Monday, November 20, 2017

Six Dividend Stocks Growing Shareholder Distributions

As part of my monitoring process, I review the list of dividend increases every week. I believe that this exercise provides a quick snapshot of the guidelines I have set up for my investing, and how I implement them with real world information.

In general I look for the following in evaluating companies ( my entry criteria).

1) A minimum of ten years of annual dividend increases
2) A P/E ratio below 20
3) A dividend payout ratio below 60%
4) Annual dividend growth that exceeds inflation
5) Analyzing the trends in earnings per share growth over the past decade
6) I do not have minimum yield requirements any more

Over the past week, the following companies raised dividends. The companies include:

Thursday, November 16, 2017

The Pareto Principle In Dividend Investing

The Pareto Principle is an economic term invented by an Italian economist Vilfredo Pareto in the 20th century. It is also called the 80-20 principle, meaning that 80% of effects come from 20% of the causes. Vilfredo observed that 80% of the land in Italy is owned by 20% of the people. The ideas behind this principle are wide ranging in multiple fields, including investing. I am a firm believer that a small minority of the investments I make today will end up becoming so successful, that they will produce 80% of my investment gains over the next 40 - 50 years. This is why I am really careful about selling, even if a stock I own is up by 1,000%.

For example, in the book “The Tao of Warren Buffet “ written by Mary Buffett, I read that 90% of Warren Buffett’s returns came from just 10 stocks. I did some research, but unfortunately I was unable to find any detailed data behind this exercise.

For purposes of simplicity, Berkshire Hathaway (BRK.A) has accounted for over 99% of Buffett’s wealth. Before 1970, the Buffett Partnership accounted for majority of his wealth. This statement  is overly simplistic, as Buffeet had to make hundreds if not thousands of stock and business decisions, that compounded partners and shareholders net worths for decades. But the quote from above, discussed the investments that made Berkshire Hathaway what it is today.

Wednesday, November 15, 2017

General Electric Cuts Dividends For The Second Time In A Decade

You probably heard the news that General Electric is cutting dividends for the second time in a decade. The previous time when General Electric cut distributions was in 2009, during the financial crisis.

The dividend cut was not surprising, given the fact that the conglomerate had a high payout ratio amidst a stagnant trend in earnings per share.

For example, the company earned 99 cents/share in 2009, the first year after the financial crisis. By 2016, GE earned $1/share. At the same time, dividends per share grew from 61 cents/share to 93 cents/share. The company is expected to earn $1.07/share for 2017 and has paid 96 cents/share in dividends. The payout ratio was obviously too high, and unsustainable.

When you cannot grow earnings, and have a high payout ratio, you cannot pay dividends.

A lot of commentators saw the dividend cut as evidence against dividends however.

This doesn’t make any sense.

GE’s story is actually a cautionary tale against share buybacks.

A lot of investors are told that dividends and share buybacks are the same thing. It is a popular narrative that share buybacks and dividends are the same thing.

This is an incorrect statement.

Monday, November 13, 2017

Seven Dividend Paying Companies Rewarding Their Owners With a Raise

As part of my monitoring process, I review the list of dividend increases every week. I believe that this exercise provides a quick snapshot of the guidelines I have set up for my investing, and how I implement them with real world information.

In general I look for the following in evaluating companies ( my entry criteria).

1) A minimum of ten years of annual dividend increases
2) A P/E ratio below 20
3) A dividend payout ratio below 60%
4) Annual dividend growth that exceeds inflation
5) Analyzing the trends in earnings per share growth over the past decade
6) I do not have minimum yield requirements any more

Over the past week, the following companies raised dividends. The companies include:

Wednesday, November 8, 2017

What I learned from analyzing my investment record

I have been investing in dividend growth stocks over the past decade. I have shared with you my strategy, how I identify companies for research, how I analyze companies, how I select to buy them, and how I build a portfolio.

Regular readers know that I am truly passionate about investing. I have focused my attention to investing and business for almost 20 years, starting out as early as high school. One of the results of this is the fact that I try to gain more knowledge over time, in order to improve. The trait I picked from many of the books I have read is that successful investors tend to analyze their past investments, in order to uncover any recurring errors.

Inspired by this knowledge, I have tried to go back to my investment detail since 2008, and understand what errors have been made in order to avoid repeating them again. Making errors is natural if you are trying to achieve anything in life. What separates the winners from the losers is that the former study their successes, as well as failures, in order to improve. The superwinners are those who are smart enough to study other people’s mistakes, in order to avoid repeating them in their own situations. After all, life is too short as it is – therefore we do not have the time nor luxury to learn from mistakes that could have easily been avoided. This is the main reason I am sharing mistakes here – in order to help YOU avoid mistakes I have made.

Here is a short list:

1) Chasing yield is bad.

Many inexperienced investors believe that dividend investing is all about finding the highest yields possible. My worst mistakes have been in buying companies, mostly because they had a high current yield. While I had a process for investing, I convinced myself that those companies are something special, and that I should ignore any warning signs. The two companies where I chased yield were American Capital Strategies (ACAS) in 2008 and American Realty (ARCP) in 2013 - 2014. I was seduced by the high yields, and did not analyze the dividend safety in the skeptical manner that I should have. Long story short, both companies ended up eliminating dividends, and I sold at a loss. What saved me was the fact that none of them ever accounted for more than 1% of my portfolio. I have had other dividend cuts, but most of them were in entities that were able to pay dividends out of cash flow or earnings, and the business conditions turned sour or management decided to start off with a clean slate.

2) Selling is costly

Plenty of  investors tend to actively monitor their holdings on a regular basis. The problem with this exercise is that this monitoring can trigger your brain into doing things that you may later regret. One of those activities is selling a good company for a variety of BS reasons such as "noone goes broke taking a profit" or "the stock overvalued now, I will buy it later at a lower price" or "there is another stock that is cheaper"or "I can increase my yield by buying something else". I have made this mistake as well, selling perfectly good companies for no good reasons, only to replace them with companies that ended up sorely disappointing. In the majority of sales I had ever done, I realized that I would have been better off simply doing nothing. Worst of all, I also ended up paying taxes and commissions on selling, along with the steep opportunity cost of replacing a great company with a mediocre one.

