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Show 'Dividends Don't Lie' a must for value investors dividend-yield indication that the market was overpriced and ripe for a correction. "Dividends Don't Lie" will probably never become a standard -of investing because it presents too many refutable opinions as dogma. However, it does d6 good job of ex- plaining the importance of divi- , dends and ways to evaluate them. The book is offered by Longman Financial Services Publishingr 52Q- North Dearborn, Chicago, 111. 60610. 'Dividends Don't Lie," a new book written by Geraldine Weiss and Janet Lowe, makes interesting reading for value investors. A company's ability to pay dividends divi-dends and to do so consistently has always been a fundamental measure of a stock's value. Because dividends divi-dends are paid from earnings,' they aren't paid or increased unless a company can afford it If you know this much about stock market theory, "Dividends Don't Lie" will be beneficial to "you. - 1 - Weiss and Lowe explain the relation re-lation of dividends, book value and earnings in the evaluation of a stock. Of these, however, they give credibility only to dividends. The book suggests that earnings can be manipulated to meet the needs of a corporation and that book value can be distorted by inflation. Both suggestions are open to rebuttal. Most analysts would disagree dis-agree with the book's position on ,. both book value and I earnings because both are generally accepted as valid yardsticks of value. However, the book's position on dividends does make sense. The safest approach is to accept them as opinion. '-- A history of regular dividend payment indicates that a company has both good earnings and sound book value. A consistent increase of dividends generally indicates a corresponding cor-responding rise in earnings. In prac tice, however, this shouldn't be assumed. Instead, the dividends and earnings should be double-checked to ensure they're moving together. Of course, the most value rests in blue chip securities. To be considered con-sidered a blue chip company, Weiss and Lowe state that a company must meet the following re-; quirements. A blue chip company has: - raised its dividends at least five times in the past 12 years, - improved earnings in seven or more of the past 12 years, - had 25 years of uninterrupted dividends, - a dividend ranking of A or better by Standard & Poor, - at least 5 million shares outstanding, and - at least 80 institutional holders. Weiss and Lowe suggest using" dividend history to arrive at a reasonable value price. A stock's yield is figured by dividing the share price into the dividend. For example, a stock that sells at $50 a share and pays a $3 annual dividend has a 6 percent yield. Weiss and Lowe state that a stock trading within 10 percent of either its historic high or low yield is either overvalued or undervalued. The same dividend yield technique techni-que is used to determine the overall market potential. Before the market crash of October 1987, the Dow Jones Industrial yield dropped to its lowest point since 1982. This was a |