Monday, April 24, 2017

Seven Companies Giving Their Owners A Raise

I look at the list of dividend increases every week, as part of my monitoring process. I then narrow the scope by focusing on companies that have increased dividends for at least a decade. I do this in order to focus on companies that have managed to raise dividends throughout a full economic cycle or two. I also focused my attention on the companies which have managed to grow dividends by more than a token amount. My next step involves reviewing trends in fundamentals over the preceding decade, in order to determine if the business is growing. I also try to determine if the dividend is sustainable and can grow in the future. I want dividends that increase due to increases in earnings power. I do not want dividends that increase merely because the payout ratio is being expanded.

Last but not least, I also like to review valuations. After all, even the best company in the world is not worth overpaying for. If you overpay for an investment, you may still lose money, even if the company excels on the operations level and meets its growth forecasts.

Over the past week, there were several companies that gave their shareholders a raise. The companies include:

Friday, April 21, 2017

Rent Versus Buy - How to decide which one is best for you?

People usually get emotional when the topic of rent versus buy is brought up. One group swears by owning a home, and believes that it is a good decision. The second group believes in renting for life, and brings a lot of arguments to support their decision. I have personally stayed in the "undecided" camp, right in the middle of it all.

We are rational people however, so we want to avoid emotions, and make the best decisions for our own situations. Owning a home is one part a lifestyle decision, and another part a financial decision.

There are pros and cons to buying and renting a home.

I believe that some people who rent may be wasting their money away if house prices in their areas are low. If home prices are high however, people who buy a home may be the ones wasting their money away. Home prices are low, if they are selling at a low multiple of home cost divided by annual rent expense. Home prices are high, if they are selling at a high multiple of home cost dividend by annual rent expense. I find a ratio about 15 or lower to be attractive. If that ratio is over 20, it may be a little bit too high.

Based on my research, if you manage to purchase a comparable unit to what you are currently renting, and you are mindful of costs, you may do better than renting over long periods of time ( exceeding ten years). On the other hand, if you pay a high price to rent multiple, and your monthly payment absorbs most of the funds you would have otherwise used to save to retirement,  you may not do as well with buying a home.

Tuesday, April 18, 2017

Loyal3 Brokerage to Shut Down in May

I just received notification that low cost broker Loyal3 is shutting down, effective May 22 2017. Loyal3 was a decent commission free alternative for beginning investors who wanted to slowly build positions in their favorite brands, without paying any commissions. The brokerage allowed you to invest as little as $10 per transaction, and allowed buying fractional shares. At one point, Loyal3 also allowed a brief arbitrage opportunity where you could invest using a credit card, and earn rewards points. Loyal3 also allowed many investors the chance to participate in IPO’s at the offer price. Sadly, it looks like its business model has not gained enough traction. Alternatively, low cost broker Robinhood offers access to all US equities for a zero rate and does it in real-time. This may have been one of the reasons for the failure.

There are several options to existing clients.

1) Do nothing, and have all securities be transferred to FolioFirst.

Monday, April 17, 2017

Procter & Gamble Raises Dividends for 61st Consecutive Year in a Row

The Procter & Gamble Company (PG) provides branded consumer packaged goods to consumers in North America, Europe, the Asia Pacific, India, the Middle East, Africa, and Latin America. The company operates through five segments: Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care.

Last week, this dividend king raised its quarterly dividends by 3% to 68.96 cents/share. This marked the 61st consecutive annual dividend increase for the dividend king Procter & Gamble.

However, it also continues the recent trend of sub-par annual dividend growth for this widely held dividend king. For anyone who has looked at the financial performance over the past decade, the slow rate of annual dividend growth should not have been a surprise.

Over the past decade, the company has been unable to grow earnings per share.

Friday, April 14, 2017

How I Use Frugality to Accumulate Wealth

In a previous article I discussed that I am on track to have my dividend income cover my expenses sometime around 2018. I received a few questions on how I am able to achieve that. I have mentioned before, that I do not like to talk about myself, because I personally find it a little tacky. (this statement in itself sounds like humble-bragging, which is also tacky)

I think I have taken for granted certain topics such as saving, and the power of compounding. I always assumed that it was common sense that people who came to this site would not be interested in learning how I drive a 15 year old car, how I graduated college without any debt but $2,000 in the bank and no debt, and that my frugality has helped me save enough to build my portfolio since 2007.

I also naively assumed that everyone who already saves money sees dividend growth investing as a tool to achieve their financial goals and objectives, be that traditional retirement, early retirement, financial independence or something else. Based on many interactions I have had over the years, I think that I was wrong in my assumptions on what constitutes common sense and what doesn’t. Given the rapid growth of the site readership since its inception in 2008, it is reasonable to expect that not everyone will be on the same page when it comes to various topics.

The first thing about investing is that in order to invest, you need to have money. In order to obtain that money, you need to utilize your most important asset to either find a job, or start a business. You then have to make sure that your expenses are less than what you earn. This surplus cash is then invested every month in dividend growth stocks. The formula to achieve wealth is really simple:

Wednesday, April 12, 2017

17 Dividend Aristocrats for Further Research

Last week, I shared the 2017 list of dividend aristocrats. The most common question I received focused on which companies are attractively valued today, according to my criteria.