If you want to look for examples, this post outlines a few. I am glad I have taken a more passive approach to my portfolio, where I almost never sell now ( unless I am forced to by a company being taken over)

Ironically, even selling after a dividend has not been a smart move for me either. I would have been ok simply holding off on the dividend cutters. My automatic rule has been to sell immediately after a dividend cut. I am seriously reconsidering this rule, and turning it into a guideline.

3) Keep costs low

In general, it is important to keep activity and turnover as low as possible. The case can be made that the investor should do a lot of regular buying over time, and very little, if any, selling. This ensures that costs are kept low, and the ability to make mistakes is reduced further.

When you keep costs low, this means there are more money working for you.

The appealing feature of dividend growth investing is the fact that once you purchase your equities, you are not charged a fee for holding on to your investments. These days, certain brokers such as Robinhood and Merrill Edge offer commission free trades to their clients. So it is even possible to have no investment costs whatsoever ( this is lower than most index funds even).

Most of my readers are also of the DIY type, who do no engage the services of an expensive investment adviser or an expensive mutual fund. If you pay 1% of assets under management to an investment adviser, you are essentially being charged a 33% annual tax on your dividend income, provided that your holdings yield 3%. It is no wonder that many financial advisers actively hate dividend investing - their services appear more expensive when framed as a tax on dividend income than as a fee on total assets under management. In addition, there are some said advisers who also sell mutual funds that cost 1% - 2%/year. This is highway robbery if you ask me.

When you avoid financial advisers, you get more money to keep for yourself. I am glad I always managed my own money, and never paid more than a commission here and there. When I did pay commissions, I always made sure that the total cost never exceeded 0.50% of the total transaction value.

4) Taxes matter ( to an extent)

Not maxing out retirement accounts was one of the mistakes I made in the first few years of my journey. When you generate investment income during your accumulation years, you have to pay taxes on it. Taxes are a real cost that reduced performance and dividend income available for you to spend or reinvest. We want to keep them as low as possible.

Even when you earn qualified dividend income, you still have to pay 15% - 20% to the friendly tax authorities ( in addition to state income taxes if you are in the highest tax brackets, plus a potential 3.80% medicare surcharge tax on top of that). Unfortunately, this presents a drag on the compounding process. Your goal as an investor is to have the maximum amount of money working for you, and not to lose any dollars to the tax man. Each dollar that doesn't compound for you, is a dollar lost forever.

Since my wake-up call in 2012-2013, I am maxing out everything available under the sun for me. This includes maxing out my 401 (k) ( both pre-tax and after-tax), SEP IRA, Health Savings Account (HSA) and Roth IRA. I am essentially to the point where my whole after-tax salary is placed in retirement accounts, while I spend my taxable dividends and side income for ordinary expenses.

The other thing to consider is to be as inactive as possible in your portfolio investment decisions. The more you trade, the higher the costs associated with this turnover. When you sell stock, chances are you may have to pay a tax on any gains generated in the process. This further reduces the amount of money left to compound for you. At this time, long-term capital gains are taxed similarly to qualified dividends. However, short-term capital gains are taxed at your ordinary income tax rates.

Of course, while taxes do matter, you should never let the tax tail wag the investing dog. Do not make investment decisions merely for the tax purposes. Always focus on the investment side first, and taxes second.

5) Diversification matters

I believe that diversification is the only free lunch available in investing. I subscribe to the idea of spreading my wealth in as many companies as possible. It is also important to think about spreading my wealth in other asset classes, provided that they offer attractive returns. Diversification is important, because the future is largely unknown. Spreading your investments means that you have a higher chance of being able to keep your wealth even if some of your assumptions are incorrect. It is important to own as many companies as possible, without sacrificing quality, in order to reduce the risk to wealth and income if one company doesn't perform as expected.  You do not want to be dependent on the success or failure of just a handful of investments. As your net worth increases past a certain point, it makes sense to focus more on wealth preservation.

After reviewing my investment record, I have recognized the fact that I never know which will be my best investments in advance. I can tell you on aggregate what I am looking for, but I never know which specific investment will perform as well as expected. This is why it makes sense to own as many companies as possible that meet my basic criteria, and to also buy them over time, as long as they offer good value for my money. This is why it also makes sense to equally weight positions in a diversified dividend portfolio. I want to give each company an equal chance of success.

While I make mistakes, their effect has not been threatening, because they had low portfolio weights. When you own an equal weighted portfolio of 100 individual companies, the worst that one company can harm you is a total loss of 1% of total net worth. Actually, the downside is much less than that,  because dividends reduce the amount at stake, and because I reinvest them selectively elsewhere. However, the upside in each position is virtually unlimited.

6) You make money by staying the course

This is the most important lesson for all of us. Staying the course through thick or thin has been the way to wealth in the US over the past two centuries.

It takes work to identify great companies, analyze them, and purchase them opportunistically at attractive prices. However, those items are just part of the success equation. It is very important to keep investing regularly, through thick or thin. It is even more important to patiently stay the course, and let the power of compounding do the heavy lifting for you.

The investor's chief enemy is likely to be themselves. I have seen too many investors trying to time the market and selling out, waiting for a correction or selling out in fear of losing money. Those are mistakes. The real money in investing is made by buying and patiently holding over many years. This is the lesson learned from studying the most successful dividend investors in the world.

While I have had a couple of companies cut dividends, I have also had an equivalent number of companies that have been multibaggers that have also generated double-digit yields on cost in a decade.

I never knew which of the companies I own will do the best. However, I do know that if I assemble a diversified portfolio of solid dividend blue chips over time, and purchase them without overpaying, I will come out ahead in the long run. As we all know, the slow and steady accumulation of income producing assets on a regular basis, and the patient compounding of dividends and capital over time will win the race and help us reach out goals.



As of the time of this writing, my forward dividend income has exceeded my dividend crossover point after a decade of saving and investing.


