Thursday, December 29, 2016

J. M. Smucker (SJM) Dividend Stock Analysis

The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and internationally. The company is a member of the dividend achievers index, and has boosted distributions for nineteen years in a row.

The company’s last dividend increase was in July 2016 when the Board of Directors approved an 11.90% increase to 75 cents/share. The company’s largest competitors include Conagra (CAG), Kraft Heinz (KHC) and Hershey (HSY).

Over the past decade this dividend growth stock has delivered an annualized total return of 14.10% to its shareholders.

Tuesday, December 27, 2016

CVS Health: A High Dividend Growth Machine to Consider

CVS Health Corporation (CVS), together with its subsidiaries, provides integrated pharmacy health care services. It operates through Pharmacy Services and Retail/LTC segments. The Pharmacy Services Segment provides a range of pharmacy benefit management (PBM) solutions. The Retail Pharmacy segment includes retail drugstores, online retail pharmacy Websites and its retail healthcare clinics.

The company announced that it is raising its quarterly dividend by 17.60% to 50 cents/share. This is the fourteenth consecutive annual dividend increase for this dividend achiever. In addition, with a new $15 billion share repurchase authorization, the company now has more than $18 billion authorized to be used for share repurchases over the next few years.

Over the past decade, the company has managed to boost dividends at a rate of 25.40%/year.  This is some impressive dividend growth out there for CVS Health shareholders. However, I would expect that this rate of annual dividend growth to slow down a little over the next decade. If CVS Health managed to grow dividends at a rate of 10%/year, supported by strong earnings growth from here, I would be a happy camper.


This was supported by a solid 12.30% average increase in annual EPS over the past decade, and a low payout ratio. I analyzed the company in November, and initiated a position around that time. Please check my analysis of CVS Health for more information about the company.

Currently, CVS is attractively valued at 16.40 times forward earnings and a yield of 2.50%. I took advantage of the huge sell-off last month and initiated a small new position in the stock. Given the rapid increase in dividends, I think that the stock is a good value today.

Full Disclosure: Long CVS and WBA

Relevant Articles:

CVS Health (CVS) Dividend Stock Analysis
Dividend Growth Investing At Work
The predictive value of rising dividends
How to value dividend stocks
Seven dividend companies bringing holiday joy to shareholders

Friday, December 23, 2016

Best Articles for 2016

I wanted to thank you all for reading the Dividend Growth Investor website. This site is a result of my efforts to improve my investing over time, write down and organize my thoughts, and make myself do the work to form an opinion on companies to invest in.

I find it helpful to write down my position on a given topic, and then revisit it a few years later, in order to learn from it. I would encourage all of you to keep an investment journal in private or in public, in order to write down reasons behind your strategy and the investment selections you are making. After a few years, you should be able to learn from your mistakes, and hopefully find ways to improve your results.

The way to improve is by gathering data, and analyzing the results against your expectations. I followed this approach to find out the most read articles on the  Dividend Growth Investor website.

I have compiled a list of eight articles that readers found helpful in 2016, as evidenced by number of visits. The articles include:

1) How to set up your own perpetual income machine

2) 24 Dividend Champions for Further Research

3) Nine Attractively Valued Dividend Stocks to Consider

4) My Five Largest Dividend Portfolio Holdings for the Long Term


5) Building a Core Dividend Growth Portfolio With These Eight Companies

6) Dividend Aristocrats List for 2016

7) Dividend Aristocrats for Dividend Growth and Total Returns

8) Dividend Champions - The Best List for Dividend Investors


It is very nice to see that my readers are interested in the tools of the trade, such as the lists of dividend champions and dividend aristocrats, which many use as their starting point in their screening process. It is also interesting to see that readers like actionable lists of companies for further research that they can analyze in more detail.

Thank you again for reading.

Dividend Growth Investor

Wednesday, December 21, 2016

Dividend Kings List for 2017

A dividend king is a company that has managed to increase dividends every single year for at least 50 years in a row. There are only 20 companies in the US, which have achieved this mighty goal.

These are impressive companies to research, because they have been able to overcome several wars, several recessions, high inflation, oil price shocks, and multiple booms and busts. This is a testament to the business models which continued to chug along, uninterrupted by outside competitive forces, delivering goods and services to customers that valued them. Against all odds, these companies managed to grow earnings, and then reward their patient long-term shareholders with a dividend raise for over half a century.

The common denominator behind each of those companies is a participant in an industry that is characterized by slow change. The list of dividend kings has increased from ten companies in 2010 to twenty this year.

The newest addition was ABM Industries (ABM), which raised its dividend last week. ABM Industries has managed to increase dividends for 50 years in a row. Another new addition in 2016 was Tootsie Roll (TR). The company with the longest streak of annual dividend increases is water utility American States Water (AWR), which has managed to raise dividends to shareholders for 62 years in a row.

Monday, December 19, 2016

Dividend Growth Stocks for Further Research

Each week I review the list of dividend increases as part of my monitoring process. This exercise is helpful in evaluating how my existing holdings are doing, and also discovering other interesting companies for further research.

For this weeks review, I have included companies that I believe are close to being attractively valued, or are attractively valued. We have a mixture of companies with a wide range of dividend growth records. I believe that each one of those companies has qualitative characteristics that make their dividends safe. The important trick is to then analyze each company, and initiate a position at the right entry valuation.

The companies include:

Thursday, December 15, 2016

The advantages of being a long-term dividend investor

Most readers know me as a person that buys a stock in a company I like, and then I keep building a position as long as valuation and allocation to security makes sense. Once I purchase a security, my intent is to hold it forever. I rarely sell, and have only done so when dividends have been cut or valuations have been hard to justify. There are many reasons why I keep holding on to a stock for as long as dividends are at least maintained.

