The Dividend Increase " Tell "

Dear readers:

Thanks again for checking in...I appreciate your time.

There is perhaps no greater sign a company's financial strength than its ability to increase its dividend.

It means that cash flow is excellent; and management feels the business is robust... and the future of the business looks promising. Otherwise: why else would they increase their liabilities?

Let apply this theory to the market. In the case of Lorillard, Inc, there is some concern about the federal government outlawing menthol. I know... absurd right? Especially given the tenuous nature of the economic recovery. Why eliminate a great tax base and many jobs? Doesn't make sense... Obama even smokes for goodness sake.

But to the point: I believe Lorillard's stock is vastly undervalued.

And the government's anti-menthol is to blame... or rather: it is creating a great buying opportunity. I guess it just depends on your perspective.

LO just increased their dividend by 12.5% on August 20... bringing the total yield to almost unfathomable 5.6%. Clearly, their management feels that menthol is here to stay; and that's great news for Lorillard...because they have a stranglehold on the menthol market. Could management be wrong??? Yes... but the cigarette business has stood the test of time... amazingly defying all nay sayers and government activists. Lorillard was founded in 1760. 25o years and still smoking strong!

In the case of Lorillard, the dividend increase is a bullish tell by management. And one from which the average investor can glean a vast amount of information.

And information, we all know, is what investing is all about.

Just ask Gordon Gekko.

Thanks again for reading. JB

Full disclosure: I am not an registered advisor, broker, or dealer. I'm only stating my opinion, not offering advice.I am not responsible for any losses you may incur as a result of acting on my blog. JB