Thursday, June 13, 2024

Warren Buffett on Living Off Dividends In Retirement

I am a big fan of Warren Buffett, the Oracle of Omaha. His letters to shareholders are an excellent resource for students of value investing. I've studied his strategy, investments and his work, and believe that Warren Buffett is a Dividend Growth Investor in disguise.

I am also a big fan of Dividend Growth Investing. The goal of every Dividend Growth Investor is to generate enough in dividend income to pay for their expenses in retirement. To get there you save and invest consistently in quality dividend growth companies that sell at attractive valuations. The next step is to keep at it, and also patiently let the power of compounding do the heavy lifting for you. It takes time to build this portfolio, brick by brick, but once you reach critical mass, the power of compounding is very visible. With dividend growth on top of regular dividend reinvestment and regular investment and after giving it some time, that dividend income and net worth goes in turbocharged mode.

I like the concept of Dividend Growth Investing when it comes to investing for retirement. The investor builds a diversified portfolio by investing regularly, reinvests those dividends until their dividend income covers expenses. At that point, they can retire. 

I recently saw an interesting video clip of Warren Buffett, which discussed how he would invest if he were retired.

You can read the transcript below:

"Warren Buffett: If I were retired, I had a million-dollar portfolio of stocks paying me $30,000 a year in dividends. my children were grown and the house was paid off, I wouldn’t worry too much about having a lot of cash around."




I love this video because it is short and to the point. 

A million dollar portfolio could be built today to generate $30,000 in annual dividend income quite easily. If history is any guide, that income would likely grow at or above the rate of inflation over time, thus preserving the purchasing power of that income. In addition, as the dividend grow, it's very likely that the value of the portfolio would grow over time as well. This in effect would also help protect purchasing power of principal as well.

The concept of living off dividends in retirement is a very powerful one. It's also very simple. When the amount of dividend income generated by your portfolio covers your expenses, you can retire. I use the rule of 3% to determine how much money I need to accumulate to cover expenses. This means that I need to have roughly 33 times the amount of money accumulated for each dollar I plan to spend in retirement. In other words, if I spend $30,000/year, I need roughly $1 Million invested at 3%. If I need $100,000/year, I need to accumulate around $3.3 Million in income generating assets.

Getting to the million dollar portfolio of course requires time, patience, perseverance and consistency. I would think that a long-term investor can get there in a reasonable amount of time. Getting there is a function of the the dividend yield, dividend growth, amount invested and time you invest for (assuming of course that the investor keeps costs low in the process as well).

For example, someone who invests $30,000/year in a portfolio of dividend growth stocks yielding 3% and growing dividends at 6%/year annualized, would be able to generate about $30,000 in annual dividend income withing 15 years or so. If that investor keeps investing for 22 years, the total amount of dividend income would reach $60,000/year. You may like this spreadsheet to play with assumption.

However, if they can only invest roughly $1,250/month, it would take about 22 years to reach $30,000 in annual dividend income. At a 3% average dividend yield, this translates into a portfolio worth $1 Million.

The other part I liked about the video is the discussion around owning your home and being in a phase of life where your children are grown up and on their own. 

At a certain point in life you may either have your house paid off, and/or you are ready to downsize, which reduces housing costs. That in itself reduces amount of investable assets that are needed to produce income for you. If your housing cost is $30,000/year on top of every other expense you have, you need an additional $1 Million in retirement assets (dividend stocks/401k etc). But if you can reduce that amount to say $15,000, then you need less in retirement assets to support this part of your budget.

If your kids are grown up and on their own, that further reduces ongoing costs as well. Of course, the retired couple may have higher discretionary expenses related to travel, and helping out with grandchildren or helping children as well. But the necessary costs have definitely been reduced, as discretionary costs could be reduced somewhat more easily than necessary ones. You need to eat even during a recession, but that trip to Paris could wait another season or another year.

Of course, the other thing to consider is other income sources in retirement. If you plan to retire at the traditional age in your early 60s, you may also be eligible for social security in the US or a traditional pension plan. If you spend $30,000/year in retirement, but also generate $1,000/month in Social Security, you actually need only $18,000/year in dividends to cover the shortfall. That means that you only need $600,000 portfolio, rather than thee $1 Million one. Of course, if you do not plan to start your Social Security until the age of 70 or you plan to retire much earlier, then you would likely need that full $1 Million in income producing assets, before you can retire early.



Monday, June 10, 2024

Four Dividend Growth Stocks Raising Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process. This exercise is one of the steps that helps me evaluate existing holdings. It's also one of the touch points that help me potentially identify companies for further research.

This review also helps show the quick ways I go about reviewing a company. That's to decide whether a company should be added to my list for further research or not.

In general, I look for:

1) A long track record of consecutive annual dividend increases. In this case, I am looking for companies that have raised dividends for at least ten years in a row.

2) A history of increasing earnings over the past decade. Rising earnings per share are the fuel behind future dividend increases. 

3) Dividend growth rate versus most recent dividend increase. Dividend increases provide a signaling opportunity into the mind of company management teams. More often than not, it provides clues as to what management teams see happening in the business, before they commit to updating the dividend. They do not make this decision lightly, but rather after evaluating the economy, competition, the business environment and their assessment of how the business would likely perform.

4) I look at trends in dividend payout ratios when evaluating individual companies. It is important to also view trends in dividend payout ratios to determine dividend sustainability and sources of dividend increases.

5) Valuation. That's a tricky concept, which takes into consideration current P/E ratios, dividend growth rates, as well as current yields, payout ratios and earnings growth. Ultimately it also ends up as an exercise in trade-offs as well as opportunity costs.


Over the past week there were four companies that increased dividends and also have a ten year track record of consecutive annual dividend increases. The companies include:


Alexandria Real Estate Equities (ARE) is a REIT which invests in life-science properties in the US.

The REIT increased quarterly dividends by 2.40% to $1.30/share. This is a 5% increase over the dividend paid during the same time last year. This is the 14th year of consecutive annual dividend increases for this dividend achiever. The company has managed to grow dividends at an annualized rate of 7% over the past decade. The five year annualized dividend growth rate is at 6%.

Between 2014 and 2023, FFO/share  increased from $4.42 to $7.19.

The REIT is expected to earn $9.49/share in FFO this year.

The stock sells for 12.10 times FFO and yields 4.45%.


Oil-Dri Corporation of America (ODC) develops, manufactures, and markets sorbent products in the United States and internationally. It operates in two segments, Retail and Wholesale Products Group, and Business to Business Products Group.

The company increased quarterly dividends by 6.90% to $0.31/share. This declaration marks the 21st consecutive year the Company has increased dividends. Over the past decade, this dividend achiever has managed to increase dividends at an annualized rate of 4.30%.

The company has managed to grow earnings from $1.18/share in 2014 to $4.13/share in 2023.

The stock sells for 19.40 times forward earnings and yields 1.65%.


UnitedHealth Group Incorporated (UNH) operates as a diversified health care company in the United States. The company operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx.

The company increased quarterly dividends by 11.70% to $2.10/share. This is the 15th consecutive annual dividend increase for this dividend achiever. Annualized dividend growth has been decelerating. The ten year annualized dividend growth is at 21.40%, while the 5 year annualized dividend growth is 16.10%.