If dividends keep increasing, and earnings keep going up, this means that the intrinsic value is increasing. If dividends are at least maintained, I take the approach of wait and see if fundamentals can improve again. I have seen it time and again with established companies like Hershey (HSY), Kellogg (K) and General Mills (GIS), where dividends are increased for many years, and then frozen for a few more years. After that, the streak of dividend increases continues, and the patient investor keeps reaping the rewards. The advantages of being a long-term dividend investor include:

Wednesday, December 14, 2016

What is dividend investment risk?

To many investors and financial professionals, the term investment risk is widely discussed. This term usually entails situations where the value of the investment fluctuates in quoted value. The saying goes that if you purchased Johnson & Johnson (JNJ) at $70/share in 2008, and the stock goes down to $45/share, your risk has increased.

I define dividend investment risk as a situation where my investment capital is permanently impaired. If I buy a stock which essentially goes to zero, I would have essentially damaged my capital, as I would be unable to generate much in income from that portion of my portfolio. I would be unable to compound my capital from that point, because anything times zero is still zero.

The scenario with Johnson & Johnson stock mentioned in the first paragraph really happened during the 2008 – 2009 bear market. However, the fundamentals of Johnson & Johnson did not deteriorate, and it was still the great business it always was. In fact, earnings didn’t get depressed as much as other industries like Financial Institutions, and dividends kept getting raised and paid like clockwork. Earnings per share increased from $3.73 in 2006 to $4.40 by 2009, while dividends per share went from $1.46 in 2006 to $1.93 by 2009. The company is expected to earn $6.71/share in 2016, and pays a per share dividend of $3.20/year. Incidentally, I find the company to be attractively valued today. Check my analysis of Johnson & Johnson for more information about the company.

Monday, December 12, 2016

Seven Dividend Growth Stocks Delivering Strong Raises and High Returns to Shareholders

There is a tradeoff between dividend yield and dividend growth. Investors who start with a higher yield, sacrifice future dividend growth. Investors who choose a lower dividend yield, expect higher dividend growth over time. Neither the future yield, nor the future growth are guaranteed of course. This is where it makes sense to hold different types of dividend growth stocks. My observation over the past decade have been that the companies with low yields are generally ignored by a lot of dividend investors. This is unfortunate, because many of these companies end up delivering outstanding total returns, and high future yields on cost for those patient enough to recognize their potential early. If you are a younger investor, it may make more sense to focus on companies with higher dividend growth, which have a lower yield today. Investors who are retired may shun lower yielding equities, because they are mostly interested in current income that meets their needs. Long term readers know that we go beyond broad generalizations, and dissect trends in financial performance and valuation in order to select the best companies at the best price.

Over the past week, there were several companies that raised their dividends to shareholders. I narrowed the list down to those that have managed to increase dividends for at least a decade. Most of those companies have lower yields, but pretty good rates of historical dividend growth. The companies include:

Thursday, December 8, 2016

Procter & Gamble (PG) Dividend Stock Analysis 2016

The Procter & Gamble Company (NYSE:PG), together with its subsidiaries, manufactures and sells branded consumer packaged goods. The company operates through five segments: Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care. This dividend king has paid dividends since 1891 and has managed to increase them for 60 years in a row.

The company's latest dividend increase was announced in April 2016 when the Board of Directors approved a 1% increase in the quarterly dividend to 66.95 cents /share. The company's peer group includes Colgate-Palmolive (NYSE:CL), Kimberly-Clark (NYSE:KMB) and Unilever (NYSE:UL)

Over the past decade this dividend growth stock has delivered an annualized total return of 6%/year to its shareholders.

The company has managed to deliver an anemic 2.80% average increase in annual EPS over the past decade. Procter & Gamble is expected to earn $3.89 per share in 2017 and $4.21 per share in 2018. In comparison, the company earned $3.49/share in 2016.

Monday, December 5, 2016

Five Consistent Dividend Payers Raising Distributions to Shareholders

Each week, I go through the list of dividend increases in order to monitor performance of existing holdings, and uncover hidden dividend gems. I then narrow down the list by eliminating companies with a short dividend growth streak. I also look at things like trends in earnings per share, dividends per share, dividend payout ratios, in order to determine the likelihood of future dividend growth and growth in intrinsic value. My basic analysis also focuses on valuation and dividend sustainability.

Over the past week, there were five dividend stocks with a long streak of consecutive annual dividend increases, which raised dividends to shareholders. The companies include:

McCormick & Company, Incorporated (MKC) manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry. It operates through two segments, Consumer and Industrial. The company raised its quarterly dividend by 9.30% to 47 cents/share. This dividend champion has rewarded shareholders with a dividend raise for the past 31 years in a row. Over the past decade, McCormick has raised dividends at a rate of 9.60%/year. This quality company is selling at 23.50 times forward earnings and yields 2.10%. I would be interested in adding to my position in this compounding machine on dips below $76/share. Check my analysis of McCormick for more information about the company.

Friday, December 2, 2016

The best asset class to hold in retirement accounts

Regular readers know that I have assets held in taxable and non-taxable accounts.

Taxable account provide me with more flexibility in the range of investments I can select, and ease of accessing my money at a moments notice. However, I have to pay taxes on dividends and realized capital gains.

Non-taxable accounts ( also referred to as tax-deferred or retirement accounts) allow me to defer paying taxes on investments I have made. These retirement accounts come in all shapes and forms, but generally they allow me to defer paying taxes anywhere from a few decades to indefinitely. Taking money out of them is generally more difficult. It is not impossible however, and worth it, if you are willing to do some planning that will shave years off your journey towards financial independence. This is also not an issue for me, because I am a long-term investor and my investment money is not going to all be needed in a lump sum right away.

