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Dividend Investing Tips From a Pro

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February 06, 2010 – Comments (0)

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. 

Fool On!

Russ

 

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