The criteria I use have been well publicized over the past decade. They are simple, but effective tools to help me identify companies to include for my diversified dividend portfolio. Obviously, since we are looking only at the list of dividend aristocrats, we are starting out with a group of companies which are already pre-screened for quality. After all, only a company with a strong business model can afford to raise dividends like clockwork for 25 years in a row, or longer. I love companies which can afford to raise dividends like clockwork. Warren Buffett also loves companies that raise dividends like clockwork. Some of Berkshire's largest positions such as Coca-Cola, American Express, Geico, IBM, Wells Fargo are examples of high quality dividend growth stars which have compounded nicely for decades.

The first criteria is to focus on companies whose P/E ratio is below 20. I focus on this rule, in order to avoid overpaying for companies. As we all know, earnings per share can be lumpy in the near term, and distorted by one-time events. While they are not perfect, I use forward earnings as a shortcut to quickly estimate earnings power without doing too much digging in the initial stage.

The second criteria is to avoid companies which have a dividend payout ratio above 60%. I want to focus on companies that can easily cover their dividend. I take the concept of margin of safety very seriously.

Monday, April 10, 2017

Four Dividend Growth Stocks Raising The Bar

As part of my monitoring process, I review the list of dividend increases every week. I usually focus my attention to companies that have raised dividends for at least a decade. It is helpful to see companies I own that keep growing their dividends, years after they have been purchased by me. I also find it helpful to review this list for hidden dividend gems. From there, I review the basic fundamental performance over the preceding decade. I like to see dividend growth which is supported by growth in earnings per share.

Over the past week, there were four companies which raised dividends and also had at least a ten year record of annual dividend increases. The companies include:

The TJX Companies, Inc. (TJX) operates as an off-price apparel and home fashions retailer in the United States and internationally. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International. The company raised its quarterly dividend by 20.20% to 31.25 cents/share. This marked the 22nd consecutive annual dividend increase for this dividend achiever. The ten year dividend growth rate is 22%/year. Earnings per share increased from 83 cents/share in 2008 to $3.46/share in 2017. The company is expected to earn 3.91/share over the next fiscal year. Currently the stock is selling for 19.50 times forward earnings and yields 1.70%. Check my analysis of TJX Companies for more information about the company.

Thursday, April 6, 2017

Dividend Aristocrats List for 2017

The S&P Dividend Aristocrats index is an elite group of companies, members of the S&P 500, which have managed to increase dividends every year for at least 25 consecutive years.

To qualify for membership in the S&P 500 Dividend Aristocrats, a stock must satisfy the following criteria:

1. Be a member of the S&P 500
2. Have increased dividends every year for at least 25 consecutive years
3. Meet minimum float-adjusted market capitalization and liquidity requirements defined in the index inclusion and index exclusion rules below.

Those companies deliver both strong income growth and strong total returns over time. The consecutive years of dividend increases serves as a filter for quality – only a company with a stable business model can afford to grow the business, increase dividends and intrinsic value over a quarter of a century. The ability of management to maintain stable or increasing dividends indicates the quality of a firm’s earnings and its growth prospects.

The index was started in 1989, and had 26 original components. The number of components in the index has ranged between 26 in 1989 to 64 in 2001. I used this list as a primary tool for identifying companies with strong brands, which have raised distributions through both good and bad economic conditions. Check this post Historical changes of the S&P Dividend Aristocrats Index for reference.

Wednesday, April 5, 2017

How to Find Dividend Stocks With The Market At All-Time Highs

This guest post has been written by Mike McNeil, passionate investor, founder of Dividend Stocks Rock and author of The Dividend Guy Blog.

I started investing when I was 23, back in 2003. Those were the good times and I luckily sold most of my portfolio to buy a house in 2006, 2 years before the market crashed. In a search for a more efficient and less stressful way to invest, I decided to switch my holdings towards a dividend growth investing strategy in 2010. Two years later, 100% of my portfolio was invested in dividend paying stocks. As it is probably the case for most of you, the past 5 years have brought stellar returns.

As many investors start worrying about the stock market trading at a very high PE ratio, I consider reviewing my investing process. Not because I fear a market correction. I don’t fear it, I know it will happen, we just don’t know when it will happen.

But does it matter?
No, it doesn’t.

It doesn’t matter because staying invested in strong dividend paying company is the only way I can achieve my goals. However, investing in dividend stocks doesn’t mean investing in any kind of company making quarterly distribution. Therefore, it is important to tighten your investment process so that aren’t any bad decisions made.

Monday, April 3, 2017

Raytheon (RTN): A High Dividend Growth Stock to Consider on Dips

Raytheon Company (RTN) develops technologically integrated products, services, and solutions worldwide. It operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS); and Forcepoint.

The company is a dividend achiever, which has managed to grow dividends for 13 years in a row. Last week, Raytheon raised its quarterly dividend by 8.90% to 79.75 cents/share.

Over the past decade, the company has delivered an annualized total return of 12.50%/year.

This strong performance was driven by the low valuation a decade ago, consistent dividend growth, consistent share buybacks, and strong earnings per share growth.

Thursday, March 30, 2017

What to do about slowing earnings growth?

Successful dividend growth investing relies on finding companies at an attractive price which can grow earnings and dividends over time. A long track record of annual dividend increases is an indication of a strong business model that generates a lot of excess cash, beyond the needs for growing the business. This is the characteristic for most of those dividend champions, which shower their shareholders with more cash every year.