I have started to ask myself how to optimize my portfolio better. Deciding which assets belong in taxable accounts, and which belong in retirement accounts is one decision that would help me achieve a more optimized result (translation: more money). I want to make sure I am making the best long term asset placement for my portfolio.

Wednesday, November 30, 2016

The Walt Disney Company (DIS) Dividend Stock Analysis

The Walt Disney Company (NYSE:DIS) operates as an entertainment company worldwide. The company operates in five segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products, and Interactive. The company is not a typical dividend growth stock, although it has paid dividends since 1957, and has never cut them. Disney is a dividend angel which often raises dividends several years in a row, after which it keeps them unchanged. This is followed by another round of dividend raises again.

The most recent dividend increase was in December 2015, when the Board of Directors approved a 7.60% increase in the semi-annual dividend to 71 cents/share. The largest competitors for Disney include Time Warner (NYSE:TWX), Viacom (NYSE:VIA) and Twenty-First Century Fox (NASDAQ:FOXA).

Over the past decade the stock has delivered an annualized total return of 13.20% to its shareholders. Future returns will be dependent on growth in earnings and dividend yields obtained by shareholders.

Monday, November 28, 2016

Six Dividend Stocks Sending More Cash to Shareholders

Each week I review the list of dividend increases. This is helpful in monitoring existing dividend holdings, and monitoring the breadth of dividend increases across the universe of prominent dividend growth stocks. Dividend increases also provide a proxy for near term expectations for the performance of the underlying businesses. If management continues raising dividends at the same rate as before, without achieving that through increases in the payout ratio, this indicates that they are expecting continued success in the business. If management raises dividends slower than expected, this might be an indication that things are slowing down.

Regular readers know that dividend increases are just one of the things I look for in evaluating companies. I am looking for a company with a strong track record of annual dividend growth, which is supported by growth in earnings per share. If such a company is available at an attractive valuation, it should be analyzed in detail, before being considered for my dividend growth portfolio.

Over the past week, there were six companies that met my minimum requirement for annual dividend increases. The companies include:

Tuesday, November 22, 2016

Six Dividend Stocks Rewarding Shareholders with a Raise

Each week, I go through the list of dividend increases in order to monitor performance of existing holdings, and uncover hidden dividend gems. I then narrow down the list by eliminating companies with a dividend growth streak that is less than a decade. I also look at things like trends in earnings per share, dividends per share, dividend payout ratios, in order to determine the likelihood of future dividend growth and growth in intrinsic value. My basic analysis also focuses on valuation and dividend sustainability.

Over the past week, there were six dividend stocks with a long streak of consecutive annual dividend increases, which raised dividends to shareholders. The companies include:

Brown-Forman Corporation (BF.B) manufactures, bottles, imports, exports, markets, and sells various alcoholic beverages worldwide. It provides spirits, wines, ready-to-drink cocktails, whiskey, vodka, tequilas, champagnes, brandy, and liqueur. Last week, the company raised its quarterly dividend by 7.40% to 18.25 cents/share. This marked the 33th consecutive annual dividend increase for this dividend champion. Over the past decade, Brown-Forman has managed to raise its dividends at a rate of 9.40%/year. Currently, the stock is overvalued at 26.10 times forward earnings and yields 1.60%. Brown-Forman would look more appealing on dips below $36/share. Check my analysis of Brown-Forman for more information about the company.

Monday, November 21, 2016

3 Low Volatility Dividend Stocks To Make Staying The Course Easier

This is a guest post written by Ben Reynolds at Sure Dividend.  Sure Dividend helps individual investors build high quality dividend growth portfolios from Dividend Aristocrats and other dividend stocks with long histories.

The article Dividend Growth Investors: Stay The Course thoughtfully examines the difficulties of investing in dividend growth stocks when stock prices are falling.  

The article discusses how important it is to stay the course and continue building your dividend growth portfolio – even when prices are falling.  See below for an excerpt:

“There is a reason why stocks have done much better than bonds in the long-run – they are riskier. With stocks, there is always the chance that there will be violent fluctuations in the price. You can have steep downturns, which can have many weak hands scrambling for the exits. When stock prices go down, many investors assume that something is wrong, they panic and sell. They forget that your upside potential in terms of dividends and capital gains is virtually unlimited.”

The volatility of dividend stocks is what makes staying the course more difficult.  The larger the price fluctuations, the harder it is to hold onto a stock.

Friday, November 18, 2016

Starbucks (SBUX) Dividend Stock Analysis

Starbucks Corporation (NASDAQ:SBUX) operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company initiated its dividend in 2010 and has been growing distributions rapidly since then. While the company has only managed to increase dividends for four years in a row, I believe that it has the potential to reach dividend achiever status, and has the growth story to become as successful for its dividend growth investors.

The most recent dividend increase was in November 2016, when the Board of Directors approved a 25% increase in the quarterly dividend to 25 cents/share. The company's competitors include McDonald's (NYSE:MCD), Nestle (OTCPK:NSRGY) and Dunkin Brands (NASDAQ:DNKN).

Since the company initiated a dividend payment in 2010, the stock has returned 315%. Future investment returns will be dependent on growth in earnings and dividend yields obtained by shareholders, as well as the initial valuation locked in at the time of investment.

