When I purchased the eBook Top 40 Dividend-Growth Stocks for 2011, I hadn't intended to write a review. But as I read deeper into this work, I realized that it would be a disservice not to call attention to its value to both Seeking Alpha readers and others who might be in search of sound advice on investing in dividend stocks.
The author, David Van Knapp, is the number one Opinion Leader in the Income Investing Strategy category and a top-20 Commentator, having published (as I write this) 72 articles and posted over 2,100 comments. Unlike many of the books that you may see reviewed here on SA, this work is designed to help the reader to not only learn more about dividend-based investing, but also to establish profitable positions in high-quality companies. (If I were writing ad copy, I'd write something like, “You'll recover your purchase price in no time!” or “Just buying one of these stocks will result in profits like you've never seen before!”) Fortunately, I'm not an ad copy writer! As many of you may know, however, my own work has coincided with that of Mr. Van Knapp, so I could be accused of bias...to which, I plead guilty. But I promise to be as objective as possible in the following text.
Contents for Everyone
At the risk of stepping on some toes, I'm going to take a shortcut and copy-and-paste the following:
1. Introduction…………………………………………………………. 4
2. A Look Back at 2010 and Forward to 2011..................... 6
3. Why Invest in Dividend-Growth Stocks? ...................... 13
4. What Are the Characteristics of the Best Dividend-Growth Stocks?................................ 41
5. Creating and Managing Your Dividend Stock Portfolio....................................... 57
6. Top 40 Dividend Stocks for 2011……............................ 70
7. Easy-Rate™ Scoresheets for the Top 40..…………………. 81
8. Dividend-Growth Stocks in Retirement Planning..…….. 123
9. Disclaimer and Important Information……………………. 136
My purpose in taking this shortcut is not just to make this article easier for me, but also to begin by demonstrating the structure of this eBook, which consists of both basic and advanced knowledge and ideas. So whether the reader is an investing novice or someone with more experience, the author provides the necessary context for understanding and using dividend-growth investing as a basic approach and selecting the best stocks to carry out that effort.
The early part of this work focuses on understanding how dividends relate to a company's earnings and financial position, as well as what distinguishes a dividend-growth stock from one that may have paid dividends, but on a less consistent (and reliable) basis. (The “look back” should alert readers to the fact that the current incarnation is the fourth year that Mr. Van Knapp has published his guide.) The work then transitions into the important concept that a cohesive portfolio is more than just owning a bunch of stocks, but rather is (or should be) a well-conceived plan for developing a reliable income stream (in the case of dividend-growth stocks). The author has published a number of articles that focus on the potentially faulty mindset of shooting for a retirement “number,” rather than the important need to develop an income stream.
Choosing the Best Stocks
Much to his credit, the author explains in great detail the scoring system that he has developed (and refined) to select the best dividend-growth stocks. A unique feature of his scoring system is that each company has a “story,” which is much ore than a simple company description or summary. By using this approach, he focuses on what sets a company apart from its competitors and how its business model will (or will not) allow it to thrive in the future. Quite often, in fact, a company's continued success is dependent on the corporate culture that it has developed over the course of many years, even decades. That culture extends to the recognition that paying a growing dividend to the owners of the company (shareholders) is a goal not to be taken lightly.
It would not be fair for me to reveal the names of the companies that Mr. Van Knapp has chosen as his best dividend-growth stocks, but it will be no surprise that some of them are among the “usual suspects” that pop up in articles and discussions. Suffice it to say that his scoring system takes into account not only the all-important company story, but also the latest earnings and dividend trends, but also the balance sheets, industry trends, and historical returns of each company.
In truth, the eBook contains more than 40 top stocks, since the author also explains why some of last year's picks dropped out of the top 40 and why certain other companies didn't quote make the list. In effect, the reader has at least a couple dozen other candidates for further consideration. This is also important from the standpoint that a reader may not fully agree with all the weightings assigned by the author, so having a number of alternatives is a nice bonus...and I know that the author regularly encourages people to think for themselves, a valuable subtext for this work.
But Wait, There's More!
OK, enough of that. In closing, I also wanted to address one possible negative issue (in some people's minds). No doubt many of us remember seeing a slew of articles at the start of the year in which authors promised their top picks for 2011, and many of you know that this is an annual phenomenon that quickly passes. You may also know that many of those articles are, unfortunately, short-term in nature. The writers often tout investments that will quickly double or “soar” beyond a reasonable price. I point this out only by way of contrast to the work being reviewed here, which is geared towards long-term investing in general and dividend-growth investing in particular. Such an approach is timeless, so I think that investors will continue to benefit from it in the months and years ahead. Do yourself a favor and buy it. Here's a link to the author's website, where it can be purchased.
- Here's a link to the author's previous book, which was published in conventional form.
- Here's a link to David Van Knapp's Seeking Alpha page.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.