One of the monitoring tools at my disposal involves checking the list of dividend increases, and analyzing companies every 12 – 18 weeks. I have noticed that several of the companies I own have been unable to grow earnings per share over the past few years. Some recent examples include Coca-Cola, Procter & Gamble and Colgate Palmolive.

Some of it could be due to the changing competitive and business nature at an individual company basis. The other reasons for slowing earnings growth is due to external factors such as:
  • The strong US dollar
  • Weaker International Economic Growth
  • Weak energy prices
  • Higher Competitive Pressures

Tuesday, March 28, 2017

14 Dividend Champions for Further Research

The list of dividend champions includes companies which have managed to increase dividends every single year for at least 25 years in a row. This is a very rare occurrence, and is indicative of a company that has a unique business model that withstood the test of time. Only a company with a unique set of competitive advantages can manage to grow the business, maintain its dominant industry position, and shower shareholders with more cash every single year for at least a quarter of a century. As of the time of this writing, there are 109 such businesses in the US. The list of Dividend Champions is maintained by David Fish, who is a true superhero for ordinary dividend investors.

After obtaining the list every month, I try to get it to a more manageable level by weeding out companies whose dividends are at risk.

My screening criteria on the list of dividend champions includes:

1) P/E ratio at or below 20
2) Dividend Payout Ratio below 60%
3) EPS growth over the past decade
4) Dividend Growth exceeding 3%/year

The companies which met this criteria include:

Friday, March 24, 2017

John Bogle Likes Dividends

John Bogle is an investing legend. He is the founder of Vanguard Group, a $4 trillion dollar mutual fund powerhouse. Vanguard is credited for single handedly rolling out the first index mutual fund in 1976. It gave millions of investors around the world the opportunity to invest at a low cost.

I have read several of his books, and really enjoyed his simple messages. I really liked Bogle's message on keeping costs low, keeping turnover low, staying the course and keeping it simple. I liked the advice the minute I read it.

It makes sense that when you do not pay 1%/year to a greedy asset manager, you have more money working for you.

I have been inspired by Bogle to find a way to educate investors and help them get their fair share of returns. For example, building a diversified portfolio of dividend companies will only cost a one time brokerage fee. This means that the investor’s only cost is to buy the diversified list of blue chip stocks for their portfolio. Their job is to then remain patiently invested. That way, they will not have to pay an annual fee for the privilege of someone else picking well-known companies for their portfolios. After all, I do not need to someone else to buy Johnson & Johnson with my money, and charge me an annual fee in the process. This is a well-known business.

I especially liked Bogle’s advice on dividends. In his books, he discusses how share returns are dependent in three factors:

Wednesday, March 22, 2017

Why Holding 100% of Equity Investments in Taxable Accounts is a Mistake

One of the best vehicles for accumulating a nest egg for ordinary investors is the 401 (k). For most employees of large companies, they get the ability to contribute as much as $18,000/year, and get a tax break in the process. The money is then invested in those 401 (k) plans, and grows tax-free for decades, until it has to be withdrawn at retirement. At that point, the withdrawals are taxed as ordinary income for pre-tax plans, and not taxed for after-tax ones. This is the best way to invest for someone who holds a demanding day job, and spends a lot of time on family affairs, and is not able or willing to dedicate even 10 hours/week on their goal of retirement or financial freedom. This is the best way for probably 80% of employees out there. Those include most investors that probably have no clue about investing, economics, business, the difference between preferred stock and livestock, and are not going to spend the time or effort to learn about it. A very close relative of mine invests entirely in index funds in their 401 (k) and Roth IRA every month, and have ok over the past decade.

I have been thinking about it, and think that this is also a very good way to invest for the average self-directed investor. Basically, what I am trying to say is that the ability to defer taxes in a 401 (k) today, enjoy tax-deferred compounding for decades, and earn an employee match on contributions is a more advantageous place for your money than a taxable portfolio. This is because by investing in a taxable portfolio, you are essentially able to place much less money to work for you. In addition, in a taxable account your capital gains and dividends are taxed during your accumulation phase, when your total income is usually at its the highest. Thus, even a portfolio of the best dividend paying stocks has to perform at least a couple percentage points better per year, in order to keep up with the tax-advantaged performance of investments in a 401 (k). In my case, I am getting a 25% effective discount from my purchase price by investing through a tax-deferred account.

Monday, March 20, 2017

Two REITs Delivering High Growing Income for Retirees

As you know, I review the list of dividend increases every single week as part of my monitoring process. I usually focus my attention on the ones that have raised distributions every single year for at least a decade. Over the past week, there were two real estate investment trusts, which raised dividends for their shareholders. These are well known, and widely held Real Estate Investment Trusts (REITs). REITs are a great way to obtain exposure to real estate for DYI investors. The companies include:

Realty Income Corporation (O) is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. The firm makes investments in commercial real estate. Realty Income raised its monthly dividend to 21.10 cents/share. This REIT is a dependable dividend achiever which has rewarded shareholders with a raise for 23 years in a row. Realty Income calls itself “The Monthly Dividend Company”. This is a very well run REIT, whose sole purpose is to shower shareholders with monthly dividend checks. I really like the stability of the long-term triple-net type leases that Realty Income uses to rent out its properties. The long-term track record of dividend increases is very impressive.