Wednesday, November 16, 2016

CVS Health (CVS) Dividend Stock Analysis

CVS Health Corporation (CVS), together with its subsidiaries, provides integrated pharmacy health care services. It operates through Pharmacy Services and Retail/LTC segments. The Pharmacy Services Segment provides a range of pharmacy benefit management (PBM) solutions. The Retail Pharmacy segment includes retail drugstores, online retail pharmacy Websites and its retail healthcare clinics. This dividend achiever has paid a dividend since 1916 and increased it for 13 years in a row.

The most recent dividend increase was in December 2015, when the Board of Directors approved a 21.40% increase in the quarterly dividend to 42.50 cents/share. The largest competitors for Walgreen include Walgreen Boots Alliance (NYSE:WBA), Wal-Mart (NYSE:WMT) and Rite-Aid (NYSE:RAD).

Over the past decade this dividend growth stock has delivered an annualized total return of 11.40% to its shareholders. Future returns will be dependent on growth in earnings and dividend yields obtained by shareholders.

Monday, November 14, 2016

Twenty Dividend Champions For Further Research

I have built my portfolio of dividend growth stocks over the past 8 – 9 years, by following a disciplined approach to investing. Having an objective approach has helped me immensely in staying the course, and not panicking and selling out when things looked difficult. As a general rule, dividend growth investors buy stocks to hold for years. Success is the result of an enterprise that is purchased at an attractive valuation, which then manages to grow earnings and dividends over time. This allows the investor to compound wealth and income, and ignore short term price fluctuations. The only exception to avoiding the moody Mr Market is when it offers quality companies at a discount. Getting paid to hold on to stocks has been helpful. Seeing the companies I own thrive, and boosting their dividends is helpful as well.

My process included a few simple steps, such as:

Thursday, November 10, 2016

An Investment Plan Helps You Stay The Course

Over the past week, we have seen some crazy turbulence in stock prices.

When I saw S&P 500 futures down by 5% on Election Day, I was not happy. However, I saw it as an opportunity to add to my portfolio. Given the rapid overnight turnaround in stocks by the morning however, I was not able to capitalize on the weakness.

I did absolutely nothing all week, other than to initiate a small position in a company called CVS (CVS) the day before. Other than that I didn’t panic on Election Day, and just held to my stocks.

As I have discussed before, I did not panic because I have an investment plan in place. My plan calls for maxing out my retirement accounts every two weeks through my paycheck, and then investing anything that is left over in my taxable portfolios. My investment decisions are mostly driven by availability of fresh capital to put to work, and investment ideas to a certain extent.

Wednesday, November 9, 2016

Building a Core Dividend Growth Portfolio With These Eight Companies

This is a guest post by Mike, aka The Dividend Guy. He authors The Dividend Guy Blog since 2010 and manages portfolios at Dividend Stocks Rock. He is a passionate dividend investor.

I had the chance to start my investment journey at a relatively young age, I was 22 when I made my first trade on the stock market. Back then, I didn’t have a detailed investment process designed. If there is one thing that I have learned since then is that investing success goes through a solid investment process. If I want to build a strong portfolio, I must have a strong methodology to select the right companies. This is the way to go for any investing strategy, and it is also the case for dividend growth investing. 

I’ve noticed that not all dividend investors think the same. To my surprise, there are some important differences between most of us in the manner in which companies are selected. For example, I’m definitely not a yield seeker. In fact, if there is one thing I don’t consider during my investment selecting process, it is the dividend yield! I focus on the dividend growth as a pillar of my investing strategy. I’ve established 7 investing principles around dividend growth to manage my portfolio. 

I wanted to share these principles with you by giving you eight examples of companies that meet my investing criteria and should create a solid base for any dividend growth portfolio.

Tuesday, November 8, 2016

My take on HCP’s Dividend Cut

HCP, Inc. (HCP) is a real estate investment trust that invests in properties serving the healthcare industry including sectors of healthcare such as senior housing, life science, medical office, hospital and skilled nursing.

HCP (HCP) spun-off Quality Care Properties (QCP) unit on October 31. Shareholders received a share of QCP for every five shares of HCP they owned. After the spin-off, the company announced its new dividend of 35 cents/share, which was a decrease from 35.70% from the prior dividend of 57.50 cents/share. This ended the 30 year streak of annual dividend increases for this dividend champion. Of course, we do not know whether QCP will be paying a dividend, and what their dividend rate is going to be. If the new dividend was decreased by 20%, I would have viewed it as a dividend freeze, which is fine as the level of income generating assets is decreasing by 20% due to the spin off. Since the dividend decrease was not proportional to the amount of shares that were spun-off, I view it as a dividend cut.

Monday, November 7, 2016

Three Dividend Kings Raising Dividends For 60+ Years

A dividend king, is a company that has managed to boost dividends to shareholders every single year for at least 50 years in a row. There are 19 dividend kings in the US, which is an increase from the end of 2015, as Tootsie Roll (TR) joined the ranks of this elite list earlier this year. There were only ten dividend kings, when I first intriduced the term in 2010. Being a dividend king is an impressive achievement, because the last 50 years were a pretty turbulent time for business. Being a dividend king is not an automatic buy signal however. I believe that each dividend king should be studied in detail by enterprising dividend investors. This is because these companies have managed to survive the calamities and destruction of the past 50 - 60 years, while growing earnings, dividends and shareholder returns.

Over the past week, there were three dividend kings, which raised dividends to their shareholders. Each of these companies has managed to grow dividends per share for at least 60 years in a row. That is an impressive track record. If these dividend streaks were individuals we were talking about, they would have been eligible for Social Security within an year or so each.

The companies include:

Friday, November 4, 2016

Timing the Market Is Costly, Risky and Difficult

Why Am I Overweight in Fixed Income?