Relevant Articles:

Should taxes guide your investment decisions?
An Investment Plan Helps You Stay The Course
My dividend crossover point
Taxable versus Tax-Deferred Accounts for Dividend Investing
How to become a successful dividend investor

Monday, November 6, 2017

The predictive value of rising dividends

Newton’s first law states that a body in motion at a constant velocity will remain in motion in a straight line unless acted upon by an outside force. While Newton lost a lot of money during the South Sea bubble in 1720 chasing hot stocks, he could have made a lot more simply by applying his findings to the world of investing in dividend stocks instead.

In my years of investing in dividend stocks, I have noticed that companies which consistently raise dividends every year tend to keep raising dividends going forward. Companies which sporadically boost dividends for short periods of time, only to freeze or cut them later tend to repeat this activity over and over throughout their corporate histories. Unfortunately, many dividend investors fail to learn from history. As a result, these investors hope for the best when dividends are kept unchanged or cut, and predict dividend cuts as the distribution is raised to record levels for many years.

The companies which tend to consistently raise dividends tend to have business models that deliver the type of sustainable earnings growth that supports dividend growth. These companies manage to expand their businesses by creating a plan and sticking to it, while capitalizing on long-term economic trends and keeping their business vibrant and innovative. In addition, many companies that have managed to achieve long streaks of dividend increases are owners of strong global brands, have strong competitive advantages and are able to deliver value added products or services, which are characterized by high quality. As a result, it would be very difficult for a competitor to steal away customers based on price alone. In order to steal customers away, a competitor would have to spend years losing money, before carving out a profitable niche in the industry. The high returns on equity result in businesses that generate so much in free cash flow, that they have to return some to shareholders. The high return on equity also translates into lower capital requirements to stay relevant or expand the business over time.

Thursday, November 2, 2017

Robinhood Offers Free Stock Trading for Dividend Investors

Robinhood is a new broker, who lets customers purchase US stocks for no commission. Yes, that is true, customers pay no commissions when they purchase stocks using Robinhood.

The service is available for customers with iPhone's or Android phones. But starting in 2018, the service will also be available on the web too. I am very excited about where this broker is going next.

I believe Robinhood could provide much lower fees to many beginning investors. To me, it would be much nicer to be able to allocate $2,000 - $3,000 into shares of 10 – 15 companies every month without paying commissions, rather than be limited to 2 – 3 investments for that month. Long-time readers know that I do not want to pay more than 0.50% in commissions on my purchase amount, and I also rarely sell. Your assets at Robinhood  are also SIPC insured, meaning that your assets are protected for amounts under $500,000.

Wednesday, November 1, 2017

Eleven Dividend Champions For Further Research

Most dividend growth investors put money to work every single month. They build their portfolios over time, one dividend paying investment at a time. Thus, they take advantage of the powers of compounding, diversification and low costs. After all, once you purchase shares in a company, you do not pay any ongoing management fees to fund companies or investment advisers. This leaves more money to work for you. I am very proud by the fact that my writing has been empowering investors to get their fair share of returns.

One of the best ways to come up with ideas for further research is the list of dividend champions. I use it regularly in order to come up with companies for further research.

I was able to screen the list of dividend champions, against my screening criteria. The criteria I applied include:

1) Being member of the dividend champions list. This is an elite list of companies that have managed to boost dividends every single years for at least a quarter of a century.
2) Having a P/E ratio below 20. I have discussed below my reasoning behind using a P/E ratio of 20.
3) Dividend payout ratio below 60%. To me, having an adequate margin of safety in dividends is essential for sound dividend investing. I go beyond dividend payout ratios however – I also look at trends in earnings, dividends and the trend in the ratio itself. For this exercise, I included two companies that I believe will deliver satisfactory returns, whose payout ratios were above 60%. You will see them by browsing the list below
4) The company is able to grow earnings and dividends over the past decade. I took out companies that have not been able to grow earnings per share over the past decade. I am also watchful for companies where earnings per share growth has flattened over the past few years. Without earnings growth, we won’t be able to have dividend growth and the value of the business won’t increase.
5) Last, but not least I also removed companies that have been unable to grow distributions above the rate of inflation, and also have low yields today.

The results of the screen are listed below:

Monday, October 30, 2017

Six Dividend Growth Stocks Working Tirelessly For Their Owners

As part of my monitoring process, I review the list of dividend increases every week. I use this exercise to monitor performance on existing holdings, and also to uncover hidden gems for further research. When I purchase shares in a company at an attractive price, I expect trends in earnings per share and dividends per share to continue into the future. This dividend momentum is a very powerful force, because it can continue for decades, while richly rewarding shareholders with higher dividends and capital appreciation. However, it is also important to keep monitoring those holdings, in order to make sure that the business is still growing, and can afford to pay higher dividends to me.

It is always great to see companies I own continue to reward me with a raise. The amount of organic dividend increases I receive from my investments has always been higher than the raises I receive at work. And that is despite the fact that I have to spend a lot of time in the office, plus the obligatory after-hours commitment to the firm. This is the nice things about dividend growth investing - the companies work very hard for you, so that you don't have to.

In the past week, there were several companies on my watchlist, which raised their dividends to shareholders. With one exception, all of those have managed to reward shareholders with a dividend increase for at least ten years in a row. The exception is a spin-off from a dividend champion which had rewarded shareholders with a raise for over four decades.

The companies include:

Thursday, October 26, 2017

How to Convert a portfolio of index funds to dividend stocks?

In a previous article, I discussed various ways that investors can accumulate their nest egg. One strategy includes putting a portion in one or a few attractively valued dividend growth stocks every single month, and reinvesting dividends selectively. The other strategy involved investing in index funds, using tax advantaged accounts such as 401 (k) for example.

Traditional vehicles for saving such as index funds and target-date funds work well when you accumulate your nest egg, but could present a challenge if you try to live off them. Many retirees prefer to have a stable and growing source of income, which maintains purchasing power over time, and is not dependent on the manic-depressive swings in stock prices. Therefore, investing in dividend growth stocks is the ideal way to generate income from your nest egg in retirement, due to the stability of dividend income. Therefore, if someone were to accumulate their nest egg in other items such as index funds, but wanted to convert to dividend investing, there are two ways that they can achieve that.

