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Dividends4Life (38.37)

If Only I Had Known About These Dividend Stocks…

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November 16, 2010 – Comments (6) | RELATED TICKERS: ABT , CL , KMB

At one time or another, we all have thought, ‘If only knew this when I was younger.’ I purchased my first dividend stock for income in 2003. Like many newly converted income investors, I was chasing yield. I quickly built a portfolio consisting of Real Estate Investment Trusts (REITs), Master Limited Partnerships (MLPs) and high yield, high risk stocks. My portfolio’s yield was consistently in the low to mid-teens. Eventually, after some unnecessary losses, I learned there was a better way to invest in dividend stocks. Here is what I learned… Dividend Investing is About Future Yield, Not Current Yield

I was fortunate enough to accidentally buy some good dividend stocks and hold them long enough to figure out the “secret” of dividend investing. It is not necessarily starting with a high-yield investment, but ending up with a high-yield investment. This usually occurs by buying investments with a moderate yield, a history of growing dividends and letting time do its job.

Too often we take a short-term approach, to our long-term detriment. There is a reason we don’t see infomercials selling dividend growth investment strategies. For those looking to get rich now, a disciplined approach to investing that focuses on the long-term simply isn’t appealing.

Successful Dividend Investing is About Substance, Not Style

In my aggressive growth investing years, I equated dividend investing with old folks and the inept. That was simply not my style. Time and experience have taught me there are no style points awarded in building a winning investment portfolio. In the end the long-term performance (substance) of your portfolio is all that ultimately matters, not how you got there.

I find it interesting that the same people that complain about taking a beating in the market, are the same ones who will ridicule those that follow a dividend growth strategy. For me, I enjoy having a growing income and portfolio, while not having to follow the market’s every move.

You Can’t Beat the Herd, by Following the Herd

Through the years I have settled down quite a bit. Using well-defined investment allocations, I have set boundaries and guidelines to ensure I don’t over expose my portfolio to undue risk and I employ a meticulous process when selecting investments.

Let the talking heads start a stampede to buy a stock after it has seen a significant run up. For me, I prefer to take a contrarian approach and buy stocks when they are cheaper and their yields are higher. My focus is on quality dividend growth stocks with a long record of consecutive dividend increases, such as:


Company | Yield | Discount | Years of Growth

Weyco Group (WEYS) 2.53% 1.5% 29

Kimberly-Clark (KMB) 4.20% 1.7% 38

Meridian (VIVO) 3.18% 7.7% 19

Abbott Labs (ABT) 3.41% 9.0% 38

Colgate (CL) 2.62% 15.4% 47

Cincinnati Fin. (CINF) 5.23% 16.4% 50

Clorox Company (CLX) 3.49% 20.3% 35

Southside Banc. (SBSI) 4.22% 35.4% 12

Starting in my 40′s, I will enjoy substantial investing success. However, if I knew in my 20′s or 30′s what I know now about dividend growth stocks, I would likely be retired now.  The compounding power of growing dividends is tremendous. Start early, at some point time will change from your friend to your enemy.

Full Disclosure: Long KMB, ABT, CL, CINF, CLX. See a list of all my income holdings here.

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6 Comments – Post Your Own

#1) On November 16, 2010 at 8:53 AM, truthisntstupid (92.27) wrote:

"I find it interesting that the same people that complain about taking a beating in the market, are the same ones who will ridicule those that follow a dividend growth strategy."

I so too.  Yet here I am, "beating the market"  without even trying - quite by accident, because I don't even care whether I beat the market or not.  And there they are, often posting blogs complaining they can't make any money in this market.

They don't know how ridiculous they are.

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#2) On November 16, 2010 at 8:54 AM, truthisntstupid (92.27) wrote:

"I so too"  -  I do too.

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#3) On November 16, 2010 at 10:53 AM, Rehydrogenated (32.27) wrote:

Good advice!

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#4) On November 16, 2010 at 12:47 PM, helicopterfool (34.49) wrote:

I love your posts.  Keep em coming.

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#5) On November 16, 2010 at 6:05 PM, Borbality (49.87) wrote:

Good advice. I'm 26 and the investments choices are overwhelming. I recently picked up YUM hoping it will be the kind of company you described. 

 

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#6) On November 16, 2010 at 6:07 PM, Borbality (49.87) wrote:

and hey, isn't that how things always work? Once you learn how to do something right, you either won't need to do it again or you really could have used that knowledge a long time ago!

 

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