Back in November of 2015, I spoke to you how I am interested in growing my fixed income exposure. I wanted to achieve that, in order to protect myself from deflation. I believe that we are at risk of a deflation, if we continue to get industries disrupted, if economies continue to languish, if we continue to get increased automation that replaces workers and therefore their incomes and demand for goods and services. I also believe that global trade could push prices lower, as global competition pushes producers to compete on a more equal level.

Over the past year I have been investing in Certificates of Deposit, US Agency Bonds and Treasury Inflation Protected Securities. I have also took advantage of a few savings accounts that offer higher yields today like NetSpend ( First $1,000 yields 5%, but used to be $5,000 a few months ago) or Insight Savings. I also keep three months expenses in my savings account, for my emergency fund. My checking account has roughly one to two times monthly expense. Most of the fixed income exposure I have is in taxable accounts. The only exception includes TIPs and a bond market fund I own in my 401 (k). I used to allocate 10% of my paycheck to the bond fund, but I have been gradually increasing that to 20%, and now it is at 30% of my paycheck. I will likely continue doing that either until S&P 500 drops below 20 times earnings or until my fixed income exposure in the 401 (k) exceeds 20% ( currently it is a lot less than 10%).

Wednesday, November 2, 2016

Avoiding High Portfolio Ownership of Successful Investments

I have been investing in dividend growth stocks for the past decade. There have been hundreds of other fellow dividend investors, who have also invested in dividend paying companies over the same period of time. There are some, who have invested for even a longer amount of time. Unfortunately, when you invest for a long time, you may end up with a few very successful positions, which account for a disproportionate amount of your portfolio.  The question I have been getting recently has been what to do in this situation. I would note that this problem generally happens to investors who are not adding money to their portfolios anymore. A few examples cited include Realty Income (O), V.F. Corporation (VFC) and Altria (MO), which have delivered fantastic returns since 2008 - 2009.

This of course is a great problem to have. If you are a long-term investor, it is very much possible that after a decade or two of patient investing, the power of compounding will result in many companies which not only pay more and more in annual dividend income, but also result in large unrealized gains for the stockholder. As a result, there may be several companies in your portfolio, which could end up with a very large portfolio weight. In my opinion, you own too much in an individual security if it accounts for more than 4% - 5% of your portfolio’s value.

This article only deals with individual stocks/securities – it is not relevant to mutual funds or exchange traded funds. In some situations like these, investors end up putting their whole portfolio in just one diversified fund, and this could actually be a prudent move from a diversification perspective.

Monday, October 31, 2016

Four Dividend Champions On Sale

I usually look at dividend growth stocks and their dividend increases every week, as part of my portfolio monitoring process. In this weekly review, I have highlighted four dividend champions, which recently raised distributions. The common denominator behind each of these dividend champions is that they seem attractively valued today.

The reason why these companies appear attractively valued in an otherwise expensive marketplace for securities, is because market participants have doubts about each of these companies and their earnings prospects. It is up to the enterprising dividend investor to analyze those opportunities, and determine if they are appropriate additions for their income portfolios.

As a rule, I try to invest at attractive entry valuations in companies that have a track record of annual dividend increases, which is fueled by earnings growth. The goal is to buy such a company without overpaying for it,to hold on to it, as it earns more, and pays me a dividend to hold to it.

The four companies in question include:

Friday, October 28, 2016

The best decision I ever made

In January 2009, I found myself without a job. But I wasn’t worried.

I had graduated school in 2007 with $2,000 in cash, which I promptly spent on a used car that drained all my money away. I then found a job, and saved up approximately 70% of my paychecks. I put enough money to get the company match on the 401 (k), and put the remainder in Certificates of Deposit. Yields on those CD’s back then were over 5%/year. I had no idea where to invest the money, so I was researching it furiously. Inflation was running high, and the first cracks of the housing bubble had started to appear.

I knew stocks went up 10%/year. The problem was that they didn’t go up every year. Sometimes, stock prices went nowhere for extended periods of time, as they did between 2000 – 2012, or 1966 – 1982. I also knew I didn’t want to spend my whole life working at a job if I didn’t want to.

So I needed a source of cash that was passive in nature, and is relatively stable in the amount and timing. Interest income seemed fine, except for it was heavily taxed as ordinary income and seemed to be losing purchasing power over time. I knew that if I didn’t want to work at some point in time, it would be helpful to have income producing assets, which will generate income to live off. I was very lucky that I sometimes had downtime at my work, so I could research things. This is when I read a lot of studies on long-term performance of US stocks. I also found a lot of blogs, many of which I still read today.

Wednesday, October 26, 2016

How I plan to retire in a decade

There are three levers behind financial independence. The first lever is earning more, and the second lever is spending less. The difference between earnings and spending is the savings we use to invest. Investing is the third lever. I have found that by focusing on these three items exclusively since 2007 – 2008, I am on track to reach financial independence somewhere around 2018. This doesn't mean that I would do nothing - it just means I would have the extra security and the option to live my life on my own terms.

I believe that achieving this goal is not an act of randomness, but an act of careful planning, execution and living life in a way that fosters building wealth. In addition, it is important to have systems, which are essential to living life in a way that fosters building wealth.

Earning

It is extremely difficult to find money to invest, if you have no money to pay for your expenses. This is where finding a decently paying job is important. I have always earned average income. In fact, my base pretax - salary never really exceeded $60,000/year until 2014/2015.

I have focused on earning more however. I have achieved this by starting this site, which has made money in the past. I have also hustled by opening bank and brokerage accounts, as well as credit cards.

By investing my savings in dividend paying stocks, my level of passive dividend income has been increasing exponentially.

