Focusing on the Losers and Missing the Big Picture

Many investors I talk to always seem focused on the losers. Just because you lose some money on a portion of investments, doesn't mean that the whole strategy is bad. What matters is making money overall on the portfolio level. Losing money is part of the game on a portion of investments. Even Warren Buffett and Peter Lynch are not right 100% of the time.

Everyone is focused on the losers, and thus ends up missing on the big picture.

As they keep losing, their relative weight in the portfolio decreases and if I did not risk more than a certain amount (decreased by dividends received), they become a footnote.

At this point, they do not matter. Unless they turn around, which some time they do. (e.g. in 1999 everyone thought Philip Morris would fail... and it didn't. Also in 2003-4 many thought McDonald's is toast.)

For example, if I invested $1,000 in Lehman Brothers in 2007, I lost $1,000. 

If I invested $1,000 in 3M in 2007, I broke even when I sold

But if I invested $1,000 into Microsoft in 2007, I have $15,000.

Note, these three examples ignore dividends received and allocated elsewhere from a risk management perspective. Those dividends shift the return expectations higher.

Back in 2007, it would have been impossible how each one would do.

Most of my investments won't be Microsoft, but most won't be Lehman either.

I expect to make most of my money on about 40% of my investments. The other 60% will likely end up break even on average.

I just do not know which one today will do great, and which one would falter.

Hence, my goal is to make sure I took my entry signal and not mess up with the compounding early on. (TL;DR - Stick to my process)

I sell rarely, because my audit showed me my sales have been a mistake, on average. I do it after a dividend cut, and if a stock is acquired. the longer i invest, the more inactive/passive in holding I try to be...

The main point behind the post could further be strengthtened with the example of Ronald Read, the janitor millionaire who died with a portfolio worth $8 Million at 92. He managed to amass his fortune with a patient, long-term, and disciplined approach that favored blue chip dividend paying stocks. One of his investments was Lehman Brothers, which resulted in a 100% loss. However, he also had 90+ other securities in his portfolio which helped him overcome this one big loss, and end up with a multi-million dollar portfolio regardless.

Ronald Read's story shows that can lose 100% on a single security in a diversified portfolio.

And still end up with $8 Million, because you are diversified and hold 100 companies.

Today we discussed a few important principles. First, focus on the big picture, and do not get lost in the weeds. Second, design a strategy with built in protections (e.g. diversify, and invest regularly). Third, stick to your strategy through thick or thin - that's how long-term wealth is accumulated. Fourth - you won't be right on every investment. But if you stick to it when you are right, you can make a lot in capital gains and dividends - it's potentially unlimited. And if you are wrong, the most you can lose is what you invested (sans any dividends received and invested elsewhere)

Sixteen Companies Raising Dividends Last Week

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

This exercise helps monitor the development in companies I already own. It also helps me monitor the breadth in the dividend growth investing universe.

I typically focus my attention on the more established dividend growth companies in those weekly review. 

I define "established" as a company that has managed to increase dividends for at least ten years in a row. I have found that this requirement weeds out a lot of cyclical and accidental records of annual dividend increases. It's also early enough in the grand scheme of things for the types of companies that will one day reach dividend king status...

Over the past week, there were sixteen companies with a minimum ten year track record of annual dividend increases, which also increased dividends to shareholders. 

The companies include:

Note this list shows data as of Friday, December 12th. The dividend increases are based on comparing the new dividend payment relative to the previous dividend announced. This works to the YOY change in dividends for most of the companies, except for the ones who raise dividends multiple times per year. For example, Realty Income eked out a 0.20% raise versus the last monthly dividend - however this is a 2.27% raise over the monthly dividend paid during the same time lasty year.

Of course, this list is merely a list of companies that increased dividends last week.

It is not a recommendation or a "buy list" by any means necessary.

It does provide some perspective in how I think about Dividend Growth Investing.

For example, I would compare the recent dividend increase for a company to the five - and ten - year average. That most recent dividend increase provides helpful insight into management's evaluation of the business and economic environment in the near term. 

A slowdown in dividend growth versus the average is somewhat of a warning signal, that would warrant further review if I owned the business. If I didn't, it would likely place it in the do not review pile as of yet.

An increase in dividend growth versus the average could pique my interest, and warrent further review to determine if there is fundamental shift upwards to warrant that increase. One also has to be a little skeptical, as many times a large one-time increase in dividends could signal management that is too overconfident or trying to look that way. 

