As part of my monitoring process, I review the list of dividend increases every week. I use this exercise to monitor performance on existing holdings, and also to uncover hidden gems for further research. When I purchase shares in a company at an attractive price, I expect trends in earnings per share and dividends per share to continue into the future. This dividend momentum is a very powerful force, because it can continue for decades, while richly rewarding shareholders with higher dividends and capital appreciation. However, it is also important to keep monitoring those holdings, in order to make sure that the business is still growing, and can afford to pay higher dividends to me.
It is always great to see companies I own continue to reward me with a raise. The amount of organic dividend increases I receive from my investments has always been higher than the raises I receive at work. And that is despite the fact that I have to spend a lot of time in the office, plus the obligatory after-hours commitment to the firm. This is the nice things about dividend growth investing - the companies work very hard for you, so that you don't have to.
In the past week, there were several companies on my watchlist, which raised their dividends to shareholders. With one exception, all of those have managed to reward shareholders with a dividend increase for at least ten years in a row. The exception is a spin-off from a dividend champion which had rewarded shareholders with a raise for over four decades.
The companies include:
Monday, October 30, 2017
Thursday, October 26, 2017
How to Convert a portfolio of index funds to dividend stocks?
In a previous article, I discussed various ways that investors can accumulate their nest egg. One strategy includes putting a portion in one or a few attractively valued dividend growth stocks every single month, and reinvesting dividends selectively. The other strategy involved investing in index funds, using tax advantaged accounts such as 401 (k) for example.
Traditional vehicles for saving such as index funds and target-date funds work well when you accumulate your nest egg, but could present a challenge if you try to live off them. Many retirees prefer to have a stable and growing source of income, which maintains purchasing power over time, and is not dependent on the manic-depressive swings in stock prices. Therefore, investing in dividend growth stocks is the ideal way to generate income from your nest egg in retirement, due to the stability of dividend income. Therefore, if someone were to accumulate their nest egg in other items such as index funds, but wanted to convert to dividend investing, there are two ways that they can achieve that.
The strategies outlined in this article also work for situations where you have a lump sum amount, and you are thinking of investing it.
The first strategy involves selling all funds in your portfolio, and using the proceeds immediately to create a diversified portfolio of quality dividend paying stocks.
Traditional vehicles for saving such as index funds and target-date funds work well when you accumulate your nest egg, but could present a challenge if you try to live off them. Many retirees prefer to have a stable and growing source of income, which maintains purchasing power over time, and is not dependent on the manic-depressive swings in stock prices. Therefore, investing in dividend growth stocks is the ideal way to generate income from your nest egg in retirement, due to the stability of dividend income. Therefore, if someone were to accumulate their nest egg in other items such as index funds, but wanted to convert to dividend investing, there are two ways that they can achieve that.
The strategies outlined in this article also work for situations where you have a lump sum amount, and you are thinking of investing it.
The first strategy involves selling all funds in your portfolio, and using the proceeds immediately to create a diversified portfolio of quality dividend paying stocks.
Monday, October 23, 2017
Four Dividend Growth Stocks to Consider on Dips
As part of my monitoring process, I review the list of dividend increases every week. This is in addition to the regular screening I do against the list of dividend champions and contenders.
I use this exercise as a way to monitor how companies I own are doing, and potentially uncover any attractively priced opportunities that my screens may have overlooked. Many times, I end up uncovering quality companies for further research that fit everything I am looking for, except for valuation. As a result, I tuck those companies on a waiting list. If they ever get close to my desired entry price, I get an alert and review the situations further.
In general I look for:
1) A history of dividend increases through a full economic cycle. A long streak of annual dividend increases is an indication that we have quality company with a strong track record for further research
2) A history of earnings growth. I believe that a company that grows earnings over time can withstand a large number of headwinds working against it.
3) A dividend that is well covered out of earnings. I require a margin of safety in dividends, for companies I am monitoring. I also require growth in earnings per share, in order to make sure that dividend growth does not occur solely by expansion of the dividend payout ratio
4) An attractive valuation. To me, this generally means a P/E below 20, coupled with a track record of earnings and dividend growth. A low valuation is not bullish in itself, if a company is not growing the bottom line.
After going through the list of companies that raised dividends over the past week, I identified four companies for further research.
The companies include:
I use this exercise as a way to monitor how companies I own are doing, and potentially uncover any attractively priced opportunities that my screens may have overlooked. Many times, I end up uncovering quality companies for further research that fit everything I am looking for, except for valuation. As a result, I tuck those companies on a waiting list. If they ever get close to my desired entry price, I get an alert and review the situations further.
