Dividend Investing Tips From a Pro
This week's Barron's has a profile on Don Kilbride, the manager for Vanguard's Dividend Growth Fund (VDIGX), titled 'Trusting in Dividends' by James A. Anderson. It may be subscribers only, but is a good read if you can get to it or are browsing through newpapers at the library.
Some excerpts I thought were important:
"One aim is to narrow the fund's sights to companies with a payout ratio -- dividend as a percentage of net income -- of between 30% and 60% on average."
"... focused on the possible capital appreciation of stocks from financially sound companies that choose to increase dividends over time."
"Kilbride gravitates toward companies where he sees approximately 10% average annual payout boosts over a five-year horizon"
Although the article didn't specifically mention looking at credit ratings, in the interview Kilbride mentioned that "the fund owns four of the five remaining AAA-rated companies." Credit rating is something I haven't been looking at in my investments, but it makes sense and I plan to start considering it.
There's no mention of a specific yield range Kilbride looks for in his holdings. The fund's yield is 2.3%, which would indicate he isn't chasing after a lot of high yielders.
Kilbride's been at the fund since 2006. Over the last three years, the fund is in the top 8% of its peer group; results over the past year aren't as impressive, lagging 71% of the peer group.
Specific fund holdings mentioned in the article are: ADP, UPS, JNJ, PEP, and MMC.
Disclosure: I'm long JNJ.