Friday, March 17, 2017

Target: An Attractively Valued Dividend Champion on Sale

Target Corporation (NYSE:TGT) operates general merchandise stores in the United States and Canada. Target is a dividend champion, which has paid dividends since 1965 and raised them every year for 49 years in a row.

The most recent dividend increase was in June 2016, when the Board of Directors approved a 7.10% increase in the quarterly dividend to 60 cents/share.

The company's largest competitors include Wal-Mart (NYSE:WMT), Costco (NASDAQ:COST) and Amazon (NASDAQ:AMZN).

Over the past decade this dividend growth stock has delivered an annualized total return of 1.60% to its shareholders. Future returns will be dependent on growth in earnings and dividend yields obtained by shareholders. More recently, the stock price has been hammered by a decline in earnings expectations. This is why I wanted to take another look at Target.

The company has managed to deliver a 3.60% average increase in annual EPS over the past decade. Target is expected to earn $4.01 per share in 2018 and $5.80 per share in 2019. In comparison, the company earned $4.09/share for fiscal year 2017.

Wednesday, March 15, 2017

Canadian Banks for Long Term Dividend Growth Investors

I have owned shares of the largest Canadian Banks as a long-term investment for over four years now. I initiated a position in those five banks in early 2013, and then added some more in late 2013.  I also added a little more a couple of years later. If prices make sense, and I have money to invest, I will likely make another investment. The banks include:

Bank of Montreal (BMO) provides various retail banking, wealth management, and investment banking products and services in North America and internationally. It has operations in the US, in the form of BMO Harris Bank. Bank of Montreal has paid dividends since 1829. Over the past decade, Bank of Montreal has increased quarterly dividends per share by 3.10%/year. And that’s despite the fact that the dividends were as left unchanged in 2009, 2010 and 2011. Earnings per share have increased by 3%/year over the same time period. The bank sells for 14.90 times earnings and yields 3.40%.

Monday, March 13, 2017

Colgate-Palmolive (CL) Dividend Stock Analysis for 2017

Colgate-Palmolive Company, together with its subsidiaries, manufactures and markets consumer products worldwide. The company operates in two segments: Oral, Personal and Home Care; and Pet Nutrition. This dividend king has paid dividends since 1895 and has increased them for 54 years in a row.

The company’s latest dividend increase was announced in March 2017 when the Board of Directors approved a 2.60% increase in the quarterly annual dividend to 40 cents /share. This was the slowest rate of dividend increases since 1980. It indicates that the company's management is cautious about Colgate-Palmolive's near term business outlook.

The company’s peer group includes Procter & Gamble (PG), Clorox (CLX), and Kimberly Clark (KMB).

Over the past decade this dividend growth stock has delivered an annualized total return of 11.50% to its shareholders.

Friday, March 10, 2017

Honeywell Beats GE On The Following Four Points

This guest post has been wrote by Mike McNeil, passionate investor, founder of Dividend Stocks Rock and author of The Dividend Guy Blog.

The current bull market hides many companies flaws. In fact, since 2009, almost all stocks have gone up one way or another. My 11-year-old boy could probably do as well as most investors on the street. This situation makes it even more difficult for investors to differentiate the good picks from the bad seeds. For example, when you look at the Honeywell (HON) and General Electric (GE) stock price graph for the past 5 years, both seem to be a good investment:



Source: YCharts

While Honeywell (HON) clearly outperformed General Electric during this period, most GE shareholders won’t complain about its performance. I know that General Electric is a very popular stock among investors. The company has been around for over 100 years, and has performed quite well for decades. However, I believe the current bull market is hiding many flaw, and Honeywell is a better option for those who look at adding an industrial stock to their portfolio. Ironically, Honeywell  failed to merge with General Electric back in 2001.

As a dividend growth investor, my focus when analyzing companies is payouts and potential increase. In order to do so, I have studied 3 components leading to sustainable payment increase as per the 7 dividend growth investing principles:

Wednesday, March 8, 2017

Five Myths About Index Investing

Index investing has become extremely popular in recent years. A lot of new investors have embraced the strategy in recent years. Unfortunately, many investors are embracing the strategy by believing certain myths that are simply not true. I am going to examine several of their problematic thought points, and discuss why they are myths that could hurt those investors in the future. In reality, there is nothing magical about index investing.

I will refute the five myths below:


1) Indexing is passive investing.

Indexing is not passive, because there is a requirement for the investor to exercise judgment as to which index funds to select.  It then also imposes forced market timing through buying and selling of assets at certain time periods. In addition, the indexes themselves comprise portfolios of individual stocks or bonds which constantly add or remove components for a variety of reasons. One recent example includes this advisor, who decided to add to international stocks in early 2015, rather than stick to their original allocation. This is market timing, dressed up in indexing clothes.

Index investors fail to understand the fact that an index is merely a collection of investments, that is actively selected by a group or a committee, using some sort of a quantitative or arbitrary reason. For example, the index committees on S&P 500 or Dow Jones Industrial Average make active component changes for various reasons. As you can see, an index investor actively chooses their funds, and then the funds themselves actively choose the components using some criteria.