In general, Iwant a slow and steady growth within a range that's probably the most sustainable. Dividend growth should closely track the growth in fundamentals (read - earnings per share OR FCF/share if you want to be fancy). Any divergence where dividend growth is happening despite deterioration of the business should be studied.

All of those instances above require monitoring recent dividend increases to the historical averages, along with trends in earnings per share, payout ratios, major events (e.g. acquisitions). 

Last but not least, you also want to review company valuations. Valuations are the combination of current P/E ratios, dividend yields along with historical dividend growth and growth expectations.

Relevant Articles:

- 14 Dividend Growth Stocks Raising Dividends Last Week

- Three Dividend Growth Stocks Raising Dividends Last Week

- Thirteen Dividend Growth Stocks Growing Dividends Last Week

My Favorite Perplexity in Investing

My favorite perplexities of investing:

I would only buy a security that fits my entry criteria, but then I would hold onto to it until it hits my exit criteria.

I would hold on to that security, even if it does not fit my entry criteria anymore, provided it has not hit my exit criteria.

This goes contrary to the popular belief that once an investment does not meet entry criteria, it should be sold, and proceeds reinvested elsewhere. The popular belief is actually quite costly, because you end up with quite a lot of turnover. This turnover ends up costing you in terms of fees and commissions, taxes that work against compounding, and behavioral errors where you end up missing out on a few rare big winners by selling them too early. You may end up paying a huge opportunity cost too. Auditing your investment decisions will uncover those glaring gaps. Few investors audit their decisions, because not many want to admit (even to themselves) they are wrong on something. But that would allow them to grow and learn and improve.

This exercise has helped me stay invested in companies that looked "overvalued" but kept growing earnings, dividends, intrinsic value. One such example is Visa (V), which has only looked "cheap" per my then criteria in 2011 - 2012, 2015, 2020 etc. This is when I bought it. However, had I sold when it looked "overvalued", I would have ended up paying taxes on the gains, and probably ended up reinvesting the money into something with lower expected returns. I also learned from this exercise that my criteria have gaps and blind spots, which I wasn't aware of until several years later. I don't know what I don't know yet, but I would know that in a few years. This is why I need a process that gives me some fail safes, to protect me against my own brilliance or lack thereof. This is why I need to audit decisions, and learn from them too, in order to improve.

It really helps to have a process that takes care of:

1. Types of companies you invest in

2. Fundamentals and qualitative factors

3. Diversification

4. Entry/Exit Rules

5. Risk management

6. Keeping costs low

7. Continuous improvement

While it helps to have a process, it is also helpful to understand that it has limitations as well. Hence the need to continuous improvement. 

This has also helped me stay invested in companies that experienced temporary issues, and it looked like they are about to crumble, but they recovered. Case in point is companies like McDonald's, which many hated on various occasions over the years, mostly due to flat share prices making the chicken littles scared. Patient investors should not be scared from long periods of flat share prices, provided fundamentals are not permanently impaired. These periods probably provide a good opportunity to acquire pieces of good businesses on a rare sale.

That being said, I also ended up overstaying my welcome on companies that ended up not doing as well subsequently, and quietly went all downhill. Cases in point include Walgreen's and 3M.

This is where having risk management process in place, and good diversification helps reduce losses when wrong. I am happy that I limit amount I invest per security to a certain dollar amount (which is basically a % of portfolio value - so for a $100,000 portfolio, I would not allocate more than say $1,000 or $2,000 to a security at cost. If fundamentals change in the process of accumulating a position, I would likely allocate much less at cost than even the $1,000 however)

The downside of selecting a bad investment and staying invested for too long is that I may lose money on it. However, downside risk is limited to what I invested, minus dividends received.

It help to spread risk between many companies and industries and time.

I do believe that the bigger risk is getting scared away from a good company, and selling too early, thus missing out on decades of rising earnings, dividends and intrinsic value.

After all, the most I could lose is 100% on an investment.

The most I could gain is unlimited.

The point of this post is that everyones process has room for improvement. You need to audit your investment decisions, and learn and improve. However, you also need to design fail safe procedures to ensure that any errors you experience before enlightenment are not too costly and that they are limited in scope and amount. The bigger mistakes are not just the losses you will realize, but missing out on the big success stories either because you didn't take your entry signal or you cut a flower way too soon.