Monday, October 24, 2016

Six Dividend Machines Boosting Dividends

With dividend growth investing, the goal is identify a company that grows earnings and distributions, and then purchase that company, without overpaying dearly for its prospects. A rising stream of dividend income is just one of the outcomes of a successful business for further research. Investing in dividend growth stocks is a long-term endeavor, which benefits only those who are willing to patiently sit and compound their wealth and income for decades.

One way to monitor progress is by evaluating how earnings and dividends are growing once per year. If a company’s management is growing dividends, this shows their bullishness on the company’s intermediate term business prospects.

Over the past week, there were several companies with established track records of annual dividend increases, which continued their streak of annual dividend increases. The companies include:

Friday, October 21, 2016

How to Grow Dividend Income Much Faster With Tax Advantaged Accounts

When I was doing my taxes for 2012, I realized that tax expenses were larger than my living expenses. I realized that in order to correct this, I need to legally minimize as much of taxes today as possible. I achieved that by maxing out all tax deferred accounts within my reach.

Since my epiphany in 2013 on the benefits of tax-deferred accounts, I have plowed most of my dollars into my 401 (k), Heatlh Savings Account (HSA), Roth IRA and SEP IRAs. I have noticed that since those moves, my dividend income and net worth increased much faster than before. This was not simply due to the bull market we experienced. It was because I just dutifully put money to work every two weeks or so, and let it sit there without touching it. In addition, the tax incentives really increased my net dividend income, and the amount I have to reinvest back.

For example, assume that all I can invest is $21,000/year. If I invested that in dividend stocks yielding 3%, I would generate $630 in annual dividend income. The types of dividend growth stocks that could make up this portfolio could include the likes of:

Wednesday, October 19, 2016

Can Apple become a dividend growth stock?

Apple Inc. (AAPL) designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players to consumers, small and mid-sized businesses, education, and enterprise and government customers worldwide. The company is the largest publicly traded company in the US by market capitalization. The company started paying a dividend in 2012, and has been raising it every year since then.

The company has done really well to its shareholders over the past decade, compounding at 27.62%/year for its shareholders. This performance is unlikely to be repeated over the next decade.


This was due to the fact that popularity for its products was exploding, and the company was unveiling new premium products to satisfy consumer needs. Examples include the iPhone and the iPad. All of this resulted in massive growth in earnings per share from 32 cents in 2006 to $9.22/share in 2015. The company is expected to earn $8.25/share in 2016 and $9.02/share in 2017.

Monday, October 17, 2016

Two Dividend Growth Stocks Showering Investors With More Cash

I believe in a bottom up method of evaluating each individual holding separately, and then if it holds up, not worrying about the portfolio as whole. Each week I monitor the list of dividend growth stocks that raise dividends. I use this as one of the procedures for monitoring my dividend portfolio holdings. Other ways to monitor your dividend growth holdings includes reviewing trends in earnings per share, dividend payout ratios, returns on equity and checking the story for major news such as acquisitions, mergers, divestments etc. In general, if you purchase a security at attractive valuations, you avoid overpaying for it, and that security grows earnings per share over time, it will deliver dividend growth and it will likely increase in intrinsic value. This is how a business owner evaluates a business by the way.

There were two companies that managed to raise dividends over the past week, which had at least a ten year track record of annual dividend increases. The companies include:

Friday, October 14, 2016

The Best Broker for Dividend Investors: Interactive Brokers

For the first three to four years of my transformation into dividend growth investing, I managed to develop a process of identifying attractive companies with prospects for further increases in passive dividend income. I managed to pay very little in commissions, since I was using brokers such as Zecco, which offered approximately 10 free trades every month. Since then, I kept adding money to other brokers, but was not able to find another company which offered low costs for me. This resulted in limitation on number of companies I can invest in every single month, despite the fact that I usually had more than 15-20 ideas at all times. I felt limited in the number of companies I can purchase every month, given that most brokers:

1) charge somewhere between $5 and $10 per online trade these days,
2) the fact that I do not want to pay more than 0.50% in commission costs per each transaction, and
3) the fact that I have a limit on the amount of funds I can contribute each month,

I believe that looking for great investments is important, but so is keeping costs to the minimum. Dividend investing is a business, and as the business owner my job is to keep expenses to the bone.

Wednesday, October 12, 2016

Two Dividend Growth Stocks On My Radar

In the past few days, I have noticed that a couple of dividend growth stocks have been selling at lower prices than before. Those are companies that have managed to grow earnings, and dividends over time. These companies are usually overvalued, but recent weakness has brought them closer to fair value territory. I would be interested in each one of those companies on dips below 20 times earnings. The companies include:

V.F. Corporation (VFC) engages in the design, production, procurement, marketing, and distribution of branded lifestyle apparel, footwear, and related products in the United States and Europe.
This dividend champion has increased dividends for 43 years in a row. Over the past decade, it has managed to boost dividends at a rate of 17.10%/year.

The company earned $2.85/share in 2015, and is expected to grow earnings to $3.20 in 2016 and $3.57 in 2017.

Currently, the stock is selling for 17.10 times expected earnings and yields 2.40%. Check my last analysis of V.F. Corporation for more information about the company.

Monday, October 10, 2016

Four Companies Rewarding Shareholders with a raise

I invest in companies that have a long track record of annual dividend increases. This is usually a result of a strong business model, that is fueled by earnings growth. I try to build a diversified portfolio of dividend growth stocks over time, and try to avoid overpaying for investments.