Monday, March 6, 2017

Eight Dividend Growth Stocks Raising The Bar

As part of my monitoring process, I evaluate the list of dividend increases every week. This exercise helps me observe the rate of dividend growth for companies I own. It also helps me to familiarize myself with other dividend growth companies. I also believe that running through the list, and narrowing it down to a more manageable level using my screening criteria is helpful to readers for educational purposes. I find it helpful to run through the exercise of narrowing the list of companies that raised dividends in a given week, by focusing on those that have raised dividends for at least ten years in a row. I also find it helpful to then evaluate each company quickly, using my well-publicized entry criteria, and then zooming in further on the fundamental performance and valuation criteria in order to determine whether a stock is worth a further look today. This is the type of decision making that goes in my head while I review different companies.

Over the past week, there were several dividend companies with a track record that raised distributions. The companies include:

Thursday, March 2, 2017

How Warren Buffett earns $1,140 in dividend income per minute

On April 3rd, 2017, Buffett’s Berkshire Hathaway (BRK.B) will receive $148 million dollars in dividend income from their 400 million shares of Coca-Cola (KO). This comes out to roughly $1.644 million in dividend income per day, $68,500 dollars in dividend income per hour, $1142 dollars in dividend income for Berkshire Hathaway every minute, or almost $19.03 every single second. Those shares have a cost basis of $1.29 billion dollars, and were acquired between 1988 – 1994. This comes out to $3.25/share. The annual dividend payment produces an yield on cost of over 45.60%. This doesn’t assume dividend reinvestment and is 4 – 5 times higher than what investors in 30 year US Treasuries would be earning today. This is why I believe that Warren Buffett is a closet dividend investor.

This is a testament to the power of long-term dividend investing, where time in market is the investors best ally, not timing the market. If you can select a business which is run by able and honest management, which has solid competitive advantages, and which is available at a good price today, one needs to only sit and let the power of compounding do the heavy lifting for them. As Buffett likes to say, time is a great ally for the good business. In the case of Coca-Cola, the past 29 years have been a great time to buy and hold the stock. The company has been able to tap emerging markets in Eastern Europe, Asia, Africa and Latin America like never before. As a result, it has been able to receive a higher share of the worldwide drinks market, which has also been expanding as well. If you add in strategic acquisitions, new product development, cost containment initiatives and streamlining of operations, you have a very powerful force for delivering solid shareholder returns. With dividend investing your are rewarded for smart decisions you have made years before.

Monday, February 27, 2017

14 Dividend Stocks Rewarding Shareholders With a Raise

Every week, I go through the list of dividend increases as part of my monitoring process. I usually focus on those companies that have raised dividends for at least a decade. I then focus on things like growth in earnings per share, in order to gauge the possibility of further dividend growth in the future. I also focus on valuation – even the best company in the world is not worth overpaying for. The discussion behind each company outlines my basic review process for proceeding with promising ideas or discarding them. I post it for educational purposes to my readers.
The companies that increased their dividends include:

Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Canada, Mexico, Australia, New Zealand, Puerto Rico, the Dominican Republic, and the Caribbean region. The company raised its quarterly dividend by 2.70% to 67.50 cents/share. This marked the 61st consecutive annual dividend increase for this dividend king. Over the past decade, the company has managed to increase annual dividends at a rate of 6.90%/year. The company managed to grow earnings from $2.98/share in 2007 to $4.59/share in 2016. The company is expected to earn $4.77share in 2017. The stock is overvalued at 21 times forward earnings and yields 2.80%. It would be worth a second look on dips below $92/share. Check my analysis of Genuine Parts Company for more information.

Thursday, February 23, 2017

Dividend Achievers Offer Income Growth and Capital Appreciation

The NASDAQ US Broad Dividend Achievers Select Index is comprised of a select group of securities with at least ten consecutive years of increasing annual regular dividend payments. There are 272 companies in this index today. You can find all those holdings as of February 2017 at the following location.

Peter Lynch, the legendary manager of the Fidelity Magellan Fund has mentioned the following about dividend achievers:

"The Dividend Achievers Handbook is one of my favorite bedside thrillers. Here's a simple way to succeed in Wall Street: Buy the stocks on Mergent's list and stick with them as long as they stay on the list"

The stocks he mentions in his book, "One Up on Wall Street", is Automatic Data Processing (ADP), which incidentally has kept raising distributions 25 years after his book was published.

In fact some of the best performing stocks on Wall Street over the past decade have been the dividend achievers. Dividend achievers are companies which have increased their distributions for at least ten consecutive years. They provide a superior alternative than investing in fixed income because they provide investors with the opportunity of a rising dividend payment and they could also receiving higher total returns over time as well. The premise is that higher dividends are a direct result of rising earnings, which translates into higher stock prices. When managements boost distributions, this shows what their outlook for the business and the economy really is.

Wednesday, February 22, 2017

The Coffee Can Portfolio

I have invested in dividend growth stocks for over a decade now, and shared experiences and knowledge with you on the Dividend Growth Investor site along the way.

One of the lessons I have learned is that once I buy a solid company, I should hold on tightly and not sell no matter what "noise" I see or hear. When I evaluated my sales, I noticed that I would have been better off simply doing nothing, rather than sell to pay capital gains taxes, and to buy another company that did not do as well as the original one.

My evaluation of the Corporate Leaders Trust in 2015 confirmed the observation that time in the market trumps timing the market. It simply pays to be patient as an investor.

