Four Dividend Champions On Sale

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

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

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

The four companies in question include:

The best decision I ever made

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

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

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

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

How I plan to retire in a decade

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

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

Earning

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

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

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

Six Dividend Machines Boosting Dividends

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

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

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

How to Grow Dividend Income Much Faster With Tax Advantaged Accounts

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

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

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