Between 2014 and 2023 the company managed to grow earnings from $5.78/share to $24.12/share.

The company is expected to earn $27.71/share in 2024.

The stock sells for 17.70 times forward earnings and yields 1.53%.


Universal Health Realty Income Trust (UHT) is a real estate investment trust, which invests in healthcare and human-service related facilities including acute care hospitals, behavioral health care hospitals, specialty facilities, medical/office buildings, free-standing emergency departments and childcare centers. 

The REIT increased its quarterly dividends by 0.70% to $0.73/share. This was the 39th year of consecutive annual dividend increases for this dividend champion. Over the past decade, this REIT has managed to grow dividends at an annualized rate of 1.50%.

FFO/share went up from $2.78/share in 2014 to $3.23/share in 2023.

The stock sells for 11.80 times FFO and yields 7.45%.


Relevant Articles:

Six Companies Increasing Dividends to Shareholders Last Week

Five Dividend Growth Stocks Rewarding Shareholders With Raises Last Week

Fourteen Dividend Growth Stocks Raising Dividends Last Week

15 Dividend Stocks In The News

Thursday, June 6, 2024

Living Off Dividends in Retirement

The goal of every Dividend Growth Investor is to generate enough dividends to pay for their retirement. It takes patience, persistence and perseverance to accumulate that income producing nest egg. But once it is built, and that dividend income covers expenses at the dividend crossover point, work becomes optional.



The neat thing about dividend income is that it has historically increased faster than inflation in the US. While individual companies in a portfolio may cut dividends, the overall portfolio continues to generate more dividends overall, because more companies increase dividends than cut them. 

Dividend Growth Stocks are not just limited to the Dividend Aristocrats, Dividend Kings, Dividend Champions and Dividend Achievers either. I have long claimed that the entire US Stock Market is basically one giant Dividend Growth Stock.

A reader of the blog recently shared an interesting chart with me. He calculated how a $1 Million investment in S&P 500 at the end of 1993 would have done for a retiree. 

The assumption is that the retiree invested $1 Million in S&P 500 fund at the end of 1993. It follows the dividend amounts per year and provides two comparisons. The first scenario is that the dividends are spent. The second scenario basically shows how the portfolio would have grown to, if somehow dividends were not spent but rather reinvested.

While it doesn't take into consideration fees, taxes, and commissions, it is never the less a very interesting review. On the other hand, it is quite possible (and has been in the past) to build a portfolio in a retirement account such as an IRA or 401 (k), and defer taxes.

(Source)

You can see that dividend income increased pretty much every year, with the exceptions of 2000, 2001 and 2009. Those years were associated with major recessions. In general, dividend income rarely declines. This is quite evident if you observe annual dividend income over the past 80+ years.



Around the years that dividend income declined, share prices actually declined by much more.

It's fascinating how dividend income kept increasing year in and year out over the past 30 years, ultimately increasing by a factor of 5 by 2023 from the initial year. 

At the same time, the value of the portfolio increased by a factor of 10. This means that the original $1 Million investment at the end of 1993 turned to a little over $10 million by end of 2023. Or $10,225,812 to be exact. 

Had the investor not spent their dividends however, they would have ended up with $18,176,399. 

On a side note, the reader has a very interesting valuation ratio on the very right of the chart above. It shows how much one needs to invest in S&P 500 in order to get $1 worth of dividends. In effect, it is an inverse dividend yield calculation. For example paying $25 for $1 of dividend income translates into a dividend yield of 4%. You want to pay less for each dollar of dividends in general, all else being equal.

You can note that over the past 30 years, dividend yields on S&P 500 has generally declined by basically half. That means that it takes roughly twice as much capital today as in 1993 to generate the same $30,000 in annual dividends. That's mostly because the dividend yield on S&P 500 today is roughly 1.50% versus roughly 3% in 1993. 

The reason for that decline is because a lot of companies these days pay dividends and also spend much more money on share buybacks. One way to generate that 3% starting yield on investments is through a focus on dividend paying companies. Of course, one also needs to avoid the temptation to chase yield as well. However, many popular dividend ETF's such as the Schwab Dividend 100 (SCHD) yield over 3% today, and have a history of growing dividends. I am actually a firm believer that it is possible to pick and choose my own individual companies in my portfolio, in order to achieve my desired goals and objectives.

Either way, living off dividends in retirement can work well for investors. The chart above shows one example of how it worked in the past, with pretty decent results.

Thank you for reading!

Relevant Articles:




Monday, June 3, 2024

Four Dividend Growth Stocks Increasing Dividends Last Week

I review the list of dividend increases as part of my monitoring process every week. This exercise helps me monitor existing positions. This exercise also helps me potentially identify companies for further research. It is also helpful to showcase the quick drill I do on each company, focusing on the factors that I find most helpful, before putting it on the list for further research or putting it in the "too hard pile".

Over the past week, there were four companies in North America that raised dividends to shareholders and have a ten year track record of consistent annual dividend increases. The companies include:


Donaldson Company, Inc. (DCI) manufactures and sells filtration systems and replacement parts worldwide. The company operates through three segments: Mobile Solutions, Industrial Solutions, and Life Sciences. 

The company increased quarterly dividends by 8% to $0.27/share. This marked the 28th consecutive year of annual dividend increases for this dividend champion. Over the past decade, the company has managed to increase dividends at an annualized rate of 7%.

Between 2014 and 2023, the company managed to grow earnings from $1.79/share to $2.95/share. The company is expected to earn $3.27/share.

The stock sells for 22.50 times forward earnings and yields 1.47%.


Lowe's Companies, Inc. (LOW) operates as a home improvement retailer in the United States. 

The company lifted quarterly dividends by 4.50% to $1.15/share. This is the 62nd consecutive annual dividend increase for this dividend king. It's also much slower than the ten year average annual dividend growth of 20.30%/year.

Between 2014 and 2023, the company managed to grow earnings from $2.71/share to $13.24/share. The company is expected to earn $12.23/share.

The stock sells for 18.10 times forward earnings and yields 2.08%.


National Bank of Canada (NTIOF) (NA.TO) provides financial services to individuals, businesses, institutional clients, and governments in Canada and internationally. It operates through four segments: Personal and Commercial, Wealth Management, Financial Markets, and U.S. Specialty Finance and International. 

The bank raised quarterly dividends by 3.80% to $1.10/share. This is the second dividend increase over the past year, bringing the year over year increase to 7.84%. This is the 15th year of consecutive annual dividend increases for this dividend achiever. The company has increased dividends at an annualized rate of 8.80% over the past decade.

Between 2014 and 2023, the company managed to grow earnings from $4.36/share to $9.47/share.

The bank is expected to earn $10.05/share in 2024.

The stock sells for 11.60 times forward earnings and yields 3.77%. (DGI Note: All Figures for National Bank of Canada are in Canadian Dollars)



Royal Bank of Canada (RY) operates as a diversified financial service company worldwide. 

The company raised quarterly dividends by 2.90% to $1.42/share. This is the second dividend increase over the past year, bringing the year over year increase to 5.19%. This is the 14th year of consecutive annual dividend increases for this dividend achiever. The company has increased dividends at an annualized rate of 8.80% over the past decade.

