What drives future investment returns?

There are several factors that drive future investment returns. The important drivers behind future returns on equity investments include:

1) Dividend Yield
2) Growth in Earnings Per Share
3) Change in valuation
4) Impact of reinvested dividends


As an investor, I try to take full advantage of those factors by focusing on:

1) Attractive Entry Price
2) Adequate growth in earnings
3) Dividend Safety
4) Strategic dividend reinvestment

While these are important drivers of future returns, it is equally important to keep as much of any returns as possible. In order to do that, investors need to be mindful of all costs. In order to reduce taxes, it is advisable to place as much shares as possible in a tax-deferred account such as a Roth IRA for example. In taxable accounts, it is advisable to refrain from too much trading, in order to let the power of tax-deferred capital gains on long-term holdings do its magic. The other way to keep costs low is by putting money in the lowest cost broker. In my situation, this is Interactive Brokers, which charges me 35 cents/investment. It feels like a steal.

Let's illustrate the concept with an example from the real life. For example, PepsiCo (PEP) sold at $52.20/share at the end of 2004. The company earned $2.41/share in 2004, and earned $2.39/share in 2005. Therefore, it sold at a trailing P/E ratio of 21.70. The quarterly dividend was increased to 23 cents/share in June 2004, up significantly from the previous rate of 16 cents/share. The stock yielded 1.76%.

Emerson Electric (EMR) Dividend Stock Analysis 2015

Emerson Electric Co. provides technology and engineering solutions to industrial, commercial, and consumer markets worldwide. It operates through five segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Commercial & Residential Solutions. Emerson Electric is a dividend king, which has raised dividends for 58 years in a row. There are only 16 dividend kings in the world.

The most recent dividend increase was in November 2014, when the Board of Directors approved a 9.30% increase in the quarterly dividend to 47 cents/share..

The company’s largest competitors include General Electric (GE), ABB (ABB), and Honeywell (HON)

Over the past decade this dividend growth stock has delivered an annualized total return of 9.10% to its shareholders.

The one lesson about Warren Buffett's success that no one wants to hear

Warren Buffett is the most successful investor of all time. Warren Buffett was able to keep learning about investments and business from the age of 11, which allowed him to compound money for decades.

The real secret behind Buffett's success is that the guy worked incredibly hard to achieve his record all his life. Buffett loves learning, thinking and breathing about investments. That is why he has been able to spend 60-70 hours a week for 70 years in a row, doing what he loves best, and building his fortune to over $70 billion. Buffett always liked his freedom to pursue his own passions at his own pace. He was actually financially independent at the ripe age of 25

You cannot put that into a formula. There is a lot of money to be made selling "secret formulas" to investors. Some even write papers, and reach erroneous conclusions that he only made money because of his investment float or because he collected high fees during the days of the Buffett Partnership. In reality, Buffett made money because he is a great investor - the insurance float only magnified his returns. And during the days of the Buffett Partnership, he was paid for performance, and he still trounced all benchmarks.

The Best Broker for Dividend Investors: Interactive Brokers

For the first three to four years of my transformation into dividend growth investing, I managed to develop a process of identifying attractive companies with prospects for further increases in passive dividend income. I managed to pay very little in commissions, since I was using brokers such as Zecco, which offered approximately 10 free trades every month. Since then, I kept adding money to other brokers, but was not able to find another company which offered low costs for me. This resulted in limitation on number of companies I can invest in every single month, despite the fact that I usually had more than 15-20 ideas at all times. I felt limited in the number of companies I can purchase every month, given that most brokers:

1) charge somewhere between $5 and $10 per online trade these days,
2) the fact that I do not want to pay more than 0.50% in commission costs per each transaction, and
3) the fact that I have a limit on the amount of funds I can contribute each month,

I believe that looking for great investments is important, but so is keeping costs to the minimum. Dividend investing is a business, and as the business owner my job is to keep expenses to the bone.

Wal-Mart (WMT) Dividend Stock Analysis for 2015

Wal-Mart Stores Inc. (NYSE:WMT) operates retail stores in various formats worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. This dividend champion has paid a dividend since 1974 and increased it for 42 years in a row. Wal-Mart is also one of the 60 companies, which can be purchased commission-free using Loyal3, with as little as $10.

The most recent dividend increase was in February 2015, when the Board of Directors approved a 2% increase in the annual dividend to 49 cents/share. This was the second year in a row that Wal-Mart delivered a small dividend increase. It is likely that management does not expect high earnings growth in the next couple of years, given by the very low hike in distributions in 2014 and 2015.

The largest competitors for Wal-Mart include Target (NYSE:TGT), Costco (NASDAQ:COST) and Dollar General (NYSE:DG).

Over the past decade this dividend growth stock has delivered an annualized total return of 7.30% to its shareholders. Future returns will be dependent on growth in earnings and dividend yields obtained by shareholders.