Dividend Growth Investing: Waiting For The Ball To Come To Me

Includes: ABT, AFL, KMB, KO, PG
by: David Crosetti


Recently, I wrote an article titled: "Dividend Growth Goes Mainstream: Should You Be Worried?" The article generated a fantastic thread of commentary and for that I am very pleased.

It was one comment that came late in the week that really caught my attention, though. When I read it the first time, I thought, "That's very good."

Then I really started to think about it more deeply and I realized that the comment actually reached right to the heart of Dividend Growth Investing in an extremely profound way. Here's the comment:

"Pete, It's funny. Because "blue chip dividend stocks" are underperforming so far this year, articles are already appearing about the "flight from safety" to riskier issues, such as small caps and non-dividend stocks. That's the market. It's like 8-year-olds chasing a soccer ball--the whole crowd moves around after the ball. The one who's going to become the best soccer player as an adult may be the one kid who's nowhere near the ball and refuses to chase it. He knows it will come to him.

It was fine with me when the crowd came, and it's fine if it leaves. Better entry points if you're still investing, and if you're not still investing, the crowd never affected the dividend stream one penny anyway."

This comment was made by David Van Knapp, one of the most ardent proponents of Dividend Growth investing and a regular contributor at Seeking Alpha.


As an investor, sometimes I doubt the wisdom of some of my stock selections. Sometimes I doubt the wisdom of my investing strategy.

The most incredible example of this "doubt" was back in the 1990s. I owned a lot of Coca-Cola (NYSE:KO) stock. For what seemed an eternity, the price of the stock just stayed flat. It paid dividends, but I wasn't really looking at those dividends in the same way that I do today.

What really got me to doubt KO was the fact that it had stopped splitting its shares. So, what had been, for me, a great profit machine, appeared to become nothing more than a "paperweight" in the portfolio. It just sat there.

I actually thought of selling my shares on more than one occasion -- and today I am glad that I didn't. Why? Because I discovered DG investing and the most important part of the strategy. It's all about "waiting for the ball to come to you."

Back in those days, when I was thinking about selling my KO position to buy the latest and greatest thing, I didn't realize how much the income from my holdings of KO would grow and what it would mean to my retirement years.

Instead, there were other sectors of the market that were on fire and making money for investors who were nimble enough to switch gears and head in a different direction.

But David's comment brings it into perspective. It's all about positioning yourself for when the ball is going to shoot out of the pack and come to you.

When it does, most of the kids will be on the other side of the field and there will be no one in front of you except for the goalie. You only have one person to beat, in order to score and win the game.


At this point in the year, we have seen the more well-known dividend growth stocks seem a little flat or even down in price from the beginning of the year.

In the meantime, you are still getting your dividends and at the same time, you are seeing those dividends increase, giving you more income. Being at the core of the DG strategy, then, it would appear that the most important component of the strategy is still working.

There are a number of companies in the Champion, Contender, and Challenger lists that offer up an opportunity for DG investors to add to their portfolios. Perhaps it is time for you to spend some effort in analyzing these companies that you don't own and get to know some of them a little better than you do.

My friend Derek likes to say that "you have to go through a lot of dirt, in order to find the gold."

There's gold in those lists. Start prospecting. You won't find the gold unless you are willing to dig for it and then sift through the diggings. While you are doing that, believe me when I tell you that the market will have a correction or perhaps two this year. That will give you plenty of opportunity to purchase more Procter & Gamble (NYSE:PG), Kimberly Clark (NYSE:KMB), Coca Cola and the other "usual suspects."

While you are waiting for those entry points, you are already collecting your dividends. Isn't that the whole reason you are using this strategy in the first place?

Let's take a look at some of the most widely held Dividend Champions and their performance year to date:


Bear in mind that this document is showing only the "price changes" for the YTD, 3 Month, 6 Month, and 12 Month periods. Depending on where you purchased these companies, your results may differ. But they are presented as a point of discussion.

Even in this short list of Dividend Champions, there are companies that year to date are doing very well. There are companies that are doing nicely in every time period examined. The point is, there is no reason to change strategies at this time.

When you start to run after a train that is leaving the station, the most common thing to happen is that you end up having a heart attack.

You aren't going to catch the train. It's leaving and will be gone in a minute. You are doing the same thing that my country dog, Ringo, does when he chases cars. There just isn't any point to it.

Rest assured that markets go up and markets go down. Right now, the crowd is chasing after "growth" stocks and some cyclicals with the idea that the economy is on the verge of turning around. That's good. If you have a profound desire to do likewise, take a little fun money and go for it.

Meantime, I am holding the course. I am not chasing trains or cars. I have worked too hard growing my portfolio to be chasing anything and changing strategies here.

Disclosure: I am long ABT, JNJ, KO, MCD, PG, KMB, CL, ITW, EMR, WMT, NUE.