Monday, August 21, 2017

Five Tips to Avoid Dividend Cuts

This is a guest post by Brian Bollinger from Simply Safe Dividends. Brian is a CPA and was an equity research analyst at a multibillion-dollar investment firm prior to founding Simply Safe Dividends. Simply Safe Dividends is a one-stop shop for dividend investors, providing online tools, research, and data designed to help generate safe retirement income from dividend stocks, while saving you the high fees associated with other financial products and advisors.

Have you ever held a stock that eventually cut its dividend?

Or do you worry that a company you own might have to reduce its dividend in the future?

If so, you aren’t alone.

Most of the dividend investors I know are focused on building a safe income stream (typically for retirement) and want to preserve their capital.

Avoiding dividend cuts can help with both objectives, and in this article I will explore five techniques that can help identify companies with the best potential of delivering safe, growing dividends over time. 

But first, I want to thank Dividend Growth Investor for letting me share with you.

His blog has been an inspiration and a wealth of quality information for dividend investors for nearly a decade, and it’s an honor to be part of it today.

Let’s take a look at five of the most important factors you can use to understand the safety of a company’s dividend and make better informed investment decisions.

Friday, August 18, 2017

An update on my fixed income exposure

A couple of years ago, I shared with you that I am increasing my fixed income allocation by buying individual bonds, CD’s and bond funds. I made some calls stating that I am increasing my fixed income exposure. Well, after an year and a half, I ended up selling most of these fixed income instruments. I got out of them over the past three months or so.

I purchased fixed income, in order to have an allocation to an asset class that would zag when stocks zig. I wanted to be protected in the event of a deflation, which would torpedo economies and business profits. The super low expected returns were the price to pay for that protection. I take diversification seriously.

When I purchased these fixed income instruments, I also had a vague idea that I may be needing that money within the next five years or so. Conventional wisdom is to place money that you will need within five years or so in fixed income. On the other hand, I also wanted to get some diversification away from equities. The results from the past two years show that I achieved diworsification in this portion of my assets.

As I reviewed what I was doing, I realized that these instruments were not generating good expected returns. While diversification is great in theory, I was essentially diversifying my future expected returns away instead. As someone in their early 30s, who will likely end up generating income for most their lives, I have decades ahead of me. So having a 15% - 20% allocation to fixed income is probably too much for me, based on future expected returns. In addition, as I now have ten years of good earnings under my Social Security history, I also can expect to see a decent retirement check several decades from now. That future stream of social security checks is an asset that is part of my long term fixed income exposure.

Wednesday, August 16, 2017

The Blueprint for Successful Dividend Investing

This is a guest post by Nick McCullum from Sure Dividend. Sure Dividend uses The 8 Rules of Dividend Investing to systematically identify and rank high-quality dividend growth stocks suitable for long-term investment.

Dividend growth investing is one of the most straightforward and powerful ways to build long-
term wealth. It can also seem highly complicated to those without experience in this investment strategy.

Fortunately, one of the best things about dividend growth investing is its ease of implementation. This makes it well-suited for a wide variety of investors.

Additionally, dividend growth investing stands the test of time. This investment strategy has been studied/written about since at least 1934, when Security Analysis (arguably the most famous book on investing) was published:

“The prime purpose of a business corporation is to pay dividends regularly and, presumably, to increase the rate as time goes on.”
– Benjamin Graham in Security Analysis

Clearly, something is special about dividend growth investing.

With that in mind, this article will describe four easy-to-understand principles that form the blueprint for successful dividend growth investing.

Invest in Consistent Dividend Growers

Monday, August 14, 2017

Tanger Factory Outlets (SKT) Dividend Stock Analysis

Tanger Factory Outlet Centers, Inc. (SKT) is an owner and operator of outlet centers in the United States and Canada. This REIT which focuses on developing, acquiring, owning, operating and managing outlet shopping centers. As of December 31, 2016, its portfolio consisted of 36 outlet centers, which contained over 2,600 stores representing approximately 400 store brands. Tanger Factory Outlet Centers is a dividend achiever, which has rewarded shareholders with a raise for 24 years in a row.

Tanger has maintained a high occupancy rate over the past 20 years. The rate usually dips to 96% during a recession, and then bounces back to 98% - 99%, before going down during the next recession. Currently, Tanger has a low occupancy rate, as if we are in a recession.

You can see Tanger's largest tenants listed below. Most of those are branded companies, which sell merchandise such as apparel (clothes) to the masses. I do believe that these tenants could face more pressure than those for Realty Income and National Retail Properties. This is where I could conclude that perhaps Tanger is slightly riskier than Realty Income and National Retail Properties. That being said, I believe that each of those retailers has a chance of implementing a dual online/brick and mortar strategy for accommodating customers. Having some brand equity associated with specialty merchandise and exceptional quality, can also be a plus. Another plus is having a type of merchandise that is unique to the customer. For example, purchasing shoes or clothes requires the need for some physical trial and error, until you find the one that fits right. Buying certain items like shoes online could be trickier, because it may create extra hassle of mailing things back if they are not as advertised. The other nice thing to consider is that the properties are easy to reconfigure in order to accommodate new tenants.

Thursday, August 10, 2017

Dividend Growth Investing Promotes Long-Term Thinking

Dividend growth investing encourages long term buy and hold investing. With dividend growth investing you buy a company with a rising dividend at the right price, and you then hold on to it for as long as the dividend is at least maintained. You ignore all the noise out there, and keep holding.

If you keep your emotions in check, you may find yourself holding companies for decades to come, while enjoying rising dividend income. This passive approach keeps investment costs low, which means that you get to keep your fair share of investment returns. It is easier to practice dividend investing through the difficult times, because you are getting paid to hold the worlds best quality companies.

With dividend growth investing, all we do is buy future income streams. With every $1,000 that I invest, I end up generating $30 - $40 in annual dividend income. This income can be used to pay for my expenses in retirement. If I earned $20/hour, I am essentially buying back 1.5 - 2 hours of freedom with every $1,000 invested. The goal is after several years of saving and investing, to replace your paycheck with the dividend income from your portfolio.

For example, if you invest $1,000 in Altria (MO) today, you will earn an annual dividend of $37/year. This sounds like a small amount of money that many will laugh at you for. But you should not despise the days of small beginnings. As the company earns more, it will pay more dividends. If earnings per share double over the next decade, and dividends follow along, your stake will be earning $74/year ( without factoring in dividend reinvestment). As you save more money, you can buy more shares in other companies. Perhaps you will add $1,000 in Tanger Factory Outlets (SKT), which will add $52 to your annual dividend income. You may also keep adding stakes in more promising dividend growth companies at attractive valuations that you stumble upon on your journey. They will generate more dividend income for you over time.

Popular Posts