Between 2014 and 2023, the company managed to grow earnings from $6.03/share to $10.51/share.

The bank is expected to earn $11.58/share in 2024.

The stock sells for 12.87 times forward earnings and yields 3.81%. (DGI Note: All Figures for RY are in Canadian Dollars)


Relevant Articles:

- Six Companies Increasing Dividends to Shareholders Last Week

Five Dividend Growth Stocks Rewarding Shareholders With Raises Last Week

Fourteen Dividend Growth Stocks Raising Dividends Last Week

Thursday, May 30, 2024

Marjorie Bradt - A Hidden Dividend Millionaire

I love reading stories about everyday people, who were able to accumulate wealth with long-term dividend investing.

These stories reiterate how to achieve success with investing:

1. Start early

2. Invest prudently

3. Have patience

4. Give your investments time

5. Let the power of compounding do the heavy lifting

Today's story is from one my favorite books on dividend investing. The book is The Ultimate Dividend Playbook: Income, Insight and Independence for Today's Investor, and it was written by Josh Peters, who was the editor of Morningstar Dividend Investor. 

The story covers Marjorie Bradt, an everyday investor who was gifted some old AT&T stock between 1955 - 1962 from her father. The stock was worth $6,626 then, which was not a small amount of course. But she did not sell it. She signed up for the company's dividend reinvestment plan, and then held on to any spin-offs in the process. 

By 1999, that investment had blossomed into 10 companies, worth more than $1 Million total..

You can read the part about Marjorie Bradt from the book below:

A Role Model

Dividend investors have few heroes, at least as far as you can discover by browsing the bookshelves at Barnes & Noble or reviewing a year's worth of cover stories in Fortune or Business Week. Indeed, dividends may be the most misunderstood aspect of investing in stocks, to the extent people bother to understand dividends at all. Most professionals are indifferent to dividends, and a surprisingly large minority are downright hostile. Even the fans of dividends you might see on TV or read about in a magazine are usually on their way somewhere else, collecting dividends just to kill time while waiting for other opportunities to crop up. True fans, those who understand the critical role of dividends over the long run, are very rare in the professional ranks.

As editor of a monthly newsletter devoted to the topic, Morningstar DividendInvestor, I am one of those rare professionals. And while I admire Warren Buffett, Peter Lynch, Marty Whitman, and many other famously successful and articulate investors as much as anyone, my true hero is—drum roll, please Marjorie Bradt.

Don't spend too much time trying to place her name; she's never been featured on CNBC or mentioned in the Wall Street Journal. She's never written a book about investing or managed a mutual fund. Indeed, the stock market has never even been a hobby of hers. Yet I'm willing to bet that Marjorie's long-term investment record beats the vast majority of investors over the past half century.

I became familiar with Marjorie's remarkable record while working as an assistant to a stockbroker in 1999. Marjorie and her husband, Don, were get- ting their ample estate in order, and they needed cost basis information for their seven-figure portfolio. Given this task, I was handed a folder six inches

thick with old statements, some dating back to the 1950s. The best information I had was their current portfolio, almost all of which consisted of the various corporate descendants of AT&T, the original Ma Bell.

Working backward from what they owned in 1999, I noticed that Marjorie's account was marked by a distinct lack of active management. All she did, it seemed, was reinvest her dividends-quarter after quarter, year after year, decade after decade. When AT&T broke up into a long distance-only carrier and the seven baby Bells, Marjorie held on to all eight stocks. When Southwestern Bell bought Pacific Telesis and Ameritech, she held on. When AT&T went on to spin out Lucent, and US West spun out MediaOne, she held on to those, too.

After more than a day's worth of work, I finally found the root of Marjorie's wealth: a handful of gifts of AT&T stock given to her by her father between 1955 and 1962. Their original value totaled $6,626. Very early on, she signed up for AT&T's dividend reinvestment plan. Instead of getting penny-ante dividend checks every three months, she turned those payments into additional shares, which led to more dividends, and so on. As AT&T prospered and raised its dividend rate, the value of each share rose as well as did the Baby Bells' dividends and share prices. By 1999, this investment had blossomed into a portfolio of ten separate stocks worth more than $1 million—all of them descendants of the original Ma Bell.

I was astounded. Here was all this wealth, but Marjorie hadn't lifted a finger to earn it. She hadn't foreseen the raging inflation of the 1970s, the surge in gold, the run of small caps, then large caps, then small caps again. She didn't predict anything—and she didn't have to. She just held and held, reinvesting every dividend, letting these rising dividend payments do all of the work.

The beauty of Marjorie's experience is its simplicity: Anyone could have done the same, even if virtually no other investors did. No PhD, MBA, or CFA was required; math skills learned in junior high school could suffice. Marjorie didn't have to trouble herself with a market-timing strategy or the pursuit of the next Microsoft. And it isn't as though AT&T was a diamond in the rough in the 1950s; back then the company owned almost every telephone in America. Other companies were growing faster, but millions of investors held stock in Ma Bell, drawn in by the same thing that made AT&T attractive to Marjorie's parents: large, steady, and growing dividends.

Marjorie thus traded the usual investor attempts at prescience for a combination of dividends and patience - and rarely does one find an example of such a richly rewarding investment strategy.



Monday, May 27, 2024

Six Companies Increasing Dividends to Shareholders Last Week

I review the list of dividend increases every week, as part of my monitoring process. I usually focus my attention on the companies with a ten year streak of annual dividend increases, and then review each company using my criteria. I am always on the lookout for new ideas, and to determine if my existing holdings are working. I also want to be ready to act quickly, when the right time arrives.

This exercise helps me to evaluate companies I already own, and see how they are doing. This is a helpful piece of the puzzle, that would be helpful when/if I decide to add to these companies at the right price.


When I review companies, I look at ten year trends in:

1) Earnings per share
2) Dividend payout ratio
3) Dividends per share
4) Valuation

This exercise also helps me identify companies for further research. A large part of the time is spent reviewing companies, screening for companies, and trying to learn more about companies, their business, etc. 

It is not glamorous at all, but dull and boring. 

But it does pay dividends.


During the past week, there were six companies that both raised dividends to shareholders and have a ten year streak of consecutive annual dividend increases. The companies include:

(This of course is just a list, not a recommendation)


Flowers Foods, Inc. (FLO) produces and markets packaged bakery food products in the United States. 

The company increased quarterly dividends by 4.30% to $0.24/share. This is the 22nd consecutive annual dividend increase for this dividend achieverdividend achiever. Over the past decade, the company has managed to raise dividends at an annualized rate of 7.40%

Earnings went from $0.84/share in 2015 to $0.58/share in 2023.

The company is expected to earn $1.22/share in 2024.

The stock sells for 19.20 times forward earnings and yields 4.10%.


Insperity, Inc. (NSP) engages in the provision of human resources (HR) and business solutions to improve business performance for small and medium-sized businesses primarily in the United States.

The company increased quarterly dividends by 5.30% to $0.60/share. This is the 14th consecutive annual dividend increase for this dividend achiever.dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 20.70%. The pace of dividend growth has been decelerating in the past few years however.

