A Dividend Growth Investor Looks At Earning Season

by: Bob Wells

I'm a dividend growth investor, and I love earning season. Although there will be fireworks this 4th of July, the real fireworks begin on July 9th, when Alcoa (NYSE:AA) reports.

This season will be different. Nearly 30% of our portfolio is in cash, the result of my wife's 401(k) being transferred to our brokerage account. It's right there in our account just waiting to produce dividend income. In our case, we're not at the stage where we are accumulating dividends, we spending ours. Doing things like taking a few trips that weren't in our budget when we were raising our girls. We are setting up college investment accounts for each of our grandchildren. It's nice to have discretionary income. That's what our account does for us.

Back to the point of all this, I noticed something for the first time I think it was last earning season. By then in my short investment career I was just starting to fully understand Dividend Growth (DG) Investing. I had already downloaded the list of stocks with a history of paying and growing dividends commonly referred to as the CCC's.

You need to download these lists available to all at no cost courtesy of SA Contributor David Fish. They are available in Excel and PDF form.

We have our own portfolio business plan that spells out our objectives and the criteria we will use in determining whether a stock is fairly valued. We are ready this time. In our case, we have a number of options. Option one: purchase more shares of the stocks that are already in our portfolio generating monthly income through the dividends they pay. Option two - buy from our watch list of dividend growth stocks that are again included in the CCC's.

Our portfolio contains 2% positions in 50 dividend growth stocks. We have an additional 40 stocks that match our objectives in a watch list and ready to go. We use a portfolio set up on Sig Fig to monitor the active movement of stocks in our portfolio and on our watch list.

Now back to what I noticed last earning season. It was 9:30 am. the market had just opened and a great dividend growth stock, Smucker's (NYSE:SJM), was down if I remember correctly more than 4%. Wow what had happened? It had missed earnings by a cent or two. It had disappointed the analysts. Around noon when I looked again that lost had started to reverse. By the end of the day SJM had made back a significant amount of its earlier loss. I watched this pattern repeat itself a number of times that season. I sure hope someone reading this bought Smucker's that day and will be so kind as to fill in the missing pieces.

We couldn't benefit from this last season because we had no available cash available to invest. As I said earlier, this year is different.

What I plan to do each morning of earning season at 9:30 is watch to see what happens to the 90 stocks we either have or are watching. I'll probably pull the trigger on the ones we want just after 10. I not trying to time the bottom, just hoping to buy a few of the stocks we want at a discount. Remember in our case we're looking for stocks that have proven they can supply steady reliable retirement income from the growing dividends they produce.

I hope other dividend growth investors will share their favorite earning season stories. It would great to hear from other DG Investors with dry powder about what's on your shopping list this earning season. May your earning season experience prove successful.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: I am not a professional investment advisor or financial analyst. You need to do your own research and due diligence before you decide to trade any securities or other products.