One of the ways to monitor dividend growth stocks is by checking the dividend increases. A company that has a culture of regularly raising dividends, is very likely to continue raising them. A company with a culture of regular annual dividend increases that reduces dividends is sending a signal that something has changed. Either way, it is important to monitor the fundamental position of the enterprise, in order to determine if dividends are sustainable, and if further dividend growth is probable.

There were four companies that raised dividends over the past week. Each one has managed to boost dividends for at least a decade. The companies include:

Wednesday, October 5, 2016

Getting Started – The Hardest Part About Dividend Investing

Imagine you have a certain amount of cash in your possession, which you do not plan on using for say 10 – 20 years. Or imagine that you are just starting out, and have a small amount of cash that will be added to your savings account every month.

You decide to invest that amount. You have been reading about dividend investing, and think it sounds cool to be paid more dividends every year from the investments you made years ago.

However, you have an uneasy feeling – there is so much information out there, you get information overload and you cannot do anything as a result. Where do you start?

Not all dividend stocks are created equal. A company is not an automatic buy, just because it happens to pays a dividend. You need to develop some knowledge to develop a framework to evaluate companies, and then need to use that knowledge to select companies for long-term income for your diversified portfolio.

So how to gain the knowledge if you are a complete beginner? What steps should you take?

Monday, October 3, 2016

Eleven Dividend Growth Companies Showering Investors With More Cash

I invest in companies that have a long track record of annual dividend increases. This is usually a result of a strong business model, that is fueled by growth in earnings over time. I try to build a diversified portfolio of dividend growth stocks over time, and try to avoid overpaying for investments.

One of the ways to monitor dividend growth stocks is by checking the dividend increases. A company that has a culture of regularly raising dividends, is very likely to continue raising them. A company with a culture of regular annual dividend increases that reduces dividends is sending a signal that something has changed. Either way, it is important to monitor the fundamental position of the enterprise, in order to determine if dividends are sustainable, and if further dividend growth is probable.

During the month of September, there were several notable dividend growth stocks, which continued their winning streak of delivering higher dividend payments to shareholders. Each of the companies listed below have managed to boost dividends for at least ten consecutive years ( with the sole exception being PMI). The companies include:

Thursday, September 29, 2016

Dividend Reinvestment – Automatic versus Manual

There are two schools of thought when it comes to dividend reinvestment. One of the options is to automatically reinvest dividends, whereas the other option is to selectively reinvest dividends received.

The automatic dividend reinvestment is the easiest one to do. Once you purchase a dividend paying stock, you essentially check the “dividend reinvestment” box. As a result, your dividend income is reinvested into more shares of the same stock, and you start the income compounding process. The set it and forget it type of action is particularly appealing to income investors who are just starting out and have small amounts to invest in the beginning,

Because of the fact that it is free, automatic reinvestment into more stock is most efficient for those investors. Otherwise, even at $4-$5/trade, reinvesting anything less than $800-$1000 in dividend income would be prohibitively expensive. In addition, some companies offer DRIP discounts for shareholders who automatically reinvest distributions back into more stock. Unfortunately, even if you reinvest dividends back into the same stock that paid them in a taxable brokerage account, you still owe taxes to the IRS, depending on your income level.

If you are investing in a retirement account, where contribution amounts are limited, it may also make sense to reinvest automatically, regardless of valuation. This is because it would be more cost efficient to do so, rather than accumulating cash until it makes sense to make another investment from a cost standpoint.

Tuesday, September 27, 2016

Common Misconceptions about Dividend Growth Investing

There are many misconceptions about dividend investing. I have tried itemizing several of them, outlining them, and providing a brief commentary. Dealing with viewpoints that are different from yours is very important, because it opens you up to new ideas, and tests your strategies against scenarios that you might not have thought about. Unfortunately, most of the time I deal with viewpoints which are against dividend investing, I often find the authors are only providing their opinions, without ever bothering to examine any factual evidence on the subject. It is very dangerous to have an opinion on a subject, without knowing it inside out, but sticking to your original viewpoint, even if the evidence refutes your original ideas.

As Charlie Munger says " “I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do.” 

The misconceptions are summarized below:

Thursday, September 22, 2016

Frequently Asked Questions (FAQ) About Dividend Investing

I have highlighted below several frequently asked questions about dividend investing. This is not an all inclusive list, but more of a running total of questions I am usually asked about dividend investing, dividend growth stocks and my strategy. The answers pertain to my investing, strategy and experience, and I have tried to respond to the best of my knowledge and intentions. As I get new recurring questions asked, I would add them to this list.

Why should you focus on dividends?

A company that pays dividends is less risky than a company that has never paid a dividend. A company that pays dividends pays with actual cash, which cannot be easily manipulated like earnings. Dividends are a more stable part of total returns, and are always positive, which is what makes them ideal for retirees who want to live off their nest egg. Paying a dividend imposes discipline on management, that makes them evaluate the cash flow impacts of new projects and make them only focus on the best ideas. This dividend payment makes management less likely to engage in empire building, and less likely to simply hoard cash or mindlessly expand/acquire companies which are not accretive to returns. Few US managements are willing to cut a dividend – doing so sends signals that the company is weak financially.

Tuesday, September 20, 2016

Key Ingredients for Successful Dividend Investing

There are four key attributes that need to be considered, in order to be successful at dividend investing. These ingredients include focusing on quality, earnings growth, entry price and sustainable distributions. In this article, I would focus in more detail behind each of these four items.

While investors could argue that one cannot put success in a pre-packaged recipe for achieving it, I have found the four ingredients above to be essential for my income investing strategy.