Between 2014 and 2023, Insperity managed to boost earnings from $0.53/share to $4.53/share.

The company is expected to earn $3.65/share in 2024.

The stock sells for 27.47 times forward earnings and yields 2.40%


Lennox International Inc. (LII) designs, manufactures, and markets a range of products for the heating, ventilation, air conditioning, and refrigeration markets in the United States, Canada, and internationally. 

The company raised quarterly dividends by 4.50% to $1.15/share. This is the 15th year of consecutive annual dividend increases for this dividend achiever.dividend achiever. Over the past decade, the company managed to increase dividends at an annualized rate of 17.25%.

Between 2014 and 2023, the company managed to grow earnings from $4.30/share to $16.62/share.

The company is expected to earn $25.25/share in 2024.

The stock sells for 19.90 times forward earnings and yields 0.91%.


LyondellBasell Industries N.V. (LYB) operates as a chemical company in the United States, Germany, Mexico, Italy, Poland, France, Japan, China, the Netherlands, and internationally. The company operates in six segments: Olefins and Polyolefins—Americas; Olefins and Polyolefins—Europe, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology.

The company raised quarterly dividends by 7.20% to $1.34/share. This is the 13th consecutive annual dividend increase for this dividend achieverdividend achiever. Over the past decade, the company managed to grow dividends at an annualized rate of 9.40%.

Between 2014 and 2023, the company's earnings went from $8.03/share to $6.48/share.

The company is expected to earn $8.27/share in 2024.

The stock sells for 11.90 times forward earnings and yields 5.44%.

Medtronic plc (MDT) develops, manufactures, and sells device-based medical therapies to healthcare systems, physicians, clinicians, and patients worldwide. 

The company eked out a 1.40% increase in its quarterly dividend to $0.70/share. Nevertheless this was the 47th consecutive year of dividend increases for this dividend aristocratdividend aristocrat. The rate of increase was much slower than the ten year annualized dividend growth of 9.75% however.

Earnings went from $2.44/share in 2015 to $2.77/share in 2023.

The company is expected to earn $5.45/share in 2024.

The stock sells for 15.10 times forward earnings and yields 3.40%


Universal Corporation (UVV) processes and supplies leaf tobacco and plant-based ingredients worldwide. The company operates through two segments, Tobacco Operations; and Ingredients Operations. 

The company increased dividends by 1% to $0.81/share. This was the 54th consecutive annual dividend increase for this dividend kingdividend king. Over the past decade, the company managed to increase dividends at an annualized rate of 4.74%.

Between 2015 and 2024, the company managed to slightly boost earnings per share from $4.33 to $4.81.

The company is expected to earn $4.78/share in 2024.

The stock sells for 9.70 times earnings and yields 7.04%.

Wednesday, May 22, 2024

Does timing the market work? If it does, does it pay?

 Does timing the market work? If it does, does it pay?



I tested this concept by creating a simple backtest.


I assumed that four different investors were able to put away $1,000/year at various points in the S&P 500 ETF (SPY) since 1993 through end of 2023. They all use a tax-deferred account, pay no commissions, and reinvest dividends. 


Investor A puts $1,000/year into S&P 500 ETF at the first available close price for the year

Investor B puts $1,000/year into S&P 500 ETF at the highest available close price for the year

Investor C puts $1,000/year into S&P 500 ETF at the lowest available close price for the year

Investor D puts $1,000/year into S&P 500 ETF at the last available close price for the year


As of last month, this is the total worth for each investor:


Investor A is worth $207,000.72

Investor B is worth $177,796.12

Investor C is worth $228,001.77

Investor D is worth $187,997.16


The conclusion that I have is to avoid timing the market. Even if you are consistently able to buy at the low of the year, every single year (which is impossible to do), you are not really that better off than someone who simply bought everything at the beginning of the year

And if you are afraid you will always buy at the top (which is also consistently impossible to do), you are not that far off either.  

If you look at it from a position of each individual year however, there is big variability. But looking at market only on a single year's worth of data is incredibly short term. It's noise.



For example, if you bought $1,000 worth of S&P 500 at the bottom in the year 2022, you returned over 7.50% in that year. You would become famous for timing that one single bottom and making money in a bear market, when everyone else lost money.

If you bought at the beginning of 2022, you would have lost 18.70% for that year on and your clients and everyone else would be laughing at you.

Yet, if you continued investing each year, your overall results won't be as huge, particularly when you get new capital added each year.  Adding that new capital each year smooths out things for you.

When you start averaging out, and stacking those investments year in and year out, brick by brick, you are in effect zooming out. You are taking a longer term approach and building wealth.


After all, in order to make money with market timing, you need to make several correct decisions.

The first one is when to sell.

The second one is when to buy back what you sold.

This sounds complicated, because it is. There are too many variables at play with a market timing strategy.

I believe that a simple strategy of buying right, and sitting tight is superior to a market timing strategy, mostly because it is simpler. When you have less variables, you reduce your chances of error.

To summarize, investing on a regular schedule beats trying to time the markets. For as long as the investor puts money in a diversified portfolio on a regular basis, over a long period of time, it hasn't really mattered if they bought at the top or the bottom.  

Hence, it makes sense to keep investing regularly, and stick to that investment process through thick or thin.



Relevant Articles:

How to accumulate your nest egg

Monday, May 20, 2024

Five Dividend Growth Stocks Rewarding Shareholders With Raises Last Week

I review the list of dividend increases each week, as part of my monitoring process. This exercise helps me to review existing holdings and potentially uncover companies for further research.

This of course is just one aspect in my process. It does provide a helpful look at the way I would quickly evaluate companies, before determining if I want to place them on my list for further research.

Namely I look for:

1) Ten year streak of consecutive annual dividend increases

2) Rate of change in the most recent dividend increase, relative to the ten year historical average

3) Trends in earnings per share, in order to determine sustainability of that dividend income stream

4) Valuation, as well as dividend safety


My review of the weekly dividend increases follows the philosophy outlined in the checklist above.

Over the past week there were five companies that raised dividends and also have a ten year minimum streak of consecutive annual dividend increases. The companies include:


Chubb Limited (CB) provides insurance and reinsurance products worldwide.

Chubb increased quarterly dividends by 5.80% to $0.91/share. This marks the 31st consecutive annual dividend increase for this dividend aristocratdividend aristocrat. Over the past decade, the company has managed to boost dividends at an annualized rate of 5.40%.

The company has managed to grow earnings from $8.50/share in 2014 to $21.97/share in 2023. Chubb is expected to earn $21.67/share in 2024.

The stock sells for 12.65 times forward earnings and yields 1.33%. 

Note, Warren Buffett recently initiated a large position Warren Buffett recently initiated a position in this insurer. 


Northrop Grumman Corporation (NOC) operates as an aerospace and defense technology company in the United States, Asia/Pacific, Europe, and internationally. 

The company increased quarterly dividends by 10.20% to $2.06/share. This is the 21st consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to boost dividends at an annualized rate of 11.90%.

Between 2014 and 2023, the company grew earnings from $9.91/share to $13.57/share. 

The company is expected to earn $24.78/share in 2024.

