Came across an old issue of "Money" magazine (I think it's a Aussie edition) with an article titled "10 Traits of Top Stocks". The 10 traits connect well with my thoughts on what constitutes factors for a good stock to invest in, when it is at the right price.
[Note: 10 traits are from the article, but comments are mine.]
1. Rising earnings. It's been making more and more money. Provided it's real and not fraudulent accounting!
2. Profits cover dividend payout. It's not paying out dividends from borrowings/debts, so the dividend is sustainable.
3. Capital raising aren't needed. Doesn't collect money from shareholder - i.e. the reverse of dividends! REITs tend not to do well in this regard when times are bad though.
4. Debt is minimal. I take that to be debt-to-equity at less than 40% (<0.4) - i.e. not overly leveraged.
5. Plenty of cash for interest bill. Has the cash flow to pay the interests on their debts - i.e. wouldn't default.
6. Profits are rising. Suggests an ability to price a premium in its product and services. Either that or it is increasingly more efficient.
7. Profitability strong and rising. Makes good use of its equity.
8. Cash flow exceeds profits. Cash is king! Best is a business that doesn't require a lot of capital expenditure.
9. Value has been rising. Has a business that has been of value.
10. Value will keep rising. Has a business that will continue to provide value. The boring stuff that provides bread and butter products and services that everybody require all the time are my favorite.
[Reference: "10 Traits of Top Stocks", Money magazine, by Vanessa Gilbert.]