The strategies outlined in this article also work for situations where you have a lump sum amount, and you are thinking of investing it.

The first strategy involves selling all funds in your portfolio, and using the proceeds immediately to create a diversified portfolio of quality dividend paying stocks.

Monday, October 23, 2017

Four Dividend Growth Stocks to Consider on Dips

As part of my monitoring process, I review the list of dividend increases every week. This is in addition to the regular screening I do against the list of dividend champions and contenders.
I use this exercise as a way to monitor how companies I own are doing, and potentially uncover any attractively priced opportunities that my screens may have overlooked. Many times, I end up uncovering quality companies for further research that fit everything I am looking for, except for valuation. As a result, I tuck those companies on a waiting list. If they ever get close to my desired entry price, I get an alert and review the situations further.

In general I look for:

1) A history of dividend increases through a full economic cycle. A long streak of annual dividend increases is an indication that we have quality company with a strong track record for further research

2) A history of earnings growth. I believe that a company that grows earnings over time can withstand a large number of headwinds working against it.

3) A dividend that is well covered out of earnings. I require a margin of safety in dividends, for companies I am monitoring. I also require growth in earnings per share, in order to make sure that dividend growth does not occur solely by expansion of the dividend payout ratio

4) An attractive valuation. To me, this generally means a P/E below 20, coupled with a track record of earnings and dividend growth. A low valuation is not bullish in itself, if a company is not growing the bottom line.

After going through the list of companies that raised dividends over the past week, I identified four companies for further research.

The companies include:

Thursday, October 19, 2017

Rising Earnings – The Source of Future Dividend Growth

Successful dividend investors understand that a steadily rising dividend payment only tells half of the story. Most dividend paying companies that have been able to consistently raise distributions for at least one decade have enjoyed a steady pattern of earnings during that period of time.

As a dividend growth investor, my goal is to find attractively valued stocks that consistently grow their dividends. I run screens on the list of dividend champions and contenders using my secret entry criteria, and then look at the list company by company. Not surprisingly, I look for a record of increasing dividends. But I look for much more than that in a company.

In a previous article I discussed the three stages that dividend growth companies generally exist in. My goal is to focus on those in the second stage, although I might occasionally select a company from the first phase. However, I try to buy not just companies that have a record of raising dividends, but those that have decent odds of continuing that streak for the next 20 – 30 years. Not every company will achieve that, but for those that do, they would generate the bulk of portfolio dividend growth. The hidden source of dividend growth potential is expected earnings growth.

As you can tell from looking at my stock analysis reports, I look for companies that can increase earnings per share over time. Rising earnings per share can essentially provide the fuel behind future dividend growth. For example, Colgate-Palmolive (CL) has increased dividends for 53 years in a row. The company has managed to increase EPS from $1.17 in 2004 to $2.72/share for 2016. This has allowed the company to increase annual dividends from $0.48/share in 2004 to $1.55/share. The rest has been invested back into the business, to fuel potential for more earnings growth.

Tuesday, October 17, 2017

Should I invest in General Mills?

General Mills, Inc. is a manufacturer and marketer of branded consumer foods sold through retail stores. The Company is a supplier of branded and unbranded food products to the North American foodservice and commercial baking industries. The Company has three segments: U.S. Retail, International, and Convenience Stores and Foodservice.

Today we are going to evaluate General Mills (GIS) against these simple four filters. In general:

1. I look for quality companies (evidenced by a long streak annual dividend increases)
2. I want them at an attractive valuation
3. I want EPS growth, to ensure future dividend growth and growth in intrinsic value over time
4. I want an adequate margin of safety in dividends

General Mills is a dividend achiever which has increased dividends to shareholders for 14 years in a row. The company and its predecessors have paid dividends without interruption for 119 years. Over the past decade, General Mills has managed to hike annual dividends at a rate of 10.40%/year.

Thursday, October 12, 2017

How to determine if your dividends are safe

As dividend growth investors, our goal is to buy shares in a company that will shower us with cash for decades to come.

One of the important things to look out for in our evaluation of companies involves determining the safety of that dividend payment.

A quick check to determine dividend safety is by looking at the dividend payout ratio. This metric shows what percentage of earnings are paid out in dividends to shareholders.

In general, the lower this metric, the better. As a quick rule of thumb, I view dividend payout ratios below 60% as sustainable. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

For example, dividend king 3M (MMM) earned $8.16/share in 2016 and paid out $4.44 in annual dividend income per share. The dividend payout ratio is a safe 54%. This means that this dividend king is likely to continue rewarding its long-term shareholders with a dividend increase into the future. This will further extend 3M's streak of 59 consecutive annual dividend increases.

However, there are exceptions to the 60% payout ratio rule.

For example, companies in certain industries such as utilities have strong and defensible earnings streams. In addition, they can afford to distribute a higher portion of earnings as dividends to shareholders due to the stability of their business model.

Wednesday, October 11, 2017

Two Dividend Growth Stocks On My Radar

As part of my process, I tend to screen the list of dividend growth stocks regularly, in order to identify companies for further research. I also skim company press releases for announcements related to earnings and dividends. I was able to identify two dividend growth stocks, which seem to have been punished excessively as of recently. Those companies include Walgreen and CVS.

Walgreens Boots Alliance, Inc. (WBA) operates as a pharmacy-led health and wellbeing company. It operates through three segments: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale. The company is a dividend champion, which has managed to raise dividends to shareholders for 42 years in a row. The ten year dividend growth rate is 17.80%/year. Walgreens Boots Alliance has managed to grow earnings per share from $2.03 in 2007 to $3.82 in 2016. Forward estimates are for $5/share in 2017. Currently, the stock is attractively valued at 18.30 times earnings and yields 2.30%. Check my analysis of Walgreens for more information about the company.