The stock sells for 18.98 times forward earnings and yields 1.75%.


Realty Income (O) is a real estate investment trust which owns over 15,450 real estate properties. 

Realty Income increased its monthly dividend by 2.14% to $0.2625/share. The new dividend is 2.94% higher than the dividend paid during the same time last year. This dividend aristocrat dividend aristocrat has increased annual dividends several times per year since going public in 1994. Over the past decade, the company has managed to boost dividends at an annualized rate of 3.60%.

Realty Income grew FFO/share from $2.58 in 2014 to $4.08 in 2023.

Realty Income is expected to generate $4.23/share in FFO in 2024.

The stock sells for 13 times forward FFO and yields 5.60%.



Advanced Drainage Systems, Inc. (WMS) designs, manufactures, and markets thermoplastic corrugated pipes and related water management products in North America and internationally. The company operates through Pipe, International, Infiltrator, and Allied Products & Other segments.

The company raised quarterly dividends by 14.30% to $0.16/share. This is the tenth consecutive annual dividend increase for this newly minted dividend achiever. Over the past 5 years, the company has managed to boost dividends at an annualized rate of 11.84%.

Between 2015 and 2024 the company managed to grow earnings per share from  a loss of $0.38/share to a profit of $6.52/share. The company is expected to earn $6.79/share in 2025.

The stock sells for 25.63 times forward earnings and yields 0.37%.


HNI Corporation (HNI)  engages in the manufacture, sale, and marketing of workplace furnishings and residential building products primarily in the United States and Canada. The company operates through two segments, Workplace Furnishings and Residential Building Products.

The company raised quarterly dividends by 3.10% to $0.33/share. This is the 14th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, the company has managed to boost dividends at an annualized rate of 2.90%.

Earnings went from $1.37/share in 2015 to $1.11/share in 2023.

The company is expected to earn $3.05/share in 2024.

The stock sells for 15.10 times forward earnings and yields 2.87%.


Relevant Articles:

- Eight Dividend Growth Stocks Rewarding Shareholders With a Raise

- Fourteen Dividend Growth Stocks Raising Dividends Last Week


Wednesday, May 15, 2024

Is it worth investing at all-time highs?

I just recently found a very interesting paper from J.P. Morgan from 2020, which tested whether it is worth it investing at all time highs. This is particularly helpful as US Markets just hit an all-time-high.

The researchers looked at the returns of the US Stock Market Index S&P 500 over a one, three and five year periods on any random day versus on a day that the index hit an all time high. The data in the sample covered the 1988 - 2020 time period. I believe that the results of the study could be relevant today, particularly for investors who may be afraid of the market because "it is too high".

If you invested in the S&P 500 on any random day since the start of 1988 and reinvested all dividends, your investment made money over the course of the next year 83% of the time. On average, your one year total return was +11.7%. 

Now, what do those figures look like if we only consider investments on days when the S&P 500 closed at an all-time high? They’re actually better! Your investment made money over the course of the next year 88% of the time, and your average total return was +14.6%.

And if we look at cumulative total returns three or five years after the original investment, the takeaway is the same. 


Markets can have bad weeks, months, and years, but the value of investments in the S&P 500 has risen over time. Getting invested and staying invested is a simple step an individual can take towards growing their capital and income over time.

The message is simple - do not let all time highs prevent you from investing. The investor who puts money to work on a regular basis could definitely benefit as well, especially from a behavioral perspective. Getting invested and staying invested over long periods of time is how wealth is built in the stock market. Over long periods of time, the US Stock Market has generated great returns partly as a result of earnings growth and reinvested dividends. Over time, those fundamental sources of returns can lead to higher intrinsic values for businesses, and higher dividends, all of which can lead to all-time-highs.


Saturday, May 11, 2024

Fourteen Dividend Growth Stocks Raising Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process. I usually focus my attention on the companies with a ten year streak of annual dividend increases, and then review each company using my criteria. I am always on the lookout for new ideas, and to determine if my existing holdings are working. I also want to be ready to act quickly, when the right time arrives.

This exercise helps me to evaluate companies I already own, and see how they are doing. This is a helpful piece of the puzzle, that would be helpful when/if I decide to add to these companies at the right price.

This exercise also helps me identify companies for further research. A large part of the time is spent reviewing companies, screening for companies, and trying to learn more about companies, their business, etc. 

It is not glamorous at all, but dull and boring. 

But it does pay dividends.

There were 51 companies that announced a dividend increase over the past week. Only 14 of these companies have also managed to increase dividends for at least ten years in a row. The companies include:



This of course is just a list, not a recommendation.


When I review companies, I look at ten year trends in:

1) Earnings per share
2) Dividend payout ratio
3) Dividends per share
4) Valuation


Since I have some experience evaluating dividend companies, I also modify my criteria based on the environment we are in and the availability of quality companies. If I see a company with a strong business model and certain characteristics that I like, I may require a dividend streak that is lower than a decade. I have also found success in looking beyond screening criteria by purchasing stocks a little above the borders contained in a screen.

It is important to be flexible, without being too lenient.

You may like this analysis of PepsiCo (PEP) as an example of how I review companies.

Relevant Articles:



Thursday, May 9, 2024

Texas Pacific Land Trust (TPL): The Story of Certificate 390

One of my favorite stock market stories involves a lost share certificate.

The Texas Pacific Railway went broke in 1885. To compensate bondholders, some land was put in a trust called Texas Pacific Land Trust

All the bonds were exchanged except for Certificate 390.




It was probably worth a few thousand dollars back around the turn of the 20th century.

The Texas Pacific Trust then found some oil and gas, and managed to distribute dividends and do share buybacks for about a century.

The Texas Pacific Land Trust spun off its oil and gas interests as the TXL Oil Co, which later merged with Texaco.

The value of that missing certificate ballooned. It led to people searching for it in basements/books/archives, but to no avail.

The story appeared in Reader’s Digest and constituted a whole radio program was launched. 

The trust placed all dividends and stock in escrow, while they searched for the owner.

That missing certificate was worth $3.2 Million by the time it was found in Wells Fargo Bank archives by a historian in San Francisco in 1979. It came in a box of documents recovered from a Manhattan subbasement.

It was exchanged for shares of Texas Pacific Land Trust and Texaco stock, which generated $170,000 in annual dividend income then...

By the time it was sold in 1986, the collection of stock was worth $5.7 million.

I've read about the Texas Pacific Land Trust (TPL) for over a decade. That stock has done remarkably well:


Texas Pacific Land Trust is also a dividend achiever with a 21 year track record of annual dividend increases under its belt. It is not a very popular dividend growth stock, which it should have been.

This is a really fascinating story, because it confirms the idea that once you find a good company, you need to just hold on to it and let the power of compounding do the heavy lifting for you. Even a moderate rate of consistent compounding can generate enormous wealth over time. In addition, by holding this certificate in paper form, and losing it, the shareholders weren't going to be able to do something silly, such as selling too early for example. Perhaps it is not untrue that the best investors are dead.

There is another fascinating interplay between this story, the company and legendary investor Warren Buffett. It was the second stock purchased by the then 13-14 year old Warren Buffett. 

