H.L. Menken defined a demagogue as "one who will preach doctrines he knows to be untrue to men he knows to be idiots."
I really hate demagogues, and I refuse to be one. This is why, although I am politically conservative, I refuse to listen to Rush Limbaugh or Glenn Beck. Some facts may well be on their side, but I resent how they make their case: picking and choosing snippets of information to bolster their argument; mocking and ridiculing the other side of the aisle; and acting as though if you don't believe them, you're stupid.
I'm sorry, but my politics are just not that pure. Neither is my investing style.
Am I a high yield investor? Clearly: my profile name is "Five Plus Investor." Have you read any of my articles? Then you know I write primarily on investment ideas that have a 5% dividend yield or higher. Think I am just chasing yield without giving thought to how I'm receiving it? Then I debate that you have even bothered to read me. Found anywhere that I recommend ONLY high yield investing and nothing else?
Well, then. You are David Copperfield and you have pulled a rabbit out of your hat (to put it nicely).
Let me set the record straight. I am no "Rush Limbaugh" of high yield investing. I am an investing "moderate." I preach to no one to "do as I do." I only present a different point of view here on Seeking Alpha, one that is not well-represented amongst the many different investing styles presented here.
Why I Write About High Yield
First of all, if you wish to take issue with my style of investing, it might be helpful to understand exactly what it is.
In my first article I recognized the four kinds of dividend investors that I had observed in my pre-contributor days, when I was a commenter. I observed that dividend investors seemed to fall into four different camps: dividend growth, high yield / high risk, income (primarily bond holders) and blended approach.
Which one do you think I am? If you guessed high yield / high risk, you are dead wrong. I am a blended approach investor. A high yield / high risk approach involves primarily screening common stocks, and assuming that the best choices involve the highest yields. I warned about this common but unsafe practice in that article:
…heed this warning: unless you understand what kind of stock you are considering, high yield is not a "green light" for a buy. If the stock is not created specifically for high yield…you are risking a loss. High yield in common stocks is usually a "yellow" or "red" light, cautioning you that the market has priced in, or believes in, bad news for the company.
Instead, I am a blended approach investor. I utilize "whatever works" to create the yield threshold I am looking for, while also creating a margin of safety. Therefore I look for yield in investments where the high yield is built into the structure of the issue. This eliminates most common stocks, but leaves behind the following better choices:
- Preferred Stocks
- Canadian Corporations & Trusts
- High Yield International Stocks
- Common stocks from high-yield industries: telecom, tobacco
For these types of investments, the company has determined from the get-go that it will pay out dividends or interest at a high level. This "builds in" a measure of safety that cannot be found in most common stock, which from the get-go are not supposed to be paying above a certain percentage of profits in dividends.
So let me set the record straight: I am NOT recommending the pursuit of "yield for yield's sake." Instead, I recommend you determine what yield you wish to pursue, and then choose the appropriate investment vehicles to accomplish that yield.
Seeking Alpha Needs Diversity
Dividend growth investing, in my opinion, is the pinnacle and highest form of dividend investing. Or, viewed another way: it's like the food pyramid. Dividend growth investing should be the large steady base upon which you build a retirement portfolio. Other investing styles can be layered on top of this base, but should not be the foundation.
My opinion on pure dividend growth investing is this: I support it. I do it. I love it!
But feeling that way, should I write only on dividend growth investing? I don't think so.
Here is the truth of the matter. I cannot match the quality, style and breadth of work that others are doing. Contributors like David Van Knapp, David Fish, Chuck Carnevale, Dave Crosetti, Dividends4Life, Tim McAleenan and Dividend Growth Investor do a better job than I in providing education about a pure dividend growth investing strategy.
At the same time, many of you enjoy hearing a different point of view.
I am especially followed by a group I affectionately call: "desperate retirees." These are investors who start investing late in life, and would dearly love to have 20 more years to safely build an income stream that yields 10% or more. Problem is: they need the income now.
They also want to accomplish this higher yield without losing their shirts. I am widely followed by these wonderful people, and I feel compelled to help them reach their investment goals. This may mean presenting a style of investing that varies somewhat from the classic, start-at-3% pure dividend growth strategy.
There aren't many contributors who write this way. Maybe I could include Todd Johnson, who writes on just about every type of yield and investment out there; and Archman Investor, who is in many ways my investing kindred spirit (and who should contribute more than he does!).
As for contributors who focus on nothing but high yield? Well, I may be a party of one. In writing only high yield, I am not saying: you MUST do it. I am not taking an advocacy position. I am simply putting my ideas out there, and saying: judge for yourself if you want to invest this way.
My Own Portfolio Has Diversity
If you also think that, in my own personal investment portfolio, everything starts out at 5% or more, again I say - you are not reading my articles and comments. Last year I lowered my yield threshold to 4% to accommodate more dividend growth choices. All I can say is - Holy Smokes! - the world of dividend growth investing became my proverbial oyster.
Here are the stocks I hold that - at the time I entered my initial positions - yielded 4%:
- Lockheed Martin (NYSE:LMT)
- Waste Management (NYSE:WM)
- CMS Energy Corporation (NYSE:CMS)
- Unisource Energy Corporation (NYSE:UNS)
- Intel Corporation (NASDAQ:INTC)
- General Electric (NYSE:GE)
Then, I got really belligerent with myself. In 2011, I actually entered two positions that (gasp!) yielded only 3%. These are:
The remaining 30 or 40 stocks I own fall into the categories I listed previously, or they make David Fish's CCC list.
I hope you really read that last statement. For high yield, I am NOT venturing outside of what is ALREADY being recommended by our most prominent dividend growth record-keeper; or that is created specifically for high yield. If what I own yields 5% or more, it meets these criteria:
- Has a proven track record of dividend increases for 5 years or more
- Is on track to make David Fish's Challengers list for 5 years of dividend increases; OR
- Is supposed to be high yield in the first place.
Signed, Your Politically Neutral Friend
Seeking Alpha can sometimes be a wearisome hornet's nest of needless infighting. I find this sad. There is no one right way to invest, and no one has a stranglehold on truth here.
This article is being published in the "Dividends and Income" section, so I'm assuming we are all on board with investments that pay us. Isn't it great that we all agree on this! Now that we all have common ground, let's all just…RELAX. Step back from your entrenched positions. Stop assuming you know either how others invest, or how they should invest.
You may end up discovering you aren't the Glenn Beck of your own investing style…and you just might learn something new.