14 Dividend Growth Stocks Raising Dividends Last Week

As part of my review process, I evaluate dividend increases every week. This process helps me to see how my portfolio holdings are doing. It also helps me to uncover and review new candidates for my portfolio.

I look for dependable dividends from companies with a minimum ten-year streak of annual dividend increases, fueled by earnings growth. I look for dependable dividends from companies with dependable earnings, and solid competitive advantages, which I can acquire at attractive valuations.

During the past week, the following companies increased dividends to shareholders. Each company has a ten year streak of annual dividend increases. I review the latest dividend increase relative to the ten year average, and the growth in earnings per share over the past decade. Last but not least, I discuss current valuation. The companies include:

This is a list of companies for further review. Many seem attractive as businesses, but that doesn’t mean that they should be invested in at any price, regardless of valuation.

The next step is to check each business, in order to determine if it is worth further review. I would look at ten year trends in earnings per share, dividends per share, payout ratios, shares outstanding. I would try to understand what the business does, and make an assessment if the good times would continue, so that I can expect higher earnings, dividends and intrinsic values over time. I would look at the valuation relative to earnings and dividend growth, in order to determine if the business is fairly valued, if it looks promising too. 

Relevant Articles:

- Eight Companies Raising Dividends Last Week

- Three Dividend Growth Stocks Raising Dividends Last Week

- Thirteen Dividend Growth Stocks Growing Dividends Last Week

Secular Bull and Bear Markets for US Stocks

The US Stock Market has delivered great returns for patient long-term investors.

You just need to have a 20 - 30 year timeframe, and avoid panicking. 

If you look at this long-term chart, the three long bearish market periods that stick out are:

1929-1944

1966-1982

2000-2012

The goal is to be able to survive these long bear stretches, stay invested and keep investing. I refer to those stretches as secular bear markets. They are much longer and more memorable than your typical, plain vanilla 20% bear market. The 20% bear market is a bear market for ants, though they are still scary for the novice and those who fail to learn from history. 

We tend to move between long secular bull markets and long secular bear markets. A typical secular bear market could last for a decade or more. A typical secular bull market could last for about two decades or so.

Since 2009 or so, we have been in a secular bull market. I believe we are getting closer to the end of it, and we may be getting overdue for a secular bear market in a few years or so. I would still be invested in equities through the ups and downs however, as I do not time any markets. But I do like to mentally prepare for anything, financially too I guess.

The previous secular bull market was from 1982 to 2000. It was characterized by a boom in earnings, dividends and share prices and a decline in interest rates. Sadly, it ended with excess and overvaluations, which took about a decade to resolve.

The secular bull market before that ended in the 1960s. It started in the 1940s.

We had a long secular bull market in the 1920s as well, which lasted for about a decade or so. That being said, the world in the 1920s was different, as the economy was more secular than today and there were not as many fail-safe mechanisms like FDIC insurance, unemployment insurance, pensions/social security etc. Plus, the sector composition of the economy today is not as secular as the sector composition of the economy from the 1920s or earlier.

The important thing is to participate in the bull markets and benefit fully, without getting cared away and losing a lot during the secular bear markets. 

Each secular bear market is characterized by different reasons for it.

I use to following model to estimate forward returns. They are a function of:

1. Dividend Yields

2. Earnings Per Share Growth

3. Change in valuation

The first two items are the so called fundamental sources of returns. The last item is the speculative source of return.

This simple model helps me put everything else in context.

In the long-run, most of returns are a function of dividends and growth in earnings per share. The change in valuation matters the least in the long run.

To paraphrase the Oracle of Omaha, in the short-run the market is a voting machine, but in the long-run it is a weighting machine.

Changes in dividends and earnings are not as noticeably imporant in the short-run, which is a period of 5 - 10 years. But they are really important in the long run. Without growth in earnings per share, those shares would just keep oscilating at a given range forever. Without a dividend, investors would basically expect to generate no returns in the long-run. 

In the short-run, changes in valuation matter a lot. That's because share prices tend to move above and below any reasonable indication of intrinsic value all the time. The share prices for large corporation scan move very quickly, above and below any estimate for fair value. This is all driven by sentiment. This is all noise if you are already invested, but a potential opportunity to scoop up value when it is on sale. *

That being said, if you can acquire shares at 15 times earnings, you'd do slightly better in the long run than acquiring shares at 30 times earnings. Provided of course it still grew earnings and dividends at a decent clip. The longer you do that for however, the lower the impact of a good entry valuation, and the higher the impact of earnings per share growth and dividends. In other words, it's far better to buy a quality company at a fair price, than a mediocre company at a steal price, to paraphrase the Oracle of Omaha.

