Dividend Growth Investor

7 Dividend Stocks to Prove Buy-and-Hold Isn't Dead

Buy and hold is not dead. It never was and never will. Any advisor that recommends that you switch in and out of stocks frequently is only after your money either in terms of selling you subscription services, charging you money for handling your investments or charging you for trades ( brokers).

One should however implement a sound buy and hold strategy that works for them and this strategy should include sound diversification, dollar cost averaging and selective dividend reinvestment. Consistent Dividend growth should be supported by sustainable earnings growth over time as well.

Buy and hold investors should also have an exit plan in case things don't go as expected. For me, when a company which has raised distributions for over a decade starts cutting dividends I exit the position and moce my business in more promising candidates.

8 Dividend Stocks with Wide Moats

Well it is important not only to purchase great stocks, but also to purchase them on dips or if you can wait accumulate them at attractive valuations..

Fewer and fewer stocks are fitting my entry criteria these days... The market is overextended, which doesn't mean however that it can't get much more overextended easily..

I do like the picks and the article however. You can't go wrong by selecting the best dividend growth stocks from different industries and hold on for the long run.

Good Debt Coverage for Sustainable Dividends

LTW,

Did you actually read the article?

Here are some highlights for you:

Some investors typically focus on debt to total assets to gain a perspective on the amount of the leverage the company has. While this method is widely accepted by some investors, I believe that it has some shortcomings, which might prevent investors from seeing the bigger picture. Most importantly comparing debt to total assets does not tell whether a company could service its debt obligations or not.


Dividend investors should generally look for a higher coverage ratio of interest payments. A lower coverage indicates that a decline in earnings could generally make it difficult for the company to service its debt, which could not only jeopardize its dividend payments but also could lead to bankruptcy down the road.


On Oct 14 09:27 PM long term wag holder wrote:

> I don'tunderstand this article. I understand a lot about debt, but
> the numbers in this chart are not explained very well

10 Dividend Stocks to Buy Now

So are you planning on purchasing these stocks in the future? I noticed you only owned NWN...

Dividend Stocks vs. Fixed Income: Which Is Better for Retirement?

NFC,

I had US Fed Govt obligations in mind. I should have made that clearer.

I disagree that stocks are not good vehicles to own during higher inflationary periods. Stocks did much better than bonds in the 1970s and they also provided a decent increase in dividends paid over that decade.
I guess it truly depends on what you consider a high inflation environment however. I read somewhere that in Zimbabwe, which had a huge hyper inflation, stocks managed to provide positive total inflation adjusted returns.

I guess I could have also written about TIPS, although this would certainly cause a discussion of whether the CPI accurately reflects inflation or not, which is not the purpose of this article.


On Sep 23 12:12 PM No Free Cake wrote:

> "Fixed income securities guarantee a return of your investment some
> time in the future, whereas stocks don’t provide that."
>
> Not true. You could argue that US Treasuries and US agency bonds
> "guarantee" a return but that's certainly not true for other fixed
> income securities.
>
> I'd also take exception to your statement of "Stocks are great vehicles
> to own during average and high inflationary periods, ...".
>
> You need only look at the US in the 1970's, which is the most recent
> period of high inflation, to realize that equities performed poorly
> during high inflation. I agree that modest inflation doesn't impair
> equities.

Dividend Stocks vs. Fixed Income: Which Is Better for Retirement?

It's fixed. Thanks for your input.


On Sep 23 10:11 AM jculley wrote:

> "The company currently yields and trades at times/earnings."
>
> You forgot something in that sentence.

Abbot Laboratories: A Healthy Dividend Aristocrat

NFC,

I agree that you could purchase the stock later on. The price of the entry is what truly matters however. The buyer of the JNJ option strike $65 might not choose to call it away from you when the stock trades at $65.01 or even 66.05 ( 65 + 1.05 option price). He might do that on options expirations day when the price is at $67. In this situation you not only generated extra commissions to your broker but you also underperformed the buy and hold investor.

