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Summary

  • The BTDP is a framework that can be used for dividend growth investors who seek a more secure financial future.
  • Investing in dividend paying stocks, combined with some basic "life" strategies is a powerful mixture for your financial future.
  • The more focus, discipline, and vision an investor has, the easier it will be going forward.

If there is anything I have learned after nearly three years of writing for Seeking Alpha, it is that knowledge is power. If we have the ability to share knowledge in ways that the regular person can understand, then many more folks will be able to navigate the confusing world of financial security.

While nothing is ever guaranteed or risk free, there are some very basic approaches that everyone, yes everyone, can implement to have a more secure financial future for a lifetime.

I happen to believe that dividend growth investing, combined with some very basic discipline strategies can serve investors well in their search for "alpha."

The Buy The Dips Portfolio Is The "Gift" That Keeps On Giving

The BTDP consists of the following stocks: AT&T (NYSE:T), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), Altria (NYSE:MO), McDonald's (NYSE:MCD), Chevron (NYSE:CVX), Apple (NASDAQ:AAPL) General Electric (NYSE:GE), Ford (NYSE:F), Microsoft (NASDAQ:MSFT), Wal-Mart (NYSE:WMT) and Pfizer (NYSE:PFE).

52 wk lo 52 wk hi TGT PRICE Symbol Shares Orig.Yield Dividend Yrly Income Share Price Tot.Cost Tot. Value 30-Jun Tgt Price % To Sell Tgt Price % To Sell
31.74 39.01 35.37 T 300 5.60% 1.84 552 31.95 9585 10068 $35.36 $47.00 25% $64 50%
84.79 103.69 93.41 XOM 100 2.80% 2.76 276 90.05 9005 10068 $100.68 $135.00 25% $180 50%
81.71 106.45 93.44 JNJ 100 3.10% 2.8 280 86.78 8678 10462 $104.62 $129.00 25% $174 50%
36.83 43.43 40.13 KO 200 3.00% 1.22 244 37.21 7442 8472 $42.36 $56.00 25% $75 50%
73.61 85.82 79.72 PG 100 3.10% 2.57 257 75.71 7571 7859 $78.59 $108.00 25% $150 50%
21.11 28.09 24.61 GE 300 3.60% 0.88 264 24.35 7305 7884 $26.28 $36.00 25% $49 50%
92.22 103.71 97.91 MCD 100 3.50% 3.24 324 93.02 9302 10074 $100.74 $140.00 25% $186 50%
109.27 131.09 120.55 CVX 100 3.60% 4.28 428 111.14 11114 13055 $130.55 $166.00 25% $222 50%
55.01 94.42 75.52 AAPL 105 2.25% 1.88 197 75.21 7897 9758 $92.93 $112.00 25% $151 50%
33.12 38.58 35.85 MO 100 5.20% 1.92 192 37.71 3771 4194 $41.94 $56.00 25% $75 50%
12.65 18.02 15.34 F 400 3.20% 0.5 200 15.15 6060 6896 $17.24 $23.00 25% $30 50%
28.51 43.55 35.08 MSFT 200 2.80% 1.12 224 40.16 8032 8340 $41.70 $60.00 25% $80 50%
71.51 81.37 76.44 WMT 100 2.50% 1.92 192 76.11 7611 7507 $75.07 $114.00 25% $152 50%
27.12 32.96 30.04 PFE 200 3.20% 1.04 208 32.18 6436 5936 $29.68 $48.00 25% $64 50%
x x x Div.Cash x x x x x 633
x x x x x 3.40% x 3838 x 109809 121,206 x x x x x

The stocks that I happen to like right now to consider adding shares to are based on the midpoint pricing I have outlined to the left of the chart, as well as very reasonable forward PE ratios: I feel that going forward, these dividend winning stocks (especially the dividend champions that have increased dividends for 25 consecutive years or more) can serve investors quite well in reaching various financial goals.

  • Procter & Gamble has a PE of about 18.00
  • AT&T has a PE of about 13.00
  • Pfizer has a PE of about 12.50
  • Wal-Mart has a PE of about 13.50

These stocks represent a fair value in my opinion, and each can be purchased below their 52 week high points, and are more defensive in nature for a "toppy" bull market.