I recently learned of an interesting concept called the Coffee Can Portfolio on the Sure Dividend website:

Tuesday, February 21, 2017

Thirteen Companies Building Wealth For Long Term Shareholders

Dividend growth investing is a very simple but effective wealth building strategy. The investor focuses on companies with a proven track record of annual dividend increases, which typically exemplifies quality in a company. The next step involves focusing on those enterprises that grow earnings and are available at attractive valuations today.

The next step in the process is the most difficult one - doing absolutely nothing after assembling your portfolio of quality dividend growth stocks, while watching your dividend income rise year over year for decades. Most dividend investors who fail, succumb to short-term thinking because they listen to the useless noise out there. The dividend investors who succeed hold patiently to their diversified portfolios over time, and end up generating a lot of dividends for decisions made decades prior to that. I always like seeing how my dividend stocks are continuing their streak of annual dividend increases.

As part of my monitoring process, I review the list of dividend increases with at least a ten year streak. The companies that met the criteria are listed below, along with my comments:

Friday, February 17, 2017

Coca-Cola (KO) Dividend Stock Analysis

The Coca-Cola Company (KO) manufactures, distributes, and markets nonalcoholic beverages worldwide. This dividend king has paid uninterrupted dividends on its common stock since 1893 and increased payments to common shareholders every for 55 years in a row. Warren Buffett’s Berkshire Hathaway (BRK.B) is the largest shareholder of the world’s largest beverage company.

The company’s last dividend increase was in February 2017 when the Board of Directors approved an 5.70% increase to 37 cents/share. Coca-Cola’s largest competitors include PepsiCo (PEP), Dr. Pepper Snapple (DPS) and Monster Beverage (MNST).

Over the past decade this dividend growth stock has delivered an annualized total return of 8.90% to its shareholders.

Thursday, February 16, 2017

The Most Successful Dividend Investors of all time

Dividend investing is as sexy as watching paint dry on the wall. Defining an entry criteria that selects quality dividend stocks with rising dividends over time and then patiently reinvesting these dividends while sitting on your hands is not exciting. While active traders have a plethora of hedge fund managers on the covers of Forbes magazine there are not many well-publicized successful dividend investors. Even value investing has its own superstars – Ben Graham and Warren Buffett.

I did some research and uncovered several successful dividend investors, whose stories provide reassurance that the traits of successful dividend investing I outlined in a previous post are indeed accurate.

Wednesday, February 15, 2017

Are you ignoring investment risks you know about?

I have always had a deep fascination with investing. I like learning about different ways to make money, strategies, and investments. It is always fascinating to watch how others make money in the markets, as you can always learn something from it.

Several months ago I watched a Netflix documentary called “ The Pit”.  It is a documentary about open outcry trading, where people buy and sell futures on an exchange floor. A long time ago, stocks, bonds and commodity futures were traded by actual humans on a trading floor ( think NYSE for stocks or the movie " Trading Places") For 20 years, one trader said, they were told that the exchange will become electronic. Yet, it never became electronic. As a result, it was a running joke that it would become an electronic exchange one day. When it did, many of these people were out of a way to earn a livelihood.

So how does it relate to me as a dividend investor? Long term readers know that my biggest investments are in the likes of Altria (MO) and Philip Morris International (PM). Combining Philip Morris International and Altria, I have a decent sized allocation to tobacco.

Monday, February 13, 2017

Seven Dividend Stocks Rewarding Shareholders With a Raise

Every week, I review the list of dividend increases as part of my monitoring process. I usually focus my attention on companies that have managed to boost annual dividends for at least a decade. This increases the odds of identifying companies that pay dependable dividends, and are committed to growing them over time. I then also review the trends in operating performance, such as earnings per share, in order to determine whether the business can support future dividend hikes.I follow a similar,but slightly more detailed process every few weeks or so, when I screen the list of dividend champions and contenders for investment opportunities. All of this helps me familiarize with story of as many companies as possible. That way, when the right quality company is available for sale at a good valuation, I can take action.

There were several companies which raised dividends to shareholders over the past week. The companies include:

Friday, February 10, 2017

How much money do you need to retire

The most important question that investors ask themselves is how much money do they need to retire. There are several things to consider, in order to answer this question. I will share those questions, and also share a rule of thumb that I have found helpful in my personal retirement planning.

1) How much money are you spending

In general, I have found that traditional rules of thumb that focused on salary income to be misleading. I prefer to focus on the spending levels in retirement. The more you save, the more you will be able to invest, and the faster you will reach financial independence. In order to get there, you need to compile a list of annual expenses from credit cards, checking accounts and other sources in order to get a reasonable gauge of past expenses. Putting everything in one place really helps in this direction.

The next step involves determining what your retirement may look like. Perhaps you will not be commuting one or two hours per day to work, and you won’t be needing professional business attire. So certain expenses would be taken out from the budget. However, if you expect to be doing more travelling, you may need to incorporate those numbers. If you are able to downsize your home, or plan to move to another location, this should also be taken into consideration.

If you expect to spend more in retirement, this means you may need a larger nest egg to support you. However, if you expect to spend less in retirement, you may get by on a smaller nest egg.

Wednesday, February 8, 2017

7 Dividend Growth Stocks on Sale

My goal is to purchase quality companies that grow earnings and dividends at an attractive price. Most members of the dividend champions list exhibit characteristics of a quality company. After all, only a company with a strong business can afford to consistently grow earnings and dividends every single year for a quarter of a century.