Anyway, while I do believe covered calls and puts are a strategy that one has to learn, I sincerely believe that one should be careful with it. One of the options brokers has an ad running saying " Generate Income in Volatile Markets". It seems to me that options are advertised as a way for investors to "generate income" in any markets, and some are trying to do just that, without fully understanding what they are getting into.

It's not weapons that injure people, its people that injure people ;-)

Abbot Laboratories: A Healthy Dividend Aristocrat

I myself am not a big fan of covered calls either, although I have sometimes found it helpful to sell covered calls on stocks I plan on selling due to dividend freezes for example. I am a fan of covered puts, which is sort of like a limit order that I get paid for. I do have several companies on my watchlist where I would be filled if the stock went down in price.

Other than that I doubt that selling options is any good on average versus a simple buy and hold of the underlying. It is true that on paper you are getting a nice return if the stock goes up, but not too much. You also get a decent downside protection if the stock goes down, but not that much really. What your strategy is doing is limiting your upside, while leaving your downside wide open.

For example if I owned 100 shares of JNJ bought @ $60, my upside is unlimited, while my downside is at 0. If you however sell a long dated JNJ call with a strike price of $65 or $70 you are better off only if the stock price doesn't go above $65. Works well for sideways markets, and probably bearish markets. But would suck your returns in bullish markets.

Actually even in bearish markets covered calls are not that good. It's true that you could buy a JNJ stock @ 60 and sell a Jan 2010 strike $65 call @ $1.05 and get the premium. But what if JNJ is trading at $30 in Jan 2010? Try selling a covered call with a strike price of $60 when the underlying is trading a $30. The most you would get will be 0.05 cents. If you wish to get any meaningful options income you would probably have to sell a covered call with a strike price of $40 or $45. If assigned you would essentially get a loss on your sale.

That's why I don't like when options traders "annualize" their performance. Investors see that they might generate a 10% return for 6 months and then think that the party could go on forever..

These 47 S&P 500 Dividend Aristocrats Are Good Investment Opportunities

THofler,

Most Aristocrats would generate very good inflation adjusted streams of dividend income. For example some investors who purchased JNJ, PG, MCD, MO 15-20 years ago are now generating double digit yields on cost. MLPs are great for now, but what happens if the US government decides to abolish the MLP structure ( just like the canadian government decided to abolish the income tax structure iby 2011)? chances are yields on MLPs would drop..

In addition to that, when interest rates start increasing,MLPs might be affected negatively in the process.


On Jul 15 11:40 PM THofler wrote:

> I happily own 4 of the above, as well as a few Master Limited Partnerships.
> The more I learn about the MLPs the more I wonder why I should own
> anything else? They are tax advantaged & pay high distribution
> yields. Check out the info at the web site below, especially the
> presentations and publications page,
>
> naptp.org
>
> Why own the aristocrats? For diversification, of course, since MLPs
> are entirely in the energy space.
>
> I also like most any foreign high dividend stock with a good future.
> Since the dollar has recovered some of its value in the FX markets
> in recent months, now is a good time to move some of one's portfolio
> out of the dollar and into these foreign stocks ahead of the next
> dollar decline. I like the Euro integrated oils (BP, E, TOT) and
> recently picked up some of the Brazilian utility CPFL Energia (seekingalpha.com/symbo...).

These 47 S&P 500 Dividend Aristocrats Are Good Investment Opportunities

Avy,

There are several companies on your " list", which have cut dividends in 2009 several months ago.Ganett (GCI) and Legg Mason (LM) are such examples.

Rohm and Haas(ROH) which is also on your list, has been bought out by Dow Chemical several months ago as well.

Check these articles below for an up-to date list of the dividend aristocrats to avoid in 2009:

www.dividendgrowthinve...

www.dividendgrowthinve...

Best Regards,

Dividend Growth Investor

S&P Dividend Aristocrats Getting Through the Credit Crisis

Actually your article is a little out-dates as JNJ has already raised dividends for 2009. In addition to that there have been about 20 increases in the Dividend Aristocrats index in 2009 versus 7 cuts.