If we go back to the model I introduced, it makes it helpful to put things into context.

For example, during the 1929-1944 secular bear market, earnings per share stayed low for almost 17 years. In addition, we had a valuation compression of the earnings stream that wasn't growing in the first place. All the returns for a 1929 - 1954 stretch came from dividends as share prices went nowhere for 25 years. The only reason I use a 15 year time frame for this bear market is due to reinvested dividends. Lower prices pushed dividend yield up. Dividends were cut, but the decline in dividends was much lower than the drop in share prices. Dividends fell by 55% while stock prices fell by 85%. We had deflation, which was bad for earnings, but increased the purchasing power of cash dividends. Dividend yields were high, which cushioned investors against declines in share prices.

The 1966 - 1982 secular bear market was during a high tide of inflation for the US and the world. While earnings and dividends increased in nominal terms, they did not increase in real terms by much. In addition, share prices went nowhere in nominal terms, even though earnings were increasing. That's because we saw a contraction in the valuation multiple. Share prices actually declined in real terms, while dividends and earnings held their ground. Ultimately using inflation adjusted numbers helps, because we care about purchasing power, that is especially important in retirement. Dividend yields were high, and dividends maintained purchasing power during that bleak period, which cushioned investors against declines in share prices in real terms. 

The 2000 - 2012 secular bear market was primarily caused by a decline in valuations and an earnings per share stream that didn't really grow until 2011- 2012. Furthermore, dividend yields were very low at the beginning of this period. Therefore, they could not adequately cushion investors against declines in share prices. This is a good model warning those who expect to just sell stocks in retirement when share prices go nowhere for extended periods of time. (Hint you increase risk of running out of money in retirement).

As I mentioned above, and I will mention below as well, a secular bear market is not your typical bear market.

The typical bear market is characterized by a 20% decline peak to through. 

While we have had a few such declines since 2009, those were basically very short lived. They have inspired a whole generation of new investors who believe in buying the dip that everything will work out soon.

We basically had some short blips on the radar, such as the 2020 Covid Bear Market, the 2022 Bear Market and 2025 Bear Market. In hindsight, those were good opportunities to acquire stock at a good price.

So many here talk about 2022 like it was some type of great depression. Perhaps that was their first major stock market decline. But 2022 and even 2020 were just a blip on the radar. Especially the most recent one in 2025.

The real bad bears like the lost decade of the early 2000s or the stagflationary lost decade of the 1970s are the ones to look out for. The worst is the Great Depression, which really affected the economy, and people's livelihoods for tens of millions in the US (and even more worldwide). These are the secular bears we are concerned about. These are the ones that affect the investor's psyche. Fewer investors are interested in stocks after a long secular bear market. 

Imagine the sentiment with investors, if we get another lost decade like the early 2000s.. Most do not remember the early 2000s, which had a long 12 year stretch of no returns, high unemployment, and two 50%+ stock market crashes. Plus a housing crash and a bunch of other unpleasant stuff.

This is why I invest in Dividend Growth Stocks. I focus on good companies that make money throughout the economic cycle. These quality companies generate more cashflows than they know what to do with. Thus they are able to keep paying and even growing the dividends over time, for many years to come, if not decades.

The stock price can go up or down in the short run, above and below any reasonable valuation basis for intrinsic value. Stock prices are very volatile in the short-run. Dividends are much more stable and dependable however. This is why I focus on the dividend, and ignore the stock price, unless I have money to deploy and take advantage of any opporunitiies.

Focusing on the dividend helps me keep invested, as I am getting paid to hold and ignore the stock prices. Plus, I do not need to sell stock in retirement to pay for my expensive tastes. I can simply cash those dividend checks. Along with any Social Security checks. 

I can build my own portfolio, slowly and over time. I can customize it to include businesses that fit my characteristics. I can then diversify, and manage risk properly, following my entry and exit criteria. Then sit tight, and enjoy the ride.

*For example, in 2025 folks were very scared that Alphabet (GOOG) would lose the AI race and thus pushed the stock below $160/share, which was equivalent to less than 16 times forward earnings. Today the stock sells at $300, which is roughly 30 times forward earnings.