These are Warren Buffett's comments about his investment from the 2022 Annual Meeting of Berkshire Hathaway shareholders:


Source: 3:10 Value

You can read more about it here:

4. You may also like this old chart I found from Global Financial Data




Monday, May 6, 2024

15 Dividend Stocks In The News

I review the list of dividend increases as part of my monitoring process. This exercise helps me monitor existing portfolio holdings and also identify companies for further research. It also identifies companies that I should put on the chopping block.

In this review, I typically share the companies that raised dividends. However, over the past week, there were two notable dividend cuts. Both came from two dividend kings, 3M (MMM) and Leggett & Platt (LEG). 

Leggett & Platt (LEG) cut dividends by 89% to 5 cents/share. This ended a 52 year streak of consecutive annual dividend increases for this now former dividend king.

3M (MMM) announced its intent to target a 40% adjusted free cash flow per share after spinning off its subsidiary Solventum (SOLV) earlier this month. The spin-off has not declared dividends yet. 3M shareholders holding 4 legacy 3M shares ended up with 1 share of Solventum as part of the spin-off.

This announcement for the new 3M dividend polity targeting 40% free cash flow payout ratio is a stealth dividend cut.


Source: 3M Press Release


Since 2010, there have been only four companies that have left the dividend kings list. One, Vectren (VVC) was acquired. The second, Integrys Energy Group was also acquired. The second, Diebold (DBD), kept dividends unchanged, but ultimately ended up cutting them. The third, V.F. Corp (VFC) became a dividend king in 2022, but left the list after 2 months as the company cut dividends in February 2023.

Losing two dividend kings at once in an year is a record. However, this number should also not be viewed in isolation because the dividend kings list has increased from 10 in 2010 to 47 in early 2024 (to 45 now). 

From a historical context, dividend kings did not even exist until 1994. That's when Winn Dixie became the first company in the world to become a dividend king. In the next decade or so, there were only one or two dividend kings at all. And between 2000 and 2001 there were no dividend kings at all. We've seen an increase in the number of dividend kings since then. You may like this post here on the evolution of dividend kings.

There were also 12 dividend increases last week from companies that have managed to raise dividends for at least 10 years in a row. The companies include:


Apple Inc. (AAPL) designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide.

Apple raised its quarterly dividend by 4.20% to $0.25/share. This is the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 8.50%. The rate of dividend growth has been decelerating over the past 3 and 5 years however.

The company managed to grow earnings from $1.62/share in 2014 to $6.16/share in 2023.

The company is expected to earn $6.57/share in 2024.

The stock sells for 27.89 times forward earnings and yields 0.55%.

American Water Works Company, Inc. (AWK) provides water and wastewater services in the United States.

The company increased quarterly dividends by 8.10% to $0.765/share. This is the 16th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 9.80%. 

The company managed to grow earnings from $2.36/share in 2014 to $4.89/share in 2023.

The company is expected to earn $5.25/share in 2024.

The stock sells for 24.50 times forward earnings and yields 2.40%.



CNO Financial Group, Inc. (CNO), through its subsidiaries, develops, markets, and administers health insurance, annuity, individual life insurance, insurance products, and financial services for senior and middle-income markets in the United States.

The company increased quarterly dividends by 6.70% to $0.16/share. This is the 12th consecutive annual dividend increase for this dividend achiever. The company has managed to grow dividends at an annualized rate of 8.60% over the past five years.

The company managed to grow earnings from $0.24/share in 2014 to $2.44/share in 2023.

The company is expected to earn $3.41/share in 2024.

The stock sells for 8 times forward earnings and yields 2.21%.


FactSet Research Systems Inc. (FDS) is a financial data company which provides integrated financial information and analytical applications to the investment community in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

FactSet Research Systems raised quarterly dividends by 6.10% to $1.04/share. This is the 25th consecutive annual dividend increase for this dividend champion. Over the past decade, it has managed to raise dividends at an annualized rate of 10.90%.

The company managed to grow earnings from $4.98/share in 2014 to $12.26/share in 2023.

The company is expected to earn $15.98/share in 2024.

The stock sells for 26.80 times forward earnings and yields 0.97%.


International Business Machines Corporation (IBM) provides integrated solutions and services worldwide. The company operates through Software, Consulting, Infrastructure, and Financing segments.

IBM eked out a 0.60% raise in its quarterly dividend to $1.67/share. This is the 29th consecutive annual dividend increase for this dividend aristocrat. Over the past five years, it has managed to grow dividends at an annualized rate of 1.30%.

The company's earnings fell from $11.97/share in 2014 to $8.23/share in 2023.

The company is expected to earn $10/share in 2024.

The stock sells for 16.60 times forward earnings and yields 4%.


MSA Safety Incorporated (MSA) develops, manufactures, and supplies safety products and technology solutions that protect people and facility infrastructures in the fire service, energy, utility, construction, and industrial manufacturing applications, as well as heating, ventilation, air conditioning, and refrigeration industries worldwide. 

MSA Safety raised its quarterly dividend by 8.50% to $0.51/share. This was the 54th consecutive annual dividend increase for this dividend king. Over the past decade, the company managed to increase dividends at an annualized rate of 4.70%. 

The company managed to get earnings from $2.37/share in 2014 to $1.49/share in 2023.

The stock sells for 27.50 times earnings and yields 1.11%.


Paychex, Inc. (PAYX) provides integrated human capital management solutions for human resources (HR), payroll, benefits, and insurance services for small to medium-sized businesses in the United States, Europe, and India.

Paychex raised its quarterly dividend by 10.10% to $0.98/share. This was the 14th consecutive annual dividend increase for this dividend achiever. The company has managed to grow dividends at an annualized rate of 9.80% over the past decade.

The company's earnings increased from $1.72/share in 2014 to $4.32/share in 2023.

The company is expected to earn $4.72/share in 2024.

The stock sells for 25.47 times forward earnings and yields 3.26%.


Pool Corporation (POOL) distributes swimming pool supplies, equipment, and related leisure products in the United States and internationally.

Pool raised its quarterly dividends by 9.10% to $1.20/share. This was the 14th year of consecutive annual dividend increases for this dividend achiever. The company has managed to grow dividends at an annualized rate of 19.40% over the past decade.

The company's earnings increased from $2.50/share in 2014 to $13.45/share in 2023.

The company is expected to earn $13.35/share in 2024.

The stock sells for 27.31 times forward earnings and yields 1.32%.


RLI Corp. (RLI) is an insurance holding company which underwrites property and casualty insurance. 

The company increased quarterly dividends by 7.40% to $0.29/share. This is the 49th consecutive annual dividend increase for this dividend champion. The company has managed to increase dividends at an annualized rate of 4.80%.

The company's earnings increased from $3.15/share in 2014 to $6.68/share in 2023.

The company is expected to earn $5.78/share in 2024.

The stock sells for 24.83 times forward earnings and yields 0.81%.


Simpson Manufacturing Co., Inc. (SSD) designs, engineers, manufactures, and sells structural solutions for wood, concrete, and steel connections. 

The company increased quarterly dividends by 3.70% to $0.28/share. This was the 11th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase dividends at an annualized rate of 7.80%.

