A long streak of annual dividend increases is a filter to weed out unwanted companies. Companies that pay dividends are able to do that based on earnings growth. A company cannot grow dividends for 25 years in a row, if earnings are not increasing. This company is thus focusing on only the projects with the most potential, when they invest their cash.
If you put money in a dividend stock, you earn higher dividends for decades. The growing earnings stream supports the higher dividend payments, and results in intrinsic value growth over time.
Early in my journey as a dividend growth investor, I was limited to using the Dividend Aristocrats and the Dividend Achiever indexes. The dividend aristocrat index is maintained by McGraw Hill/S&P Global, who also owns the rights to the S&P 500 index. It included companies which were part of the S&P 1500 index, and which had raised dividends for at least 25 years in a row.
The index included some of the best known dividend stocks such as Coca-Cola(KO), Wal-Mart (WMT), Johnson & Johnson (JNJ) to name a few. Since I was a new investor, I had a list of about 50 companies to research, which made it easier to focus on those and choose only the ones that fit my value criteria. The problem was that it didn’t seem to be including other quality companies with long dividend growth streaks such as Altria (MO), Colgate Palmolive (CL) to name a few. As a result, I was potentially missing out on other companies. By focusing on dividend increases every week, I was able to uncover more companies which were never part of Dividend Aristocrats index. I then created my own list of companies to follow, but this took a lot of extra time, which I already didn’t have. I am not sure why S&P committee excludes certain companies. I believe it has to do with the index requirements.
Friday, January 5, 2018
Wednesday, January 3, 2018
Two Dividend Achievers on My List for 2018
Over the years, I’ve built my own model
to identify the best dividend paying companies. The core of my investment
strategy has been built around dividend growth. Overtime, I didn’t want to
limit myself among a short list of 19 or 51 companies and rather starting the
study of a wider group; the achievers.
The Dividend Achievers Index refers to
all public companies that have successfully increased their dividend payments for at least ten consecutive years.
At the time of writing this article, there were 265 companies that achieved
this milestone. With the right combination of metrics, this list is probably
the best starting point to build your dividend growth portfolio or to find your
next addition.
As we start a new year, I’m fairly
positive about the upcoming months. I believe 2018 will mark the 10th
consecutive year of this bullish market. I’ve selected two companies from the Achievers
list that should continue to reach higher levels this year.
HASBRO (HAS)
Source: Ycharts
Friday, December 29, 2017
Best Investing Articles For 2017
I wanted to thank you all for reading the Dividend Growth Investor website. This site is a result of my efforts to improve my investing over time, write down and organize my thoughts, and make myself do the work to form an opinion on companies to invest in.
I find it helpful to write down my position on a given topic, and then revisit it a few years later, in order to learn from it. I would encourage all of you to keep an investment journal in private or in public, in order to write down reasons behind your strategy and the investment selections you are making. After a few years, you should be able to learn from your mistakes, and hopefully find ways to improve your results.
The way to improve is by gathering data, and analyzing the results against your expectations. I followed this approach to find out the most read articles on the Dividend Growth Investor website.
I have compiled a list of ten articles that readers found helpful in 2017, as evidenced by number of visits. The articles include:
I find it helpful to write down my position on a given topic, and then revisit it a few years later, in order to learn from it. I would encourage all of you to keep an investment journal in private or in public, in order to write down reasons behind your strategy and the investment selections you are making. After a few years, you should be able to learn from your mistakes, and hopefully find ways to improve your results.
The way to improve is by gathering data, and analyzing the results against your expectations. I followed this approach to find out the most read articles on the Dividend Growth Investor website.
I have compiled a list of ten articles that readers found helpful in 2017, as evidenced by number of visits. The articles include:
Wednesday, December 27, 2017
My Bet With Warren Buffett
A decade ago, Warren Buffett made a famous bet with hedge fund manager Ted Seides. Buffett believed that hedge funds cannot beat the S&P 500 due to their high fees. Both parties put enough money in treasury bonds at the end of 2007, which was supposed to be worth $1 million by the end of 2017.