CVS Health Corporation (CVS) provides integrated pharmacy health care services. It operates through Pharmacy Services and Retail/LTC segments. The company is a dividend achiever, which has managed to boost its dividend for 14 years in a row. The ten year dividend growth rate is 27%/year. CVS Health has managed to grow earnings per share from $1.90 in 2007 to $4.90 in 2016. Forward estimates are for $5.88/share in 2017. Currently, the stock is attractively valued at 15.20 times earnings and yields 2.70. Check my analysis of CVS Health for more information about the company.

Monday, October 9, 2017

Three Companies Rewarding Shareholders With a Raise

As dividend growth investors we are trying to identify quality companies with an established track record of annual dividend dividend increases, which are growing earnings, have sustainable dividends, and are available at an attractive valuation. If we identify enough such companies to add to our portfolio, we will be able to generate a sufficient stream of income to live off in retirement.

I identify such companies as part of my screening process, and as part of my monitoring process.

As part of my monitoring process, I review the list of dividend increases every week. I go through this exercise, in order to check if the companies I own are going to pay me more for owning them. I also use it to uncover hidden dividend gems for further research. Most importantly, this exercise is helpful as an educational tool, used best to reiterate what we are really looking for as investors.

The companies that recently announced their intention to reward shareholders with a raise include Honeywell International (HON), RPM International (RPM) and Northwest Natural Gas Company (NWN).

RPM International Inc. (RPM) manufactures, markets, and sells specialty chemical products for industrial, specialty, and consumer markets worldwide.The company raised its quarterly dividend by 6.70% to 32 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion.

Wednesday, October 4, 2017

Four Dividend Growth Stocks to Consider on Dips

I was able to identify a few dividend growth stocks that I find to be attractively valued today. That doesn’t mean that these companies will not decline further in share prices from here. It also doesn’t mean that those are recommendations for you to act upon. These are just a few companies that I believe are attractively valued today, and are likely to grow earnings and dividends over the next decade or so. If that thesis plays out, it is also likely that share prices will grow over time.

The companies include:

The J. M. Smucker Company (SJM) is a manufacturer and marketer of branded food and beverage products and pet food and pet snacks in North America. The Company's segments include U.S. Retail Coffee, U.S. Retail Consumer Foods, U.S. Retail Pet Foods, and International and Foodservice. The company is a dividend achiever, which has managed to increase dividends for 20 years in a row. Over the past decade, it has managed to boost dividends at a rate of 9.80%/year. Earnings per share grew from $3.03 in 2008 to $5.11 in 2017. The company is expected to earn $7.72/share in 2018. It is selling for close to 20 times earnings and yields 3%. It could be an interesting idea below $102 - $103/share. Check my analysis of J.M. Smucker for more information about the company.

Hormel Foods Corporation (HRL) is engaged in the production of a range of meat and food products. The Company operates through five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store (JOTS), Specialty Foods,, and International & Other. The company is a dividend king, which has managed to increase dividends for 51 years in a row. Over the past decade, it has managed to boost dividends at a rate of 15.30%/year. Earnings per share grew from $0.55 in 2007 to $1.68 in 2016. The company is expected to earn $1.56/share in 2017. It is selling for close to 20 times earnings and yields 2.10% It could be an interesting idea below $33 - $34/share. Check my analysis of Hormel Foods for more information about the company.

The Walt Disney Company (DIS) is an entertainment company. The Company operates in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media. The company is a dividend challenger, which has managed to increase dividends for seven years in a row. Over the past decade, it has managed to boost dividends at a rate of 18.80%/year. Earnings per share grew from $2.34 in 2007 to $5.76 in 2016. The company is expected to earn $5.81/share in 2017. It is selling for less than 20 times earnings and yields 1.60%. It could be an interesting idea below $105 - $106/share. Check my analysis of Walt Disney for more information about the company.

Altria Group, Inc.(MO) manufactures and sells cigarettes, smokeless products, and wine in the United States. The company is a dividend champion, which has managed to increase dividends for 48 years in a row. Over the past decade, it has managed to boost dividends at a rate of 11.60%/year. Earnings per share grew from $1.49 in 2007 to $3.03 in 2016. The company is expected to earn $3.26/share in 2017. It is selling for less than 20 times forward earnings and yields 4.10%. It could be an interesting idea around $61 - $63/share, or below. Check my analysis of Altria for more information about the company.

Relevant Articles:

How to become a successful dividend investor
Dividend Kings List for 2017
How to value dividend stocks
Why do I use a P/E below 20 for valuation purposes?
Rising Earnings – The Source of Future Dividend Growth

Monday, October 2, 2017

Lockheed Martin Rewards Shareholders With A Raise

Lockheed Martin Corporation (LMT), a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space Systems.

The company raised its quarterly dividend by 9.90% to $2/share. This marked the 15th consecutive annual increase for this dividend achiever. Over the past decade, the company has managed to boost distributions at a rate of 18.40%/year. This was supported by growth in earnings per share from $7.29 in 2007 to $12.42 in 2016. Lockheed Martin is expected to earn $12.64/share in 2017.



Currently, the stock is overvalued at 24.50 times forward earnings. The stock yields 2.60%.

The company has benefitted from share buybacks over the past decade. Lockheed Martin managed to reduce the number of shares outstanding from 416 million a decade ago to 291 million in the most recent quarter. Net income from continuing operations increased from $3 billion in 2007 to $3.753 in 2017. Earnings per share also received a large boost, because the valuations were very low a decade ago. Unfortunately, today shares are overvalued, but the company keeps buying them regardless of valuation. I believe that defense contractors are expensive at or above 20 times earnings. I would be interested in the stock when valuations are in the 15 – 16 times earnings range.

Relevant Articles:

Dividend Achievers Offer Income Growth and Capital Appreciation Potential
Lockheed Martin Corporation (LMT) Dividend Stock Analysis 2013
Should Dividend Investors be Defensive about these stocks?
How to value dividend stocks

Thursday, September 28, 2017

Performance of Dividend Payers versus Non Dividend Payers in S&P 500

I recently obtained the data behind the performance behind dividend and non dividend payers in the S&P 500 per year. This is a calculation performed by the index committee that separates members of S&P 500 into dividend paying and non dividend paying, and then equally weighting those portfolios. The performance of an equal weighted portfolio of dividend stocks is compared to the performance of an equal weighted portfolio of non dividend paying stocks.