The company's earnings increased from $1.30/share in 2014 to $8.31/share in 2023.

The company is expected to earn $8.44/share in 2024.

The stock sells for 21.46 times forward earnings and yields 0.62%.


The Timken Company (TKR) designs, manufactures, and sells engineered bearings and industrial motion products, and related services in the United States and internationally. 

Timken raised dividends by 3% to $0.34/share. This was the 16th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 6.97%.

The company's earnings increased from $1.89/share in 2014 to $5.52/share in 2023.

The company is expected to earn $6.18/share in 2024.

The stock sells for 14.48 times forward earnings and yields 1.52%.



Tetra Tech, Inc. (TTEK) provides consulting and engineering services in the United States and internationally. The company operates through two segments, Government Services Group (GSG) and Commercial/International Services Group (CIG). 

The company raised quarterly dividends by 11.50% to $0.29/share. This is the tenth consecutive annual dividend increase for this newly minted dividend achiever. Over the past five years, the company has managed to increase dividends at an annualized rate of 16.70%.

The company's earnings increased from $1.68/share in 2014 to $5.14/share in 2023.

The company is expected to earn $6.20/share in 2024.

The stock sells for 33.51 times forward earnings and yields 0.56%.



Unum Group (UNM) provides financial protection benefit solutions primarily in the United States, the United Kingdom, Poland, and internationally. 

The company announced a 15% increase in its quarterly dividend to $0.42/share. This is the 16th year of consecutive annual dividend increases for this dividend achiever. Over the past decade, the company has managed to raise dividends at an annual rate of 9.70%.

The company's earnings increased from $1.57/share in 2014 to $6.53/share in 2023.

The company is expected to earn $8.17/share in 2024.

The stock sells for 6.32 times forward earnings and yields 2.83%.


Relevant Articles:

- Five Dividend Growth Companies Raising Dividends Last Week






Friday, May 3, 2024

How Ronald Read managed to accumulate a dividend portfolio worth $8 million

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.

The reason why dividend investors are not highly publicized is because dividend investing is not sexy enough to be featured in the financial mainstream media. In addition to that, it is not profitable for Wall Street to sell you into the idea that ordinary investors can invest on their own. This is why you have advisors crying wolf over the fact that you are paying 15% tax on your dividend income, while charging clients 1%/year on assets under management, and investing that money in a mutual fund that costs an additional 1%/year. Mutual funds, annuities and other products generate billions in commissions for Wall Street, despite the fact that they might not be in the best interest of small investors.

The dividend investor to profile today is Ronald Read, who left an $8 million fortune behind when he passed away in 2015. What's fascinating about him is that he never earned a high income, because he worked as a gas station worker or a janitor. 

I find this story to be very inspiring, because it showed how an ordinary person who never earned a high income was able to amass a dividend portfolio worth $8 million by the time of his death. The portfolio was generating close to $20,000 in monthly dividend income on average. This portfolio was a result of frugality, hard work, and ability to buy stocks to hold for decades, while patiently reinvesting dividends.

When Ronald Read died at the age of 92 in 2014, he left a dividend portfolio worth $8 million to charity and his children. That story shows that Ronald Read earned close to $20,000 in monthly dividend income from this diversified portfolio of 95 blue chip securities. They were spread across a variety of sectors, including railroads, utility companies, banks, health care, telecom and consumer products. He avoided technology stocks. It looked like Mr Read invested solely for dividend income, and his portfolio was well put together. Besides being a good stock picker, he displayed remarkable frugality and patience which gave him many years of compounded growth.



Ronald Read didn't have a finance degree, nor an MBA, but was an ordinary Joe who managed to save and invest for the long term. The story is appealing to me because it shows that investors who pick quality blue chip stocks to hold for decades, and reinvest those dividends patiently, can accumulate a sizeable portfolio over time. The important trait is patience. I follow the same slow and steady approach to long term dividend investing as Ronald Read.

Attached below is a list of Ronald Read's largest portfolio holdings:


Mr. Read left behind a five-inch-thick stack of stock certificates in a safe-deposit box. Owning the stock directly is old school, but it also reinforces the behavior to buy and hold equity stakes in solid blue chips. 

Among his longtime holdings were blue-chip stalwarts such as Procter & Gamble, J.P. Morgan Chase, General Electric and Dow Chemical. When he died, he also had large stakes in J.M. Smucker, CVS Health and Johnson & Johnson. He was able to stick to his securities for many years. Not all of his securities worked out, but did pretty well in the end. For example, his portfolio included shares of Lehman Brothers Holdings, the financial firm that collapsed in 2008, for example. 

One example of a long-term investment was buying 39 shares of Pacific Gas & Electric on Jan. 13, 1959 for $2,380. Adjusting for stock splits, these shares would have been worth $10,735 at te time of his death. He ended up owning 578 shares in all of PG&E, worth just over $26,500, some of which he may have purchased with the dividend payments made to shareholders.

He researched his ideas thoroughly, reading business publications such as Wall Street Journal, going to the library, and chatting about investments with close friends.

Ronald Read's success was dependent on several important factors:

1) Stay frugal and live within your means
2) Invest savings at a high rate of return for a long period of time
3) Invest in companies with durable competitive advantages with a long runway
4) Stay patiently invested for decades, without selling
5) Keep reinvesting those dividends along the way

This dividend investor managed to turn small investments into a cash machine that generated large amounts of dividends. He was able to accomplish this through identifying quality dividend growth companies at attractive valuations, patiently reinvesting distributions and mostly maintaining a diversified portfolio of stocks. These are the lessons that all investors could profit from.





Monday, April 29, 2024

Seven Dividend Growth Stocks Increasing Dividends Last Week

I review the list of dividend increases every week, as part of my monitoring process.

I use this exercise to review existing companies and identify companies for further research.

In my evaluation, I review the rate of dividend increase relative to the historical average. In general, I look for consistent dividends. This is where I note decelerating dividend growth as a potential red flag. 

I then review the trends in earnings per share, in order to determine if that dividend growth is on a solid footing. Rising earnings are the fuel behind future dividend increases.

I also review the valuation as well. That means looking at the P/E ratio and dividends in relation to dividend growth.

During the last week, there were seven companies which have managed to grow dividends for at least a decade, which also increased dividends last week. The companies include:



Comfort Systems USA, Inc. (FIX) provides mechanical and electrical installation, renovation, maintenance, repair, and replacement services for the mechanical and electrical services industry in the United States. It operates through two segments, Mechanical and Electrical. 

The company hiked quarterly dividends by 20% to $0.30/share. This is the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to grow dividends at an annualized rate of 15%.

Between 2014 and 2023 the company managed to grow earnings from $0.61/share to $9.03/share.

The stock sells for 25.38 times forward earnings and yields 0.40%.


Avery Dennison Corporation (AVY) operates as a materials science and digital identification solutions company in the United States, Europe, the Middle East, North Africa, Asia, Latin, America, and internationally. 

The company increased quarterly dividends by 9% to $0.88/share. This is the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade the company has managed to grow dividends at an annualized rate of 10.80%.

The company managed to grow earnings from $2.61/share in 2014 to $6.23/share in 2023.

The company is expected to earn $9.39/share in 2024.