To come up with the companies below, I started with a custom made list of the dividend champions I keep at Yahoo Finance. Being a dividend champion fulfills the quality criterion.

I then sorted the list by P/E ratio, and picked the companies with a P/E below 20. I have a maximum P/E requirement in order to avoid overpaying for companies. Even the best company in the world is not worth overpaying for.

The next step in the process included evaluating trends in earnings per share and dividends per share. As I mentioned above, I want companies that can grow earnings per share over time. This will drive future increases in dividends, and protect the purchasing power of my income in retirement. I do not want companies that increase dividends merely by increasing their payout ratios, or who have slowed down on dividend increases because their earnings are stagnant.

The companies include:

Monday, February 6, 2017

Eight Dividend Stocks Rewarding Shareholders With A Raise

Every week, I review the list of dividend increases as part of my monitoring process. I usually focus on companies I already own. However, I also focus on companies that have raised dividends for at least a decade, in order to observe their performance from the grounds up. Over the past week, there were several companies that raised dividends. In the case of Diageo, I missed this company during my review last week, which is why I wanted to include it here. I have highlighted the ones that have managed to reward shareholders with a raise for at least ten years in a row. The companies include:

Diageo plc (DEO) produces, markets, and sells alcoholic beverages worldwide It offers scotch whiskey, gin, vodka, rum, beer and spirits, Irish cream liqueurs, wine, Raki, tequila, Canadian and American whiskey, Cacha├ža, and brandy, as well as adult beverages and ready to drink products. The UK based company raised its interim dividend by 4.90% to 23.70 pence/share. This international dividend company has increased dividends for 19 years in a row. (The UK currency is the British pound, and each pound is divided into 100 pence). Dividends on the ordinary shares are normally paid twice a year: an interim dividend in April and a final dividend in October. The approximate split between the two payments is 40:60. This would translate into an increase in the October payment to 38.40 pence/share, for a total annual dividend of 62.10 pence share.

Friday, February 3, 2017

3 Dividend Stocks Trading At A Discount

This guest post has been wrote by Mike McNeil, passionate investor, founder of Dividend Stocks Rock and author of The Dividend Guy Blog.

As the S&P 500 just finished its 8th consecutive year with positive returns, the crash of 2008 has become merely an old souvenir for many.

Source: Ycharts

Wednesday, February 1, 2017

How to allocate capital

The biggest fallacy out there is that each dollar reinvested by companies will automatically translate into more profits.

Unfortunately, real life does not work this way. There are issues with that. There is law of diminishing returns. There is the competitive nature of business and various physical constraints.

Research from Fama and French has uncovered  that companies which reinvest a higher portion of earnings, tend to do worse than companies which reinvest a lower portion of their earnings. Companies in general have done a terrible job at allocating capital.



Most dividend investors intuitively understand this. For example, a company like Target (TGT) is a better value at $62 than at $85. Therefore, it makes sense to invest dollars into Target at a lower valuation, since that provides better margin of safety and higher future dividend income potential. Buying a stock at 12.60 times earnings and 3.80% yield is better than buying at 18 times earnings and a 2.80% yield. Of course, as the company has not really grown its store base for several years, we may be seeing the limits to its growth. This is why paying a dividend may be the optimal capital allocation decision.

Most great companies that we talk about on this site have been able to grow dividends per share for decades. These companies have accomplished that because they are of high quality, have branded products, and are able to generate high returns on invested capital. These companies generate a lot of excess capital, that they do not know what to do with. This is how companies like Coca-Cola (KO), Altria (MO) and McDonald's (MCD) have delivered substantial shareholder wealth over the past 50 years. Having too much cash is a good problem to have of course. It allows you to grow your business, and still shower your shareholders with cash. I will discuss a few examples below, which will provide more detail on my main thesis above.

Monday, January 30, 2017

14 Dividend Growth Stocks Rewarding Shareholders With a Raise

Every week I go through the list of dividend increases, as part of my monitoring process. I monitor the dividend increases from companies I own, and for companies I may be interested in the future. I find it helpful to see companies that I have bought almost a decade ago, still delivering consistent annual increases. I also find it helpful to observe companies that have raised dividends for at least a decade. The rate of dividend increases shows how confident company executives are of near term business conditions. It may be worth taking a second look at these companies, in order to determine suitability for the income investor's portfolio.

Over the past week, there were 14 companies with a long streak of annual dividend increases, which raised dividends to their shareholders. The companies include:

Wednesday, January 25, 2017

Hormel Foods (HRL) Dividend Stock Analysis

Hormel Foods Corporation (HRL) produces and markets various meat and food products worldwide. The company operates in five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, Specialty Foods, and International & Other.

The company is a dividend king which has managed to increase annual dividends for 51 years in a row. There are only twenty dividend kings in the world, which have each managed to boost annual dividends every single year for at least half a century.

Hormel’s last dividend increase was in November 2016 when the Board of Directors approved a 17.20% increase in the quarterly distribution to 17 cents/share.

Hormel’s largest competitors include Tyson Foods (TSN), Conagra Foods (CAG), General Mills (GIS), Campbell Soup (CPB) and J.M. Smucker (SJM).

Over the past decade this dividend growth stock has delivered an annualized total return of 16.10% to its shareholders.

Monday, January 23, 2017

Six Dividend Growth Stocks Raising Dividends Like Clockwork

There were several companies over the past week, which raised dividends to shareholders. I isolated six of those companies, which have managed to increase dividends for at least a decade.