Source: S&P/Dow Jones Data

The number of dividend paying stocks has varied over time. Currently, there seem to be 419 companies paying a dividends, out of 505 members of the S&P 500 index ( the difference is due to the inclusion of multiple share classes on the same company – e.g. GOOG and GOOGL)
Most companies paying a dividend are in mature industries. Most dividend stocks tend to be value stocks, which tend to decline by less during bear markets but still provide sufficient upside during bull markets.

Tuesday, September 26, 2017

Three Quality Companies Raising Dividends and Returns

As part of my monitoring process, I review the list of dividend increases every week. This helps me keep a pulse of dividend growth stocks I own, as well as the ones I may be interested in at the right valuation.  The companies that raised dividends over the past week in review include Microsoft, McDonald's and W.P. Carey.

In general, we want dividend growth stocks which have raised distributions for at least a decade, which was possible due to growth in earnings per share, and we want those at an attractive valuation. The quick review of each dividend raiser is focused on these general points of interest.

McDonald’s Corporation (MCD) operates and franchises McDonald’s restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, Latin America, and internationally.
The company hiked its quarterly dividend by 7.40% to $1.01/share. This marked the 42nd consecutive annual dividend increase for this dividend champion. As a McDonald's shareholder, I am lovin' it! I celebrated the dividend increase with the two cheeseburger number two meal at my local establishment. McDonald’s has managed to boost dividends at a rate of 13.70%/year over the past decade. This was supported by an increase in earnings from $1.93/share in 2007 to $5.44/share in 2016. The company is expected to earn $6.52/share in 2017. Currently, the stock is overvalued at 24.40 times forward earnings and yields 2.50%. McDonald's would be a better value on dips below $130/share, and an even better one on dips below $109/share. I came up with these values by multiplying the forward earnings for 2018 by 20 and the earnings for 2016 by 20.

Friday, September 22, 2017

Share Buybacks and Dividends Are Not The Same Thing

Share buybacks have gained prominence in the past twenty years. The amount corporations spend on buybacks exceeds the amount they spend on dividends. Plenty of investors mistakenly believe that dividends and share buybacks are equivalent.

They are not.

I prefer dividend payments. When a company declares and pays a cash dividend, this is yours to keep. You can do anything with that cash. The dividend represents a return on investment, and an instant cash rebate on your original purchase back. Every shareholders receives the same treatment per each share they own. Plenty of investors these days hate dividends, because of their tax inefficiency. When you earn dividend income, and you are in the high tax brackets, you can pay over 20% to the government. These investors forget that most stock in the US is now held in retirement accounts, where taxes are either deferred for decades or they are tax-exempt. So the easy solution for most investors in the US is to buy stock in retirement accounts.

When a company declares a buyback, not all shareholders are impacted the same way (this example of course assumes that the company indeed follows through with the buyback, which is not always the case). When a company declares and executes a buyback, and you do not sell, you won’t have to pay a dime in taxes. Plenty of people love this idea, and focus on the tax efficiency aspect above everything else. However, the investors who sold their shares back to the company have to pay taxes on any gains, assuming they held the shares in a taxable account. By the way, if an index fund holds the stock, it needs to sell a portion of the shares, because the float is reduced from the share buyback.

Wednesday, September 20, 2017

My Favorite Pick Right Now

This is a guest post written by Mike McNeil, author of the Dividend Guy Blog and co-founder of Dividend Stocks Rock. Mike is currently investing $100,000 in a 100% dividend growth portfolio as the market trades at an all-time high.

Regardless where I look these days, I read alarming news about the stock market. Government debts are through the roof, there are tensions among many countries, debt is “too cheap” and we make a bad use of it, interest rates are climbing up and the stock market doesn’t listen to reality, like Icarus reaching for the sun. As Icarus’s story, once our wings will be burned by the sun, the fall will be fatal. This is obvious; everything is set to have the market crashes and burns.

I recently quit my job as a private banker to work full-time on my investing website Dividend Stocks Rock (DSR).  This is how I received $108,000 as a lump sum for my pension. What am I going to do with this new money? What should I do as a dividend investor? Should I keep money aside and wait for a correction?

This could be argued to be an interesting strategy if you think you can time the market. However, for a dividend growth investor, we should all know that time in the market is a lot more important than market timing. We should ignore the noise and keep investing. This is what I’m doing anyway. I decided to invest it all in the stock market now; because when the stock market goes down like this:

Monday, September 18, 2017

Three High Yielding Dividend Machines Rewarding Shareholders With a Raise

Over the past several weeks, there were three high yielding dividend growth stocks that raised distributions for shareholders. I am going to do a quick review on all three, using my criteria for evaluating dividend growth stocks.

I review the list of dividend increases every week. I then narrow the list down based on a variety of criteria such as minimum streak of annual dividend increases. The end result from the list today includes three high yielding companies that raised dividends over the past two weeks. The companies include Philip Morris International Inc., Realty Income Corporation and Verizon Communications.

Plenty of retirees I have gotten in touch with over the years seem to own those dividend machines. The question is, are those still good ideas today for accumulation?

Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes, other tobacco products, and other nicotine-containing products. The company raised its quarterly dividend by 2.90% to $1.07/share. This marked the 9th consecutive annual dividend increase for PMI. The new annualized dividend payment is $4.28/year. This is a decent rate of growth from the annualized dividend payment of $1.84/share in 2008.

Friday, September 15, 2017

My Take on Real Estate Crowdfunding

I have been reading about real estate crowdfunding platforms over the past several months. Many of these platforms seem to market to investors, showcasing high dividend yields in the 8% - 10%/year range.

I was intrigued, and tried researching those. After all, if I can obtain 10%/year investing in real estate easily, I can just retire and call it a day.