I did enjoy the article however. Always pays to know as much as possible about the Dividend Aristocrats!

Dividend Aristocrats Strike Back

Marcap,

You are looking at only one side of the story - tangible book value. I look at stocks as an asset that generates cash flows. EPS has almost doubled since 1999. Revenues have increased from 13 bln to 29 bln.

You are not understanding ABT's business. Here is the description: This diversified life science company is a leading maker of drugs, nutritional products, diabetes monitoring devices, and diagnostics.

Intangibles such as patents are important for this company to innovate and sell new products and generate revenues. Once you have created a medical product like a drug, your variable cost is pretty small. How do you account for that in your valuation?

You are not going to make any $$$ no matter what the balance sheet says, unless the financial situation is directly monetized for you as a shareholder of ABT. Even if the company had $60/share in cash unless ABT distributes them back to you as a dividend, what good is it for the stock price?

Axelrod,

It is highly suspicious that HTE will keep paying out $.24/share every month. What would happen in 2011 when canadian trusts begin getting taxed less favorably?
Other trusts such as AAV, PGH and PWE have recently cut their distributions. If HTE maintains their distributions that's good for you. If

Anyways, I do like some MLPs, but I would caution you not to chase high yielding stocks. Look for sustainable dividend payments/distributions... Concentrating all of your portfolio in MLPs and Canadian Trusts is a recipe for disasterin the making. I am a big fan of diversification.




On Feb 24 11:41 AM Marcap wrote:

> "ABT,KO, TEG and SHW are indeed dividend aristocrats. They are amoung
> the few that have consistently raised dividends every year for more
> than a quarter of a century. That's not a small achievement"
>
> You are joking, right? Take Abbott Laboratories (seekingalpha.com/symbo...)
> for just one example. While Abbott's stated book value is $12.47
> per share, remove the huge amount of stated Goodwill and other Intangible
> crap totaling more than $15.8B from its Balance Sheet, and net book
> value plunges to a mere $1.35 per share. Now if anyone thinks that
> paying $54.42 (current market) for a stock with a net book value
> of only $1.35 is justified simply because of a current 2.7% dividend,
> boy do I have a deal for them.

Dividend Aristocrats Strike Back

Market Ace,

ABT,KO, TEG and SHW are indeed dividend aristocrats. They are amoung the few that have consistently raised dividends every year for more than a quarter of a century. That's not a small achievement

Marcap,

It is true that some companies raise dividends when they cannot afford to. But most companies that have raised their payments for more than a decade and can keep doing that are sending fundamentally strong signals. If you can keep raising your dividend in a recession, you must have a wide moat business. If you check the dividend aristocrats list in 2009, there have been 12 increases and only 2 cuts. The business models of most aristocrats and achievers are pretty anticyclical. You don't get to raise dividends for more than 25 years just by accident.
In a bear market, when your stock loses 50%, but your dividend check is the same and even gets increased, what do you care?

Dividends have accounted for the majority of total returns over the past few decades. Stock prices go up and down and few if any investors could take advantage of market timing. Thus a simple buy and hold with a dividend reinvestment could do miracles for you no matter where the stock market goes. As long as your dividend is stable and/or going up.






On Feb 23 10:33 AM market ace wrote:

> If you call these aristocrat dividend stocks you are a joke. There
> are many many much better dividend stocks out there compared to your
> pathetic list.

A Tale of Three Pharmaceuticals: Abbott Labs, Pfizer and Eli Lilly & Co.

Nice review. I reviewed PFE several months ago and concluded that the company should spend its funds not on buybacks but on acquiring other companies with pipelines.

Dividend Aristocrats Handily Outperforming Main Indexes in 2008

Great resource David!
It's great to see that dividends are cushioning the losses for investors this year. To everyone else who believes that this is a short term phenomenon, please check this link out:

dividendgrowth.blogspo...