what's that stock worth?

What's that stock worth?

When you buy a stock, you're buying the future earnings of the company and their effect your wealth. Your future depends on purchasing stocks that grow earnings and increase in value.  

If you pay too much for a company's stock, you won't make much money on it.
If your stock pays a dividend, you'll collect that dividend, regardless of the price you pay.
On the other hand, part of the total investment yield is based on what happens to the stock price.

If the company whose stock you purchase pays no dividend, how can you earn anything at all from your investment? Only one way; by appreciation in the stock price. What drives stock prices up? Expectations of future earnings!  The company earns money. It takes that money and does something with it. What? hopefully it re-invests in the business, so the next year it earns more money. If so, rising earnings, and rising earnings per share should result in a higher price for the stock.
If the company decides to pay some of it's earnings to it's owners in the form of a dividend, you can do one of three things with that dividend: use it buy something you want, use it to buy more of the company's stock, or use it to buy a position in some other company.

Most folks think that you shouldn't pay more than 15-20x earnings to own a stock. That would be an earnings return (return on invested capital or ROIC) of 5-7%. Some companies make a lot more money than that. If the executives use some of the earnings to grow the company, stock price tends to drift up to keep the price/earnings in a historical range. You have to pay attention to whether the company is issuing a lot of new shares, since that will dilute earnings per share and adversely effect price per share. Some companies use excess earnings. over and above what's needed to grow the business, to purchase shares and retire them. That reduction in shares tends to boost the price per share, thus making the value of your holding higher, as earnings are distributed amongst fewer shares.

Certainly, a company that is generating loads of cash, paying some of it to owners as dividends, using some of it to grow the business, and some of it to buy back shares sounds like an investment you'd like to own. The good news is, there are plenty of such companies out there; you just have to know how to identify them.

There are lots of ways you can start; one would be to use a screening tool. There are many, from value line, Morning-star, investors daily, etc. I like a subscription service called FASTGraphs.
You can read websites that are devoted to investing, develop a screening list and use any number of resources to find the metrics you need to decide if a company is worth your attention.
I got to my roughly 50 issue portfolio by following my nose, subscribing to newsletters and reading Seeking Alpha.  Over time I collected enough understanding of valuation to have a rough understanding of how to decide if a company is on a good footing or not. I don't do formal valuation, but I have some understanding of how it works. Others do it and publish it routinely online.
I check my holdings regularly via FASTGraphs to see if the rate of earnings growth is declining, if the dividend growth rate is changing, if the valuation is getting too high.

Dividend growth investors live in the tension between two desires; the first is to have a growing stream of income. The second is to see the portfolio value increase. The problem is, high stock prices mean less accumulated shares when the dividends are reinvested. Low stock prices mean the stock value isn't appreciating. What's an investor to do?  Find a company that constantly raises dividends. That allows continue accumulation of meaningful amounts of additional shares, and drives the appreciation of stock value as well.  If valuation outstrips dividend growth, then you rotate to another more appropriately valued company.  That means you need a reserve team. You need to know some companies that you'd buy if one of your holdings needs replacing for one reason or another. So, you keep a watch list; companies you'd own if you had twice the money.

In order to grow income and grow wealth, you need both dividends as well as appreciation in the value of your holdings. The good news is, there are plenty of companies who have done this in good times and bad. You can find them. They're not hidden. They're right in plain sight. Ditch the adviser. Ditch the fees.  Study hard, read a lot. Keep listening until you hear the truth. You'll be able to recognize it. Sound principles are not obscure.