Friday, June 24, 2016

Time in the Market Trumps Timing the Market

Good morning,

As you are probably aware by now, British voters have decided to leave the EU. The stock markets around the world are falling; currencies are going all over the place. Everyone is scared.

As an individual investor however, I have realized that the world is uncertain. I cannot do much about the fact that things change over time. I cannot do much about what other people feel, or do. I can only control what I do, or how I approach a situation.

The fact remains that we need to save for retirement. Therefore, as an investor, I can continue do follow my plan and focus on things within my control. Those things include:

1.Saving money every month, because I live below my means
2.Investing that money in dividend stocks and my 401 (k)
3.Reinvesting dividends strategically
4.Allowing my investments to compound over long periods of time

I personally believe that time in the market beats timing the market. This is because I am letting the companies do the heavy lifting for me over time, and thus allowing the maximum amount of time to let the power of compounding do its magic.

You may like the following articles I had written before:

If I were already retired, I would continue sticking to my plan, and living off those dividends, interest and pension income I am generating.

On a side note, I posted an analysis of Diageo (DEO) last week.

I would be interested in nibbling more if this stock goes below $100/share. It is also possible that today you may be able to see some bargains from companies which may be temporarily beaten down. Again, it is important to avoid extreme fear or extreme greed. Doing nothing today is perfectly fine. Nibbling and adding to some positions is probably fine. But if an investor panics and sells, chances are that they will regret this decision down the road.

I will continue following my plan. It is possible that the next several weeks will be volatile. But as a long-term accumulator of equities I welcome the opportunity to purchase future dividend income at a discount.

Thank you for reading!

Dividend Growth Investor

My personal journey with dividend stocks

This is a guest post by Financially Integrated who writes about dividend investing, wealth creation and escaping the rat race.

I have been attracted to dividend stocks for the better part of a decade. Over that time, my approach to investing in dividend stocks has changed somewhat, but the central theme remains high quality wide moat businesses that return a regular, growing stream of income.

I stumbled onto dividend stocks as a result of personal investment failures. My initial investing experiments in my early 20's were focused on chasing internet stocks with unsustainable business models. I had wrongly reasoned that they were a solid way to build quick wealth.

Unfortunately, what soon became apparent to me was that these were often businesses with poor economics and no sustainable competitive advantages. It cost me valuable time and money to ultimately figure this out, as my losses in these positions mounted.

I soon embraced Warren Buffet's Rule No 1, which is to never lose money. I realized that the best way to do this was to invest in businesses that have sound defensive positions and which generate significant cash flow. I also noticed that many of these high quality businesses happen to return significant cash flow back to shareholders in the form of dividends.

Wednesday, June 22, 2016

How to get dividend investment ideas

The daily life of dividend growth investor

Successful investors buy stock in companies which are within their circle of competence. This concept has been ingrained in the minds of value investors by Ben Graham and his most famous student Warren Buffett. Investors should buy only stocks they are intimately familiar with, either because they have extensive work experience with the company in some capacity, or because they use its products and services. "Buy what you know" is also a concept that legendary fund manager Peter Lynch has discussed in his book "One Up On Wall Street"

Some of the dividend paying companies in my portfolio are corporations, whose products I and millions of other consumers worldwide use on a daily basis. Here is a summary of how my daily routine provides me with dividend stock ideas for further research. The narrative is rather simplistic, but the point is that we are surrounded by investment ideas everywhere. Only after training ourselves to spot these opportunities, will investors be able to capitalize on them.

Monday, June 20, 2016

Diageo (DEO) Dividend Stock Analysis

Diageo plc (DEO) produces, distills, brews, bottles, packages, and distributes spirits, beer, wine, and ready to drink beverages. This international dividend company has increased dividends for 18 years in a row.

The company’s latest dividend increase was announced in January 2016 when the Board of Directors approved an 5.10% increase in the interim dividend to 22.60 pence /share. The company’s peer group includes Brown-Forman (BF.B), Beam (BEAM), and Constellation Brands (STZ).

Over the past decade this dividend growth stock has delivered an annualized total return of 7.70% to its US ADR shareholders.

The company has managed to deliver an 7.60% average increase in annual EPS in British Pounds since 2006. Diageo is expected to earn 88.71p per share in 2016 and 95.74p per share in 2017. In comparison, the company earned the equivalent of 94.60p/share in 2015. Each American Depository Receipt (ADR) that you can purchase on the NYSE is equivalent to four shares that are traded on the London Stock Exchange. If we convert the numbers to US Dollars using the exchange rate on 06/17/2016, we have expected earnings of $5.10 for 2016 and $5.50/share in 2017. The earnings for 2015 are equivalent to $5.94/share, using the exchange rate on June 30, 2015. The British Pound has depreciated by 9.40% since June 30, 2015. Using today’s rate, those same earnings are worth $5.43.

Friday, June 17, 2016

Key lessons I learned from my investment in Pfizer

This is a guest post written by Todd Wenning, CFA, who is an equity research analyst. Todd is the author of Keeping Your Dividend  Edge: Strategies for Growing & Protecting Your DividendsThe opinions expressed here and in the book are those of the author and not those of his employer.

In July 2008, just as the financial crisis was picking up steam, I bought some shares of the pharmaceutical giant, Pfizer. At the time, Pfizer had a trailing dividend yield of 6.9%. I thought this was a slam dunk investment. After all, Pfizer had increased its dividend for over 40 consecutive years, had recently boosted its payout by 10%, had a AAA-rated balance sheet, and was in a defensive industry that should, it seemed, hold up relatively well in a poor economy.[i] Even with Pfizer facing generic competition and slowing sales, declining dividend coverage, and a well-above average dividend yield, it seemed Pfizer was well-positioned to withstand some short term turbulence.

Revenue (million)
Dividends per Share
Free cash flow cover
Earnings cover
Source: Company filings, Author calculations.
A few months later in January 2009, I was having lunch with a colleague and we began discussing the sweeping dividend cuts that were occurring at the time. “I’m shocked at the types of companies that are cutting their payouts,” I remember him saying, “General Electric, Dow Chemical…and today was Pfizer.”

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