In general, I look for companies that:

1) Have raised dividends for at least a decade
2) Have managed to grow earnings per share over the past decade
3) Are available at attractive valuations

This is a quick and dirty method that I use to determine if a company is worthy of further research or whether I should throw it away from further consideration.

This is a qualitative characteristic which is important, because only a certain type of business will have the dependability to manage to grow dividends per share every single year for at least a decade. I then try to analyze further whether dividend hikes were supported by growth in earnings per share over the past decade. I do this in order to determine if this dividend growth was supported by growth in fundamentals, rather than by merely increasing the dividend payout ratio. After a company that passes this test, I check if it has an attractive valuation. Otherwise, I may place an alert if the stock price falls below a certain level. If the stock is attractively valued, I will analyze it and determine if it is a buy.

The companies include:

Thursday, January 19, 2017

Nine Dividend Investing Lessons Learned From Nine Years of Blogging

Today marks the ninth birthday of the Dividend Growth Investor blog. It is unreal that I have managed to keep this up for 9 years in a row. There have been more than 1,600 articles published during that time. I wanted to thank you all for reading along the way, through the ups and downs.

Today, I wanted to share nine lessons that I have learned about successful investing over the past nine years. Those were learned from personal experience, through my interactions with readers and through observations of other investors.

1) Diversification matters.

Diversification is the only free lunch out there. This means holding as little as 40 – 50 individual companies from as many sectors as possible. Diversifying over time helps build the discipline to allocate money in the best ideas every single month. By slowly building out a dividend machine over time, you will end up with a portfolio that is well diversified, since different companies and sectors are available at different points of each economic cycle. Having some allocation to fixed income in retirement could be helpful as well, though not as helpful in the accumulation phase.

Tuesday, January 17, 2017

My Goals for 2017 and after

Another year has passed here in dividend growth investing land. This was a year with a lot of changes for me. It is time to evaluate what happened, and see if we can learn anything from all of this.
Before I write things down, I want to let you know that I actually try to focus my efforts on building systems rather than goals. In other words, I believe that focusing my energy on those five items within my control will ultimately lead to me to my ultimate goal of living off dividends in retirement:

1) Growing my income
2) Saving as much as possible
3) Investing wisely, without overpaying for investments
4) Keeping investment and tax costs low
5) Remaining patient ( not chasing yield, not overpaying, not churning my portfolio)

I believe that by focusing too much on earning a certain dividend income in a certain year I am pressuring myself to do things for the sake of doing things. This is an example of short-term thinking, which I try to discourage on this blog. I am all for long-term dividend investing, not chasing short term targets. I would rather pursue only good opportunities that would result in a lifetime of sustainable dividend income instead.

Thursday, January 12, 2017

Medtronic (MDT) Dividend Stock Analysis

Medtronic, Inc. (MDT) manufactures and sells device-based medical therapies worldwide. This dividend champion has paid dividends since 1977 and increased them for 39 years in a row.

The company’s last dividend increase was in June 2016 when the Board of Directors approved a 13.10% increase to 43 cents/share. The company’s largest competitors include Baxter (BAX), Becton Dickinson (BDX) and St Jude Medical (STJ).

Over the past decade this dividend growth stock has delivered an annualized total return of 5% to its shareholders.

Tuesday, January 10, 2017

Two Wide Moat Dividend Stocks to Consider on Dips

I like to invest in quality companies, with an established track record of dividend increases. I want to acquire these quality companies at an attractive entry price, and then see earnings per share, dividends per share and intrinsic values grow over time.

The beauty of quality companies is that you need to get one decision right – that is the ability to identify their business model, and then buy those companies in the first place without overpaying for them.

I do not want to worry about buying at a low price, and then selling at a high price. I want to make one decision, and then let these quality companies do the heavy lifting for me. My favorite holding period is forever. While some may fail, I know that by building a diversified portfolio of dividend growth stocks, I will do just fine over time.

Thursday, January 5, 2017

Three Of My Favorite Dividend Stocks For 2017

This guest post has been written by Mike McNeil, passionate investor, founder of Dividend Stocks Rock and author of The Dividend Guy Blog.

In the beginning of this New Year, many investors review their portfolios. We all hope for a good year on the market and, most importantly, steady dividend growth increase among our portfolio. I selected three companies I think will perform well in 2017 and will increase their dividend payouts.

3M (MMM)

Business model:
3M (MMM) produces products like Scotch tape, projector systems, Post-it notes, Tartan track, and Thinsulate. This is a conglomerate that produces products for many industries and for both personal and business use, and their manufacturing, research, and sales offices are all over the world.

Tuesday, January 3, 2017

17 Quality Dividend Stocks For 2017 ( and after)

One of the advantages of being a dividend investor is that I invest in businesses that meet a certain qualitative and quantitative criteria. This allows me to focus on quality compounding machines with established track records. This discipline also allows me to avoid overpaying for those companies. Even the best company in the world is not worth overpaying for. The third trait I have is patience - I am willing to sit on a stock for years, which reduces transaction costs and lets me take advantage of the maximum power of long-term compounding.

While everyone is complaining that the stock market is “high”, I went ahead and started looking for companies that are attractively valued today. I think that the following companies are worthy of being considered for your further research. The companies include:

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