I read the following two articles in my research:

Investing with RealtyShares – see how I’m doing with real estate crowdfunding by Joe Udo

How To Invest In Real Estate Without Owning Real Estate by Mr 1500 Days.

I essentially posted the following comment on both blogs:

I believe that all of those platforms are still relatively untested. And probably giving those platforms a try could be worth it with what many refer to as “play money”.

Perhaps I do not understand these well enough and need to do more research. However, why would individual investors like you and me get a cut out of lucrative Fundrise/Mogul real estate deals, when other REITs (like the ones in VNQ) could be easily taking on those projects? I keep wondering whether those private placement real estate platforms just include mostly higher risk projects that more established players have passed up on, and may not deliver the total returns we want. The real test would be how these platforms would perform during the next recession. It would be interesting to check these out in a decade, and compare notes on how things progressed.

A decade ago, P2P loans were a new thing. Many people invested in them through Prosper & Lending Club, and the forward results were not good.

Wednesday, September 13, 2017

The Magic Dividend Cocktail

This is a guest post by Mr Tako, who writes about investing and financial independence over at Mr Tako Escapes. The author is a financially independent dividend investor, who focuses his time on his family, investing and blogging. Mr Tako is living off dividends in retirement, which is the ultimate goal for most of us.

The dream of dividend growth investing is a dream about passive income -- An ever growing stream of passive income that lasts for decades and requires very little work to maintain.
That was my dream anyway, and for the most part I achieved it.

Unfortunately, the dream of passive income is easier to dream about than it is to achieve.  It takes work.  Dividends don't just keep growing out of "thin air" -- Companies have to actively make the right moves to keep those beautiful dividends growing.

This means investors must also find the right companies to stay invested in -- the ones with dividends that grow faster than inflation for long periods of time.

How does an investor find companies like these?  One great place to start is by identifying the four methods by which companies grow dividends...

Monday, September 11, 2017

19 Dividend Champions For Further Research

One of the most important factors that separate winning investors from losing investors is the ability to develop a process that you stick to no matter what happens. When you have a process, you take guesswork out of investing, and you stick to the plan through thick or thin.

Ever since I started focusing on dividend growth investing a decade ago, I have been able to invest my savings regularly, using my process. My process for identifying companies is very simple:

1) I start with the list of dividend champions, which includes companies that have raised dividends each year for at least a quarter of a century. This requirement ensures that I focus on quality companies with lasting business models

2) I eliminate companies that sell at high P/E ratios above 20. I believe that even the best company in the world is not worth overpaying for. I would much rather buy a quality company at a favorable valuation, than overpay for future growth. Valuation is important.

3) I eliminate companies with high dividend payout ratios. Dividend safety is very important, which is why I want to have a margin of safety in order to lower the likelihood that dividends will be cut during the next recession. Since I plan to live off dividends in retirement, I only want to focus on the companies that can deliver dependable dividend income for me.

4) I also focus on companies that have managed to boost dividends by at least 3%/year over the past 5 and 10 years. We want companies whose dividend payments will at least match inflation.

5) Last but not least, we evaluate the ten year trends in company’s earnings per share. We want companies that grow earnings per share. This provides fuel for future dividend increases and increases the likelihood that the intrinsic value of the business grows over time.

Thursday, September 7, 2017

The dumbest argument against dividend paying stocks

One of the dumbest arguments against dividend growth investing is showing a single investment that failed, and thus implying that the strategy is not good. An opponent of dividend growth investing would usually use a company like Eastman Kodak (KODK), General Motors (GM), or one of the major banks like Citigroup (C) as an example of type of stocks that investors believed to be buy and hold forever.

There are several logical flaws with this argument.

The first issue stems from the fact that only some of the banks used in this argument have ever been dividend growth stocks at the time of their demise. General Motors, which was one of the bluest of blue chips for decades, had never been a dividend growth stocks, because of the cyclical nature of its distributions. Eastman Kodak was a dividend achiever once, having raised dividends for 14 years in a row through 1975, when the Board of Directors elected to freeze distributions. This was over 37 years before the company declared bankruptcy. Since 1975, the company had raised dividends off and on, but never for more than five consecutive years in a row. After the company cut dividends in 2003 however, no objective dividend investor should have held on to the stock.

Tuesday, September 5, 2017

Index Investing versus Dividend Growth Investing

One of the largest debates I have seen involves the debate on index investing versus dividend growth investing. Plenty of individuals who have already made a commitment to a strategy argue fiercely why their choice is superior.

An index investor will tell you that their way is superior to your way of investing.

A dividend growth investor will tell you that their way is better.

As usual, it is important to step back, and determine what drives those debates in the first place.

I believe that those debates are ego driven and not that useful for your ability to invest to reach your goals. Both sides may resort to bending statistics and facts to their liking, in order to “win” an argument. This is a dangerous exercise, because these individuals are actually learning how to justify their preexisting biases, rather than think objectively. When you double down on your position on a certain topic, you are focusing on your side of the argument, but ignore anything else. The debate is further driven down the drain by interested parties whole sole livelihood depends on selling you index fund portfolios or selling you dividend stock services.

Thursday, August 31, 2017

How to never run out of money in retirement

Here is the simple answer: live off dividends

Here is the longer answer –when you live off the income that your portfolio produces, the chance that you will ever run out of money is greatly reduced. If you have to sell portions of your portfolio and thus rely on finding someone else to sell at higher prices than you bought, then you have a higher chance of outliving your money.

It is very easy to monetize a pile of cash, and convert it into a neat dividend machine, which will deposit cold hard cash into your brokerage account regularly. You can then use that cash to either spend or to reinvest into more dividend paying stocks, paying even more cash.

As I discussed earlier, there are largely two types of dividend growth investor investors. The first group are those who have been putting money mostly in dividend growth stocks regularly, reinvested dividends, and maintained their portfolios. The second group include those who are trying to convert a nest egg accumulated over a lifetime of hard work, or an inheritance or another pile of cash received recently as a lump-sum. Those are the ones who want to learn how to pensionize their assets, and live off that pile, while also minimizing the risk of loss to the minimum.

