Friday, July 31, 2015

Dividend Growth Stocks I Purchased in July

One of my favorite quotes from Warren Buffett deals with an issue that many dividend investors face from time to time. The quote is” If you like a stock at $50, you would love it at $30”

As usual this quote is jam-packed with a lot of insight. It makes perfect sense that a long-term investor should be excited to purchase ownership stakes in real businesses at cheaper valuations. If you have analyzed a company, and you like the business, and the economics of the business are not materially impaired, the investor should be excited that prices are lower. For us dividend growth investors, it is always better when we can obtain dividend income at a discount. Who doesn’t like getting more bang (dividend income) for their buck?

In the month of July, I managed to add to my stakes in the following companies listed below. I didn’t get to buy all companies I was eyeing at the beginning of the month, since unfortunately I only have a limited amount of capital to deploy each month. I also decided to take advantage of the declines in two transportation companies, which have been exhibiting weakness recently.

Wednesday, July 29, 2015

Dividend Growth Stocks Protect Investors from Inflation

One of the biggest risks that investors in retirement face is inflation. There is a general trend of rising prices over time, which decreases the purchasing power of cash today, as prices on many items slowly increase. A dollar today is going to have a higher purchasing power than a dollar received in 2025.

Dividend growth stocks are the ideal venue for investors in retirement. This is because the dividend income usually rises faster than the rate of inflation, in diversified portfolios of dividend paying securities. For example, historically prices have risen by an average of 3.90% per year between 1960 and 2014. However, annual dividends on the S&P 500 index have increased by 5.60%/year between 1960 and 2014. I have taken the S&P 500 as a proxy for overall dividend growth that could be expected from a diversified portfolio of US stocks.

Monday, July 27, 2015

How I manage my dividend portfolio

I have received quite a few emails recently, asking me how I manage my dividend portfolio. In general, I focus on several things that I believe are important in managing a dividend portfolio.

1) Researching and analyzing companies

I try to make sure I have analyzed each company I own at least once every 12 – 18 months. This includes the analysis I post on this site. I do not post each stock analysis, since many of the companies I own are not attractive for a purchase. Hence I don’t post as many stock analyses as I actually do.

I obtain my information from multiple sources, including annual reports, financial websites, press releases, company presentations etc. I also have a spreadsheet, where I basically update the annual numbers I find helpful once per year for each company I am monitoring.

Friday, July 24, 2015

ACE Limited (ACE) Dividend Stock Analysis

ACE Limited (ACE), through its subsidiaries, provides a range of property and casualty insurance and reinsurance products worldwide. It operates through five segments: North American P&C, North American Agriculture, Insurance, Overseas General, Global Reinsurance and Life Insurance. ACE Limited is a dividend achiever, which has raised dividends for 23 years in a row.

The most recent dividend increase was in May 2015, when the Board of Directors approved a 3.10% increase in the quarterly dividend to 67 cents/share. After reviewing the past history of dividend increases however, I wouldn’t be surprised if there isn’t another dividend increase this year.

The company’s largest competitors include American International Group (AIG), Travelers (TRV), and Berkshire Hathaway (BRK.B)

Wednesday, July 22, 2015

Sector Allocations for Dividend Growth Investors

I am a fan of diversification as a tool to reduce risk. I diversify by buying at least 30 – 40 securities, representative of as many sectors as possible. As I mentioned in an article from last year on diversification, there are 10 11 sectors:

There are ten major sectors as identified by Standard and Poor’s. Those include:

Information Technology
Financials (used to include REITs, now they are their own sector)
Health Care
Consumer Discretionary
Consumer Staples
Telecommunication Services
Real Estate Investment Trusts (REITs)

Tuesday, July 21, 2015

Am I a successful dividend investor?

How do you define success? To me, success is the freedom to do my own thing, and the ability to reach my goals. Given the fact that I am a few years away from potentially reaching out my dividend goals, I would consider myself a successful dividend investor in progress. So how did I get there? The answers are simple – I developed my own approach, stuck to it through thick and thin, kept learning more about investing and kept my emotions at bay. At the same time I ignored the random noise that comes from individuals who do not know what they are talking about, yet scream the loudest.

I kept buying dividend growth stocks in 2008 and 2009, when everyone else tried to make me scared about investing. The economy was supposed to go in the tank, and the Great Depression was coming. Based on my studies of history, the Great Depression was tone of the best times to buy equities. Hence, I continued putting my hard earned cash into dividend paying stocks.

Monday, July 20, 2015

Six Dividend Growth Stocks That Keep Delivering For Their Shareholders

Dividend growth stocks are the gift that keeps on giving. I like the fact that most of the work in selecting good dividend growth stocks is upfront in analyzing those investments. What follows next is a lifetime of dividend payments, distributed every quarter, which grow over time. My goal is to assemble enough dividend growth stocks in my portfolio, in order to start generating income to pay for my retirement. My dividend portfolio is a silent worker in my household, who works 24/7 for me, and who dutifully shares all of their income with me. This income is completely passive in nature, and it does not require me to wake up at 6 am every day, shuffle TPS reports all day long, and make sure I do not forget to put a coversheet on those same reports.

I like watching dividend growth investing at work – this is when the companies I own keep rewarding me with a higher dividend check for a decision I made years ago. There were several notable companies which raised their dividends to shareholders. The list includes:

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