Dividends Still Don't Lie: The Truth About Investing in Blue Chip Stocks and Winning in the Stock Market

Chapter 8. Value, Cycles, and the Dow Jones Averages

Order and simplification are the first steps toward mastery of a subject.

—Thomas Mann

In the preceding chapters, I have attempted to lay out in a logical manner the importance of quality, value, cycles, and trends. To narrow our considerations to only the highest quality blue chips we use the Criteria for Select Blue Chips. To identify historically repetitive areas of undervalue and overvalue of dividend yield we use the Dividend-Yield Theory. By combining the fundamental qualities of the Criteria with the technical attributes of the Dividend-Yield Theory we have the components of the dividend-value strategy.

In addition to identifying the areas of undervalue and overvalue for individual stocks, the cyclical aspect of the Dividend-Yield Theory applies to the broad market, as measured by the Dow Jones Industrial Average (DJIA), in equal manner. By understanding the cyclic nature of value in the Dow, it allows the investor to further hone his buy, sell, and hold decisions. While many stocks will cycle through the phases of value contra to the primary trend of the broad market, it is no secret that it is easier to swim with the tide than against it.

In the next chapter, I combine what has been written through this chapter into a roadmap for building and managing the dividend value portfolio. Central to that discussion is the primary trend of the Dow, which phase of value is currently in force, and how this information should be included ...