Today is Valentine’s Day and love is in the air. One method to ensure love is in your portfolio is to start with companies with a high quality of good management. Warren Buffett believes that when you find companies that possess excellent businesses that are run by managers who are both talented and shareholder oriented you should increase your holdings in them. The question becomes how do you access the quality of management?  Jennifer Dowty wrote an article titled How to access the quality of management?

Experience: Research management’s background and read their biographies on the website from the perspective of how that background helps your investment. What have they done successfully in the past? what challenges are you expecting?

Execution: Find out whether management delivers on its promises. Ideally you want to under-promise but over-deliver, for when the street hears and reads about it, they will react positively.

Management’s objectives: Are your objectives and management’s objectives similar? Do you want the company to focus on growth or income?

Ownership: who owns the shares of the company? does senior management own shares and how much of their wealth is tied to the shares? You can check with the website http://www.sedi.ca.

Linking to dividend paying stocks, as a part owner, the company becomes a partner in your finances which allows you evaluate management. If you like the management, then the other analysis of the business needs to be done. If you are buying for dividends, you will want to ensure the company is profitable and earns enough free cash flow to continually increase the dividends or at least as long as you own the shares.

There are more questions than answers, till the next time – to raising questions.