Stock price valuation is an interesting and complex subject. It is an open rather than closed issue. It has huge variences in differing economic periods. Take the nineties as an example, when the standard of a fifteen price earnings ratio went out the window for numerous industries without any basis other than fictional emotionalism. I tend to favor companies which have relative small increases in cost versus larger increases in unit sales and profits: That model works in the better drug and biotechs with high consistancy. It is to some degree applicable in subscription service industries such as satellite radio or cable tv or telephony. Then there is the issue of management and the contingent issue of labor relations: Merck, the best drug company with the highest return on assets for years, had a critical loss of upper management a few years back and has tumbled since. The auto and steel industries succumbed years ago to rediculous union demands and are paying the price today in declining market shares. Interest rates and energy costs have varying impacts on costs and demand. There are always so many variables to take into account to try and conclude where the inefficincies are to be found in market pricing, and thus the profit opportunities. Inflation, which simply put is a growth in the money supply without a concurrent growth in productivity, is not always a sound indicator of commodity prices; for example gold and silver. So, while I understand your effort to concentrate on the ability of a company to pay dividends as your major focus of valuation, I would suggest that there are many more elements to consider in the process of valuation....Sam
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