Monday, August 28, 2017

Altria Delivers Dependable Dividend Growth and High Total Returns

Altria Group, Inc.(MO), through its subsidiaries, manufactures and sells cigarettes, smokeless products, and wine in the United States.

The company recently raised its quarterly dividend by 8.20% to 66 cents/share. Altria has delivered dependable dividend increases for 48 years in a row. Over the past decade, this dividend champion has managed to boost distributions at a rate of over 8%/year.

This dividend growth stock has delivered dependable dividend growth, and exceptional total returns to shareholders for decades. In fact, the company managed to become the best performing stock in the S&P 500 between 1957 and 2003.

Since then, the company spun-off Kraft foods in 2007 and Phillip Morris International in 2008. Kraft foods was further split into two companies in 2013 – Mondelez and Kraft. The latter merged with Heinz to form Kraft Heinz (KHC). An investor who bought Altria in 2003, and held on to all spin-offs, while reinvesting dividends, still managed to do much better than the S&P 500.

Thursday, August 24, 2017

Sequence of returns matters in retirement planning

One of the important truths about investing for retirement is that the sequence of returns matters greatly. In order to be successful in retirement, you want your money to outlive you. In order to achieve that, you do not need to identify the best performing investment over the next 20 years.

Rather, your goal should be to identify the investments which can generate reliable and consistent returns on live off. This is why I focus my attention to investments that pay me a reliable dividend which also grow over time. Dividends are always positive, they tend to be more stable than capital gains, and they are more reliable than capital gains. This is why we focus on the reliable dividend income in retirement planning. Share prices and corresponding capital gains or losses on the other hand are almost impossible to forecast. With dividend stocks, the randomness of total returns are smoothed out by dividends.

This is why we focus on living off dividends in retirement. Dividends are more stable and dependable as source of returns than capital gains. The industries that tend to produce the best dividend payers in the world also tend to be more mature and dependable.

I will illustrate the importance of consistent returns with an example.

Imagine that it is the year 1999, and you have $1 million to invest. You want to retire immediately, and enjoy the fruits of your labor. You require $40,000/year in annual expenses for your modest lifestyle. You can only choose between two companies – Amazon.com (AMZN) or Realty Income (O). The only other piece of information you are given is that a $1 million investment in Amazon will be worth $16,698,870 in 2017, while the same investment in Realty Income will be worth $14,455,380. Not a bad return for either investment.

Which investment would you choose, given those constraints?

Monday, August 21, 2017

Five Tips to Avoid Dividend Cuts

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

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

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

If so, you aren’t alone.

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

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

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

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

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

Friday, August 18, 2017

An update on my fixed income exposure

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

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

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

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

Wednesday, August 16, 2017

The Blueprint for Successful Dividend Investing

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

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

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

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

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

Clearly, something is special about dividend growth investing.

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

Invest in Consistent Dividend Growers

Monday, August 14, 2017

Tanger Factory Outlets (SKT) Dividend Stock Analysis

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

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

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

Thursday, August 10, 2017

Dividend Growth Investing Promotes Long-Term Thinking

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

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

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

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

Monday, August 7, 2017

Ten Companies Rewarding Shareholders With Regular Dividend Increases

As part of my monitoring process, I review the list of dividend increases regularly. This helps me to monitor the performance of companies I own. It also helps me to identify promising companies for further research.

I typically focus on companies that have raised dividends for at least a decade. I rarely violate this principle, but when I do, I have found out to have mixed success.

I also evaluate trends in earnings, dividends and look at valuations in order to determine whether a company is worth researching further today. In general, dividend growth investors want to acquire shares in a quality company with a long record of annual dividend growth, which also sells at an attractive valuation. The goal is to invest in such a company that can grow earnings over time. This provides the fuel behind future dividend increases, which pay for expenses in retirement.

Over the past couple of weeks, there were several notable companies raising dividends to shareholders. The companies include:

Thursday, August 3, 2017

Why I Use Dividend Growth Investing to Get Wealthy

Mark Seed is passionate about personal finance and investing and is the blogger behind My Own Advisor. Mark is currently investing in dividend paying stocks on his journey to financial freedom. He is almost halfway to his goal of earning $30,000 per year in tax-free and tax-efficient dividend income for an early retirement. You can follow Mark on his path to financial freedom here.

I wasn’t always a dividend growth investor. In fact, for a good part of my 20s, I wasn’t much of an investor at all. As a young Canadian kid fresh out of university having secured my first full-time (real) job at a major pharmaceutical company, I didn’t think very much about my financial future. Sure, I knew enough to “pay myself first” (and I did) to the tune of about $50 per month in my registered investment account, similar to a 401(k), but I was focused on living for today. And who isn’t for the most part in their 20s – you only live once right?

The reality check
As you get older in life, you realize more and more you don’t know what you don’t know. You also figure out when it comes to investing in particular, by owning some pricey mutual fund investments, you’re paying steep money management fees for products that have no chance to outperform the market over time. You also learn the fees paid in money management fees is money you’ll never see again. It’s a massive double-whammy that occurs in Canada, and the United States, and pretty much anywhere around the world. This is part of the reality check that led me to dividend growth investing.

Monday, July 31, 2017

How to Use Real Estate to Create Dividend-Like Income

This is a guest post from Chad Carson from CoachCarson.com. Chad started with only $1,000 in the bank and was able to build up a real estate empire that now consists of over 90 units

Thank you to Dividend Growth Investor for letting me share with you today. It's an honor!

Over the last 15 years, I've used real estate investing as a vehicle to achieve financial independence. Everyone has their own idea of life after financial independence, but in my case, it involves my family and travel to other countries.

Currently my wife, two young daughters, and I are living in Ecuador in South America for 14 months. We're having new experiences, my daughters are enrolled in local Spanish speaking schools, and we're all learning and growing together.

And relevant to this article, real estate income pays for it all!

In the rest of this article, I'll share lessons that have helped me get to this point using real estate. I can assure you my journey has been far from perfect, but I hope my successes and failures will help with your own journey.


Dividend Growth Investing vs Rental Properties

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