In general I look for:
1) A history of dividend increases through a full economic cycle. A long streak of annual dividend increases is an indication that we have quality company with a strong track record for further research
2) A history of earnings growth. I believe that a company that grows earnings over time can withstand a large number of headwinds working against it.
3) A dividend that is well covered out of earnings. I require a margin of safety in dividends, for companies I am monitoring. I also require growth in earnings per share, in order to make sure that dividend growth does not occur solely by expansion of the dividend payout ratio
4) An attractive valuation. To me, this generally means a P/E below 20, coupled with a track record of earnings and dividend growth. A low valuation is not bullish in itself, if a company is not growing the bottom line.
After going through the list of companies that raised dividends over the past week, I identified four companies for further research.
The companies include:
Thursday, October 19, 2017
Rising Earnings – The Source of Future Dividend Growth
Successful dividend investors understand that a steadily rising dividend payment only tells half of the story. Most dividend paying companies that have been able to consistently raise distributions for at least one decade have enjoyed a steady pattern of earnings during that period of time.
As a dividend growth investor, my goal is to find attractively valued stocks that consistently grow their dividends. I run screens on the list of dividend champions and contenders using my secret entry criteria, and then look at the list company by company. Not surprisingly, I look for a record of increasing dividends. But I look for much more than that in a company.
In a previous article I discussed the three stages that dividend growth companies generally exist in. My goal is to focus on those in the second stage, although I might occasionally select a company from the first phase. However, I try to buy not just companies that have a record of raising dividends, but those that have decent odds of continuing that streak for the next 20 – 30 years. Not every company will achieve that, but for those that do, they would generate the bulk of portfolio dividend growth. The hidden source of dividend growth potential is expected earnings growth.
As you can tell from looking at my stock analysis reports, I look for companies that can increase earnings per share over time. Rising earnings per share can essentially provide the fuel behind future dividend growth. For example, Colgate-Palmolive (CL) has increased dividends for 53 years in a row. The company has managed to increase EPS from $1.17 in 2004 to $2.72/share for 2016. This has allowed the company to increase annual dividends from $0.48/share in 2004 to $1.55/share. The rest has been invested back into the business, to fuel potential for more earnings growth.
As a dividend growth investor, my goal is to find attractively valued stocks that consistently grow their dividends. I run screens on the list of dividend champions and contenders using my secret entry criteria, and then look at the list company by company. Not surprisingly, I look for a record of increasing dividends. But I look for much more than that in a company.
In a previous article I discussed the three stages that dividend growth companies generally exist in. My goal is to focus on those in the second stage, although I might occasionally select a company from the first phase. However, I try to buy not just companies that have a record of raising dividends, but those that have decent odds of continuing that streak for the next 20 – 30 years. Not every company will achieve that, but for those that do, they would generate the bulk of portfolio dividend growth. The hidden source of dividend growth potential is expected earnings growth.
As you can tell from looking at my stock analysis reports, I look for companies that can increase earnings per share over time. Rising earnings per share can essentially provide the fuel behind future dividend growth. For example, Colgate-Palmolive (CL) has increased dividends for 53 years in a row. The company has managed to increase EPS from $1.17 in 2004 to $2.72/share for 2016. This has allowed the company to increase annual dividends from $0.48/share in 2004 to $1.55/share. The rest has been invested back into the business, to fuel potential for more earnings growth.
Tuesday, October 17, 2017
Should I invest in General Mills?
General Mills, Inc. is a manufacturer and marketer of branded consumer foods sold through retail stores. The Company is a supplier of branded and unbranded food products to the North American foodservice and commercial baking industries. The Company has three segments: U.S. Retail, International, and Convenience Stores and Foodservice.
Today we are going to evaluate General Mills (GIS) against these simple four filters. In general:
1. I look for quality companies (evidenced by a long streak annual dividend increases)
2. I want them at an attractive valuation
3. I want EPS growth, to ensure future dividend growth and growth in intrinsic value over time
4. I want an adequate margin of safety in dividends
General Mills is a dividend achiever which has increased dividends to shareholders for 14 years in a row. The company and its predecessors have paid dividends without interruption for 119 years. Over the past decade, General Mills has managed to hike annual dividends at a rate of 10.40%/year.
Today we are going to evaluate General Mills (GIS) against these simple four filters. In general:
1. I look for quality companies (evidenced by a long streak annual dividend increases)
2. I want them at an attractive valuation
3. I want EPS growth, to ensure future dividend growth and growth in intrinsic value over time
4. I want an adequate margin of safety in dividends
General Mills is a dividend achiever which has increased dividends to shareholders for 14 years in a row. The company and its predecessors have paid dividends without interruption for 119 years. Over the past decade, General Mills has managed to hike annual dividends at a rate of 10.40%/year.
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