Quality

I believe in purchasing quality dividend paying companies. This means that I try to focus on companies with strong competitive advantages, strong brand names and/or wide moats. Companies like that offer a product or service which customers desire, and are willing to pay a price which would deliver a fair profit. In addition, companies which offer products which are perceived to have quality characteristics, which typically translates into repeated purchases of the goods or services. In addition, companies that offer a unique product or service are able to compete based upon the added value they bring to the marketplace, and avoid costly price wars with competitors. Furthermore, the company would be able to have pricing power and pass on costs to customers, which will be much less likely to switch to another product. I understand that quality lies in the eyes of the beholder, but through experience, dividend investors should be able to uncover quality dividend paying gems.

Thursday, September 15, 2016

Dividend Champions - The Best List for Dividend Investors






Investors who are looking for quality stocks that regularly raise dividends have several lists available as a starting point in their research. The typical lists include the S&P Dividend Aristocrats index, which consists of 50 constituents of the S&P 500 which have raised distributions for over a quarter of a century and also have certain capitalization, liquidity requirements. Another popular list includes the Dividend Achievers Index, which includes almost all companies traded on US exchanges which have consistently raised distributions for over one decade, and which also meet a certain liquidity threshold as well. The third list, the dividend champions, is maintained by Dave Fish. This is by far the most comprehensive list of dividend growth stocks available for free. It breaks down the dividend growth universe into dividend champions, dividend contenders and dividend challengers. The list could be obtained from this link.

The dividend champions list includes all stocks traded in the US, which have raised dividends for at least twenty-five consecutive years. I prefer the dividend champions list than the dividend aristocrats index, since it is more complete and does not have artificial requirements such as index membership or minimum trading volume. These requirements are typically irrelevant to long-term dividend investors, who focus on fundamentals that could support a growing distribution, not on day to day market fluctuations. Currently there are 110 dividend champions, which yield 2.46% on average.

Some notable dividend champions include Colgate-Palmolive (CL), Procter & Gamble (PG) and Coca-Cola (KO). Colgate-Palmolive (CL) has consistently raised dividends for 53 years in a row, but for some strange reason was not included in the dividend aristocrats index until 2012. This is a great example why focusing on the dividend champions list could provide a more comprehensive selection of elite dividend stocks. Another dividend champion is Altria Group (MO). The only reason why the company is not on the dividend aristocrat list is because its dividend payment is lower due to the spin-off of Phillip Morris International (PM) in 2008 and Kraft Foods (KFT) in 2007. Other than that, the tobacco company has managed to increase dividends for 47 years in a row.

Tuesday, September 13, 2016

Create Your Own Dividend ETF With Motif Investing



Motif Investing is an established brokerage which lets investors create their own portfolios, and purchase them for a set commission. Each investor can build a portfolio of up to 30 individual securities, and then purchase that portfolio for a single commission of $9.95. This works out to 33 cents per trade on 30 securities, which is cheaper than Interactive Brokers on a per-trade basis. If you were making 30 individual stock trades at Scottrade, you would have to pay $210. At Tradeking, you would have to pay $148.50 for purchasing those 30 individual securities. At Schwab, it would cost $268.50 to assemble a portfolio of 30 individual stocks.

There are no monthly fees and no account minimums, which makes Motif Investing a good broker for new dividend investors. Motif Investing also offers single stock purchases for a low price of $4.95/trade, which is relatively cheap as well. They do require a minimum investment of $250 to purchase a Motif. You can buy or sell Motifs for $9.95 or you can re-balance also for $9.95/trade. The brokerage is SIPC insured, which means that securities up to $500,000 are protected in case the brokerage firm goes under. They do not reinvest dividends yet, but this is not really an issue for me, since I reinvest dividends selectively.

Thursday, September 8, 2016

The List of All Articles From the Dividend Growth Investor Blog

I have been writing about dividend growth investing since January 2008.

I often get asked questions by readers. Many of those questions inspire me to write articles, that address them.

However, I also constantly get a lot of questions which have already been addressed before. This is why I maintain a list of all articles written since I started this site in 2008. I try to update this list at least once per month. I just updated it through the end of August.

Please feel free to browse through the articles. I believe that this list of articles will likely address a large portion of questions.

Below, you can find the complete list of all articles that were published to Dividend Growth Investor site since January 2008. Thank you for reading!

▼ August 2016 (12)

▼ July 2016 (10)

▼ June 2016 (14)


▼ May 2016 (12)

▼ April 2016 (11)



▼ March 2015 (14)
▼ September 2014 (14)
▼ August 2014 (15)
▼ July 2014 (16)
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▼ May 2014 (16)
▼ April 2014 (16)
▼ March 2014 (21)
▼ February 2014 (17)
    ▼ January 2014 (16)
    ▼ November 2013 (16)
      ▼ October 2013 (16)
        ▼ September 2013 (16)
          ▼ August 2013 (17)
            ▼ July 2013 (20)
              ▼ June 2013 (22)
                ▼ May 2013 (20)
                ▼ April 2013 (17)
                ▼ March 2013 (15)
                ▼ February 2013 (14)
                  ▼ January 2013 (16)
                  ▼ 2012 (153)▼ December 2012 (12)
                  ▼ November 2012  (11)
                  ▼ October 2012 (15)
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                  ▼ January 2012 (13) 
                  ▼ October 2011 (16)

                  ▼ September 2011 (13)

                  ▼ August 2011 (14)
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                  ▼ June 2011(16)
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                  ▼ April 2011 (15)
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                  ▼ January 2011 (13) 
                  ▼ December 2010  (13)
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                  ▼ August 2010 (14)
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                  ▼ 2009 (201)▼ December 2009 (12)
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                  ▼ February 2009 (21)
                  ▼ January 2009 (19) 
                  ▼ December 2008 (17)
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