolio? This is a question I am often asked and my short answer is always the same - it depends. The truth is, there is no perfect method or strategy for designing a stock portfolio that is right for every individual investor. However, there are principles of sound investing that every investor can follow and apply when designing a common stock portfolio that’s just right for them.

Investing in anything comes with a degree of uncertainty because all investing returns happen in the future. And even though the future is unpredictable, the future is what everyone that invests is investing for. These realities present important challenges that every investor must face and deal with in order to succeed.

In order to understand what the intrinsic value or fair value of a common stock is, you must think like a long-term business owner and not like a stock trader. Additionally, you must think like a business owner that has no intention of selling their business. Put another way, your business generates your livelihood. Therefore, your primary focus and attention is on answering the question: how’s business?

The current market environment is presenting many challenges to the conservative retired investor in need of current income. Interest rates are near all-time lows and the valuations of many blue-chip dividend growth stocks have become extended. Consequently, it is becoming very difficult to find quality investment opportunities that can provide safety through sound valuation, attractive yield and the potential to fight inflation.

Utility stocks are generally low-growth high-yield investments. As I will soon illustrate, both Southern Company (SO) and AGL Resources Inc (GAS) neatly fall into that category. These low-growth and above- average dividend yield characteristics have led me to only invest in utility stocks when two important conditions are met.

Investing money in anything is never without risk. When investing in liquid investments, prices can and do fluctuate daily. Importantly, all liquid investments can fluctuate in price, and that includes both stocks and bonds. I mention this because price volatility, especially when investing in common stocks, represents one of the biggest risks that investors focus on, some to the point of obsession.

When I first got interested in investing in common stocks some 50 years ago, I thought it would be wise to research and then study the investing behaviors and philosophies of the recognized investor greats. My efforts first led me to Ben Graham, and from there to many other famous value investors such as Philip Fisher, Walter Schloss, William J. Ruane, Irving Kahn, Peter Lynch, and of course the venerable and perhaps most famous of all, Warren Buffett.

After an exhaustive search of the dividend growth stock universe I identified 20 dividend growth stocks that I felt were currently worthy of consideration for retirement portfolios based on valuation. In part 1 of this 2-part series found here I discussed the current level of the S&P 500, and offered some important principles about valuation. Additionally, I offered the first group of 10 of what I consider the highest quality members of the 20 screened research candidates I uncovered.

Assuming an equal investment in each of the 20 research candidates provides an average aggregate dividend yield of 3.66%. Although each candidate was primarily suggested based on the merit of fair or attractive valuation, the 10 research candidates in this article was primarily focused on quality. In part 2, the 10 candidates presented were focused primarily on either yield or total return.

The primary attractions supporting investing in bonds or other fixed income instruments have traditionally been high income and safety. People invest their principal in bonds and receive a stated interest rate (coupon) over the life of the bond and are given the promise of having their principal returned at maturity. Under normal times, bonds would typically pay a higher rate of interest than the dividend rate on stocks. Consequently, bonds have acquired the reputation as low risk and high income instruments.

Any discussion on the appropriateness of any “investment” strategy should start with a discussion on the important differences between investing versus speculating. Although these are radically different concepts, it is all too common in finance jargon to ubiquitously reference all financial activity as investing, even when speculating would be the more precise term. I believe it is vitally important for people to understand the distinctions between investing and speculating, and it’s even more important to be cognizant of which you are engaging in.

In my most recent article titled “Designing a Retirement Portfolio That’s Just Right for You” I opined that a retirement portfolio should be designed to meet the individual investor’s specific goals, objectives and risk tolerances. I also suggested that the highest total return is not always the best approach because if the investor needs income to live off of, a focus on a consistent rising income stream makes more sense.

No one knows your own personal financial situation better than you do. Every individual possesses their own unique investment goals, objectives, needs and risk tolerances. At first glance this may seem simple and straightforward to the point of stating the obvious. However, I contend that the reality that individuals have different financial situations, goals and objectives is profoundly important as it relates to designing an appropriate retirement investment portfolio.

On virtually every financial website on the planet there is a never-ending daily stream of stock tips and recommendations. Consequently, the investing public is literally flooded with information and advice regarding what stock to buy today or not to buy. Some of what is offered is supported by factual information and logic, but unfortunately, much of what is offered is merely based on the opinion of the author. This presents quite a challenge to the prudent prospective investor seeking sound advice or guidance.

I believe that one of the most important attributes that a successful investor must possess is optimism. Any serious student of financial history would recognize and acknowledge that economically speaking, things are good much more often than they are bad.

To be considered prudent investors we must recognize and accept the undeniable reality that all true investing is done in future time. Consequently, the key to long-term investment success is to forecast the future as accurately as we possibly can. Of course, we must simultaneously recognize and accept that forecasting the future can only be accomplished within a reasonable degree of accuracy. Forecasting the future, and investing for that matter, can never be a game of perfect. Nevertheless, our investing success will ultimately be achieved based on how good our forecasts turn out to be.

Prudent investors might consider investing in fairly valued utility stocks if they need income, and if they are concerned about safety and capital preservation. Utility stocks can also serve as a viable alternative for parking cash. This last point is especially relevant when the valuations of other equity options are extended as they are today.

Ever since I first got interested in investing in stocks circa 1965 I have been confronted with a constant and persistent admonition about the next pending market crash. In those early days I contributed much of the negativity toward stocks to a lingering overhang from the Great Depression. Many of the people I was talking with had been literally traumatized by stern warnings from their parents or grandparents about the risk of investing in the stock market. Stocks were too risky for prudent people to invest in and serious money should never be invested there.

I am a fervent believer that investment decisions should be made based on the relative merits of each individual investment under consideration. However, my anecdotal observations and experience suggests that many investors do not embrace that approach. This is especially true regarding investment decisions on common stocks. Instead of focusing on the opportunities and valuations available from select individual businesses, many investors are obsessed, and I allege blinded by generalized views or beliefs about the overall market and/or the economy.

In recent weeks I received several questions and comments from readers regarding my views on the appropriateness of investing in growth stocks in retirement portfolios. Additionally, and on a related topic, I have also come across numerous discussions, sometimes quite heated, about whether it’s best to invest for total return or growth of dividend income. Consequently, I thought it would be interesting to share my views and provide my perspectives on both the appropriateness of growth stocks, and/or whether it’s best to invest for total return or income growth.

In today’s low interest rate environment, prudent long-term investors, especially those in retirement, are best served by putting maximum weight and focus on dividends. There are important reasons why I support this position, and those reasons will be the focal point of this article. However, putting maximum weight and focus on dividends does not simultaneously mean at the exclusion of other important fundamental metrics.

Beta is a rearview mirror statistic that is based solely on an analysis of its price history. To the prudent fundamental oriented value investor, statistics can never substitute for serious analysis and due diligence. Comprehensive research based on fundamentals will serve investors far better in the long run.