Buffett’s pick of S&P 500 did better than the portfolio of hedge funds selected by Ted Seides. This bet has been widely publicized by many investors. Those who believe in indexing use it as a reason to reinforce their beliefs. After all, the S&P 500 did much better than the hedge funds.
Unfortunately, the reason why the hedge fund bet did worse than S&P 500 over the past decade comes down to the fact that it had high costs and because it was globally diversified.
It makes sense that a hedge fund that charges high fees has a high hurdle rate relatively to a low cost portfolio of stocks. For example, hedge funds charge investors a 2% annual fee. In addition, they also charge investors a performance fee based on assets under management. The fee is for roughly for 20% of gains on investment. This is a rather steep set of fees, given the fact that the investors are the ones coming up with the capital at risk in the first place.
The other fact is that those hedge funds focused on US Equities, Foreign Equities and other asset classes. This is why the comparison to S&P 500 is not really an apples to apples comparison. However, even if we compare the performance to an equally weighted portfolio of US stocks, Foreign Stocks and Bonds, the hedge funds did not deliver either due to fees. However, the margin of error was lower.
I believe that the reason why the bet didn’t do as well was due to high fees, and the fact that we are not comparing apples to apples. As a DIY investor, I do not understand the need to have someone else look after your money. Wall Street makes its money by making investing complicated, so that they can charge you fees forever.
The truth is, building your own portfolio isn't really that difficult. I will illustrate this concept with this article.
Buffett’s pick of S&P 500 did better than the portfolio of hedge funds selected by Ted Seides. This bet has been widely publicized by many investors. Those who believe in indexing use it as a reason to reinforce their beliefs. After all, the S&P 500 did much better than the hedge funds.
Unfortunately, the reason why the hedge fund bet did worse than S&P 500 over the past decade comes down to the fact that it had high costs and because it was globally diversified.
It makes sense that a hedge fund that charges high fees has a high hurdle rate relatively to a low cost portfolio of stocks. For example, hedge funds charge investors a 2% annual fee. In addition, they also charge investors a performance fee based on assets under management. The fee is for roughly for 20% of gains on investment. This is a rather steep set of fees, given the fact that the investors are the ones coming up with the capital at risk in the first place.
The other fact is that those hedge funds focused on US Equities, Foreign Equities and other asset classes. This is why the comparison to S&P 500 is not really an apples to apples comparison. However, even if we compare the performance to an equally weighted portfolio of US stocks, Foreign Stocks and Bonds, the hedge funds did not deliver either due to fees. However, the margin of error was lower.
I believe that the reason why the bet didn’t do as well was due to high fees, and the fact that we are not comparing apples to apples. As a DIY investor, I do not understand the need to have someone else look after your money. Wall Street makes its money by making investing complicated, so that they can charge you fees forever.
The truth is, building your own portfolio isn't really that difficult. I will illustrate this concept with this article.
Thursday, December 21, 2017
Attractively Valued Dividend Kings
I shared with you the 2018 Dividend Kings List the other day. To be considered a dividend king, a company must have rewarded shareholders with an annual dividend increase for at least 50 years in a row. This is such a difficult task, that only 26 companies in the US have managed to achieve this regal status in the dividend investing world.
I received a few questions from readers, asking me which one I thought were worthy of further research. In order to answer this question, I went through my basic screen:
1) P/E ratio below 20
2) Dividend Payout Ratio below 60%
3) Having more than a nominal dividend growth
4) Rising earnings per share over the past decade
5) Since those companies have each raised dividends for 50 years in a row, they already meet my ten year minimum requirement for annual dividend increases
After applying those criterion over the list of dividend kings for 2018, I came up with the following companies for further research:
I received a few questions from readers, asking me which one I thought were worthy of further research. In order to answer this question, I went through my basic screen:
1) P/E ratio below 20
2) Dividend Payout Ratio below 60%
3) Having more than a nominal dividend growth
4) Rising earnings per share over the past decade
5) Since those companies have each raised dividends for 50 years in a row, they already meet my ten year minimum requirement for annual dividend increases
After applying those criterion over the list of dividend kings for 2018, I came up with the following companies for further research:
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