A Combination Of Basic Strategies Are The Keys To Success

This does not have to be complicated. As a matter of fact, it should be etched into everyone's mind by now, but here are the raw basics:

  • Save as much as you can for as long as you can, and start as soon as you can.

Person 1 began saving 2k per year and investing at age 18, and stopped at age 28. Person 2 began saving and investing 2k per year at age 28 and kept doing it for nearly 40 years (at an average growth rate of 10%).

The power of compounding is evident in the final numbers; Person 1 has $1.3 million, while poor old person 2 only has $800k:

Obviously, both have done very nicely, just by saving as much as they could, for as long as they could, as soon as they could. Yes the numbers are correct, I have done it hundreds of times before to educate people (I even used this chart here on Seeking Alpha). The power of compounding is amazing, and an early start beats a later one even though it lasts for 1/4th the amount of time.

Simply amazing right?

  • Spend less than you have coming in, forever, and you will never outlive your money, period.

I really love the following chart (I have used it before) because it encapsulates with one look, what we are preaching here:

The amount of wealth you will ultimately have, forever, correlates exactly with the income you have and spending less all the time. The longer you can do that, the more you will have. That is wealth defined, very simply.

Unfortunately, far too many regular folks are simply not saving enough. Take a look at this chart (also used before):

According to this, nearly 80% of all Americans had less than $100,000 saved as of 2010.

In this report (everyone should read this report by the way), it is noted;

"CLUELESS ABOUT SAVINGS GOALS: Many workers continue to be unaware of how much they need to save for retirement. Less than half of workers (46 percent) report they and/or their spouse have tried to calculate how much money they will need to have saved for a comfortable retirement by the time they retire (Fig. 23, pg. 22)."

This action is within YOUR control, nobody else's, and you can do it with focus, determination and discipline.

Invest in mega cap, blue chip, dividend paying stocks that have a great history of returning shareholder value in the form of dividend income.

Well, we all know where we are with this part as of now. The Buy The Dips Portfolio, or BTDP, is filled with these stocks that offer an income stream that will give us the ability to have a more secure financial future. Before retirement, during retirement...and potentially for our heirs.

Stay Away From The Major Problems That Could Derail Your Strategy

  • Buying high and selling low

The run of the mill approach is to follow the herd. When the herd is buying then that must be the best time to load up right? Nope, just the opposite folks. When the herd is buying, you want to be a seller, not a buyer. (Of course if you do not want to sell any shares, then just sit back and watch the frenzy.)

  • Chasing the hot momentum stocks

Obviously, this approach could lead to buying high and selling low, but so many folks fall victim to this because they feel they will miss out on a huge opportunity. The opportunity is when the momentum stops, the sheep begin dumping, and if the company is a solid one, you can buy at bargain basement prices.

  • Not knowing when to take profits

Every investor I have ever spoken to wants to ride their winners until they become filthy rich quickly. There are folks that will just buy and hold forever and that IS a strategy with the right stocks in my opinion (dividend growth stocks), but the everyday investor-stock-picker hangs on to shares of a strong stock for way too long.

I have given readers a simple guide as to the target pricing that the BTDP has, to the far right of the chart. Basically, based on your purchase price, if the share price rises by 50% sell 25% of your position if you want to take profits, and if the share price rises 100% sell 50% to recoup your investment, let the profits run and redeploy the cash to keep your income growing.

  • Dumping shares and positions for no other reason besides panic

I have done this, everyone I know has done it, and you have probably done it. Take a period we have had recently. The market is shaky, toppy, overdue for a correction, etc. It does not know whether to go up or down and when it drops it drops with a thud. Taking all of your investment hopes and dreams along with it right? Balderdash! That is what our fearful brain is telling us.

Our smart brain should be looking at our holdings and reviewing the company fundamentals and focusing on what our real goals are. It is not easy to do when a stock drops 5, 10, 20% in a short period of time. After all, we do not want to live in an empty refrigerator box eating termites when we are 85 right? Well that might happen if you sell solely out of panic folks.

The Bottom Line

Hopefully I have made this simple to follow. Begin right now, take charge of your financial future. Teach someone else while you're at it!

Happy Investing!

Source: Retirement Strategy: Dividend Investing Will Get You Where You Need To Be

Additional disclosure: I might open positions in WMT and PG in the coming weeks.