We’ve said it before and we’ll say it again; the greatest pleasure of maintaining a website has been to collaborate and share with other likeminded investors. We were recently contacted from Jimmy at Dividend Reference to share some tips related to personal finance generally and dividend investing at a more granular level.
Three of our tips have been featured in this very ambitious article: 101 Dividend Investing Tips from the Experts. We encourage you to give the article a read and browse the rest of the site as well. It is a great resource for investors.
Here are the three tips we submitted which are featured in the piece:
(26) Be a net accumulator. Contrary to what the financial media blitzes us with on a minute-by-minute basis, there’s nothing glorious about buying and selling stocks. If you ascribe to that manic strategy of trying to cycle in and out of equities, you’ll wind up emulating the proverbial hamster on the wheel rather than Warren Buffett. Don’t get me wrong, I’m not blindly advocating buy and hold either. What I am suggesting is that you focus on being a net accumulator of assets; my favourite being dividend growth stocks. In my years of investing, I have only sold a single stock. Even on that occasion, I was able to turn a profit as a result of the dividends received. By taking a long-term approach and allowing dividends to bolster my overall returns, I have easily weathered considerable market turbulence all while receiving a steady, growing income. If I had been actively selling every time there was a patch of negative news headlines, however, I am confident I would not be here saying the same thing; I have no crystal ball revealing the ups and downs to come. While forecasting the future is not my strong suit, I am quite confident that high quality companies will generally be doing far more business two decades from now than they are today. Over time your goal should be to do a lot more buying than selling.
(52) Rising dividends are our profitability litmus test. Decades of dependable dividend increases is pretty hard to fake, even in a world fraught with accounting sleight of hand and often downright chicanery. A track record of dividend increases is our favourite way to determine whether a company has true competitive advantages and a durable business model.
(94) Think ownership. The great strength of building a dividend growth portfolio is to allow the power of compounding the necessary amount of time it requires to amplify returns. The longer the investing window, the better. This means investing with the mindset of a business owner and not a stock trader. As an example: A few years back I sold a put option on McDonald’s (MCD) stock to make a short-term profit while it was trading around $66 per share. I made a few hundred bucks. Great, right? Wrong. MCD proceeded to then march all the way up to where it now fetches ~$104 per share. I missed out on gains of a few thousand dollars to reap a couple hundred. Moral of the story? Go long and think like an owner.
So, thanks again to the folks at Dividend Reference for reaching out to us and we hope you find value in our tips!
– Get Rich Brothers
Which tips are your favourites?
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But we need to be careful of rising dividends as well as it’s not always 100%. Look at a stock like CSKI – a total shell company that lured investors with false earnings and a dividend. And when they were exposed the US government did nothing.
Mark,
Absolutely. A track record of increasing dividends is just the starting point for further research. It is a great indicator but, as with any other indicator, it is only one piece of the puzzle and isn’t actionable on its own.
Thanks for stopping in!
– Ryan