The stock sells for 23.33 times forward earnings and yields 1.61%.



Delek Logistics Partners, LP (DKL) provides gathering, pipeline, transportation, and other services for crude oil, intermediates, refined products, natural gas, storage, wholesale marketing, terminalling water disposal and recycling customers in the United States. 

The partnership increased quarterly distributions by 1.4% to $1.07/unit. This distribution represents a 4.4 percent increase over Delek Logistics’ distribution for the first quarter 2023. This is the eleventh year of annual distribution increases for this dividend achiever.

Delek Logistics Partners has increased distributions for 11 years in a row. It has an annualized distribution growth of 11.34% over the past decade.

The partnership yields 10.21% today.


Nasdaq, Inc. (NDAQ) operates as a technology company that serves capital markets and other industries worldwide. It operates in three segments: Capital Access Platforms, Financial Technology, and Market Services.

Nasdaq increased quarterly dividends by 9.10% to $0.24/share. This is the 12th consecutive annual dividend increase for this dividend achiever. Over the past decade the company has managed to grow dividends at an annualized rate of 17.40%.

Nasdaq managed to grow earnings from $0.82/share in 2014 to $2.10/share in 2023.

The company is expected to earn $2.69/share in 2024.

The stock sells for 22.32 times forward earnings and yields 1.60%.


Parker-Hannifin Corporation (PH) manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems. 

Parker-Hannifin increased quarterly dividends by 10% to $1.63/share. This is the 68th consecutive annual dividend increase for this dividend king. The company has managed to grow dividends at an annualized rate of 12.48% over the past decade.

Between 2014 and 2023, the company managed to grow earnings per share from $6.98 to $16.23.

The company is expected to earn $24.43/share in 2024.

The stock sells for 22.66 times forward earnings and yields 1.18%.


Sysco Corporation (SYY) engages in the marketing and distribution of various food and related products to the foodservice or food-away-from-home industry in the United States, Canada, the United Kingdom, France, and internationally.

Sysco increased quarterly dividends by 2% to $0.51/share. This marked the 48th consecutive annual dividend increase for this dividend aristocrat. Over the past decade, the company has managed to grow dividends at an annualized rate of 5.86%.

Between 2014 and 2023 the company managed to grow earnings per share from $1.59 to $3.49.

The company is expected to earn $4.32/share in 2024.

The stock sells for 17.85 times forward earnings and yields 2.65%.


Tompkins Financial Corporation (TMP) provides commercial and consumer banking, leasing, trust and investment management, financial planning and wealth management, and insurance services. The company operates through three segments: Banking, Insurance, and Wealth Management. 

Tompkins Financial increased quarterly dividends by 1.60% to $0.61/share. This is the 38th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to increase dividends at an annualized rate of 4.54%.

Between 2014 and 2023 the company's earnings per share went from $3.51 to $0.66.

The company is expected to earn $4.54/share in 2024.

The stock sells for 10.20 times forward earnings and yields 5.27%.


Relevant Articles:

- Eight Dividend Growth Stocks Rewarding Shareholders With a Raise






Wednesday, April 24, 2024

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. When a company pays out almost all of its earnings as dividends, that leaves little room for maneuvering if earnings decline. In addition, this leaves little for investing and growing the business. While there are some exceptions when it comes to certain pass-through entities such as Real Estate Investment Trusts, it is still good business practice to practice a WCGW mentality (What Could Go Wrong).

For example, dividend king Automatic Data Processing (ADP) earned $8.25/share in 2013 and paid out $4.79 in annual dividend income per share. The dividend payout ratio is a safe 56%. 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 ADP’s streak of 50+ 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.

Another example have included tobacco companies, which tend to distribute high portions of net income to shareholders, since they do not need to reinvest back in the business in order to grow income. Plus, they have limited opportunities to reinvest those cashflows at high rates of return that the tobacco business already provides for them.  That being said, one should probably be cautious in not putting too much weight in such enterprises, because while their revenue streams have historically been defensible and stable, there is little margin of safety in case of unforeseen shocks.

Speaking of exceptions, you should note that for certain pass-through entities such as Real Estate Investment Trusts (REITs) and Master Limited Partnerships (MLPs), the traditional dividend payout ratio is not a good metric for dividend safety. For REITs, instead of using earnings we evaluate profitability through Funds from Operations. Therefore, we evaluate dividend safety by using Funds From Operations Payout Ratio – which calculates the proportion of dividends over the FFO. I like to get a feel for the FFO Payout Ratio over the past decade when evaluating individual REITs. However, I am most comfortable with FFO Payout Ratios around 70% - 80% or below. For Master Limited Partnerships we look at the Distributable Cash Flow per Unit Payout Ratio.

In general, when in doubt, I like to review the ten year trends in the dividend payout ratio. If a company has paid a consistently high dividend payout, while growing earnings and dividends, I am not as worried.

I do not just look at the dividend payout ratio in isolation however. When I analyze companies, I look at the relationship between earnings, dividends and the dividend payout ratio. Evaluating the trends in these three indicators over the past decade is extremely helpful.

In general, we look for companies that grow earnings and dividends at roughly similar annual rates every year. As a result, the dividend payout ratio stays in a certain range. This depends on whether the company is in one of the three stages of dividend growth.

We want to avoid situations where management is growing dividends per share faster than earnings per share. The dividend payout ratio will go up to a certain ceiling if dividends are raised without a corresponding growth in earnings per share. This action is unsustainable, and could lead to dividend cuts down the road ( even if the dividend looks safe today).

If earnings per share do not grow, we could see a stop to dividend increases. If management keeps growing the dividend, or if earnings start falling from here, or if the company takes on too much new debt, it is possible that the dividend be cut.

Without growth in earnings per share, future dividend growth has an upper ceiling. In addition, any future growth in intrinsic value for the share price will also be limited, due to stagnating earnings. That doesn't mean however that share prices can't go higher from here (or lower), if investor expectations get overly cheerful ( or gloomy).

Another factor to consider is the quality of earnings. We want companies whose earnings are relatively immune to the economic cycles. This makes forecasting earnings easier, which allows managements to have a distribution in place that is not at the mercy of bad results during the next recession. If we have company earnings that are not defensible, but fluctuate, we may be in for a bad surprise during the next downturn. We want stability in earnings, which can then be counted on to provide stable and rising dividend income. If earnings tend to get depressed during recessions, the dividend has high risk of cut. This is why a low dividend payout ratio has to be evaluated in conjunction with trends for earnings per share and dividends per share.

Conclusion

Today we discussed the factors I leverage to reduce the risk of dividend cuts. While the risk of dividend cut will always be out there, I believe that it can be managed by the strategic dividend growth investor. The nice factor to consider is that in a diversified portfolio consisting of 50 securities, one dividend cut by 50% is easy to overcome if the rest of components grow distributions to offset the cut. In addition, by selling after a dividend cut and reinvesting the proceeds in a company that keeps growing distributions can have a positive income and psychological benefit for the investor, because it would allow them to reassess the situation with a cool head.

Having an investment plan that focuses on dividend safety, valuation, and sound portfolio management could ultimately be beneficial in including all factors listed above, and help the investor reach their goals and objectives.

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