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  • Investors Should Not Be Complacent About Dividend Champions [View article]

    Wonderfully written article. I will acknowledge that I am a DG investor, so I don't feel this as attacking but certainly a topic for great debate and something I mentioned about survivorship bias on another thread (I think Norman Tweed's friend who picked 10 stocks 10 years ago and none were banks). I do want to ask this:

    For the companies that still remain on the CCC list, and let's just focus on the Champions for now, they have been increasing the dividend well before the "Great Moderation," having gone through massive inflation of the 1970s, and some as far back as when the Nifty Fifty was started. My belief is with these companies that remain, there is a corporate culture of raising that dividend, of the ego of the CEO NOT to be the one to suspend or cut the dividend and having the share price tank on their watch. For the ones that most DZers focus on (who are more buy and monitor and not buy and forget), the debt is not outrageous, tangible products are made that touch millions/billions of consumers around the world, significant free cash flow every year and have pricing power to keep the margins intact for the long haul. Do you really see this list getting cut even in half in the next 5 years?


    P.S. Keep up the good work.
    Sep 23, 2011. 01:09 PM | 15 Likes Like |Link to Comment
  • Building A Portfolio, One Wish-List Stock At A Time [View article]
    I'll try and answer this for the author and I will call it the Chowder Law because he is the one that beat this into everyone else on this segment of SA:

    The purpose of the DGI philosophy is to protect the income stream. The more companies one has, the less risk you are placing on any one sinking your man-made, inflation beating annuity. To accommodate for this being your primary goal, you must let the volatility of the market change your portfolio value/net worth every day. You can't have both and I am guessing the author is not focusing on total return in the truest of defintions.

    My .02 reinvested.

    Jul 16, 2012. 06:41 PM | 11 Likes Like |Link to Comment
  • My Fear As A Dividend Investor [View article]

    You can say at least 450 stocks raised their dividends in 2008-2009 because they made it on to Fish's CCC list.

    Lbushmaker: To a certain extent, I understand your point that you can't follow 30+ stocks. But I will argue that is from a total return point of view. I have begun to realize more, with the help of Chowder continuing to bang this point home in numerous threads, that one gets to the equal weighted 33-50 stock range, you protect the income stream, and that's the focus of most of the people that reply on these boards. After one does the due diligence on the stock and purchases at their preconceived buying threshhold, it really boils down to only two questions moving forward:

    1) Has the company drastically changed their operations in the last 12 months that it could affect long term performance?

    2) Did they raise the dividend at a rate greater than inflation?

    If the first answer is no, and the second answer is yes, you are done until the next annual report and the next press release that should announce the next dividend increase. I know this grossly oversimplifies things, but is Coke really going to screw with their formula and come out with New New Coke?

    My .02 reinvested

    Jun 8, 2012. 09:16 PM | 9 Likes Like |Link to Comment
  • Retirement's 4% Rule: Why Mr. & Mrs. Income Don't Need It (Part 2) [View article]

    I think you bring up some great points and well worth the discussion. It has been noted we don't know the future and have to rely somewhat on the past. I have written a book, mostly for my kids, but whoever wants it I have emailed to and they have made comments to make things better(thanks richjoy and Fish). I'll share two paragraphs which is why I now invest this way (appreciate the sarcasm in there too):

    Warren Buffett, whose name I am sure most people have heard of, likes to quip that his tax rate is less than that of the people who clean his office. (Businessweek, 4/11/2011) Why? Because he can live off his dividends. Now you may be thinking that Buffett gets $375 million dollars in dividends just from his stock in Coca-Cola alone and anyone can barely squeak by when they are getting that much money. But it became that large a number for a couple of reasons. First, he holds on to stocks for a LONG time. As he says, his goal is to hold forever. Why is that his timeframe? Mr. Buffett selects companies where management has made a CONSCIOUS effort to continue to not only reward their shareholders but grow that reward each and every year they believe in their company. As I will explain below, the companies that can show you 4 out of the 5 cards in their poker hand (the one card held back is our only guess in the equation – the dividend growth) by showing you the money may not be the best poker players, but they do become the companies you want to be business partners with.

    Reference #2:

    Q: How can you have so much confidence that a company will continue to increase it dividend?

    A: When you start investing for a while, there is one universal truth: You have no idea what’s going to happen tomorrow. Now having said that, when companies have religiously paid dividends and increased those dividends over time, they don’t just stop paying their dividend unless it is a last resort option. Why can I say that with such confidence? All companies are run by people. When you become this powerful within a company, you have an ego and you don’t want to be the CEO or the CFO who stops the dividend or worse, cuts the dividend and tank your stock price. There is a streak on the line as well. Abbott Labs has been a dividend increaser for 39 straight years. If it were to stop in 2012, it would take until 2051 to get back to the same length of a streak. Even if it was a token increase of 2% for Year 40, the ego wants to keep the dividend increasing intact no matter what.

    Aug 29, 2011. 03:49 PM | 9 Likes Like |Link to Comment
  • Beware The False God Of The Dividend [View article]

    I think I understand your argument. Within the vaccuum of your example for the one day, the trader lost one cent per share or $1 dollar excluding commission costs.

    But I said this is a trader. As someone else mentioned, the people that are commmenting here are investors and are not looking to trade around one day and one event. Everyone is talking around the same circle. Those companies that are strong enough to provide dividends and raise them show their wide moat and the market will bid the price up, increasing the investor's net worth. So, if you want to be truly literal Greg, the dividend itself does not make you richer, but buying these companies that have the capacity to do so will. The dividend, the actual cash given back to you in your hand, is the PROOF they can versus those companies that keep all the profits within the company and we have to pray that they can prove their worth quarter after quarter.

    Nov 6, 2012. 04:38 PM | 8 Likes Like |Link to Comment
  • Options Trading For The Dividend Growth Investor [View article]
    I'll answer Byloe. You are correct. Skyler gave an overview but you do need to understand all the costs to see if this is worth doing or not. An excellent primer would be to follow the author K202 when he first started writing articles. Also, I will use TDAmeritrade fees, since that is the brokerage I use.

    Commission $9.99+ $.75 per contract (1 contract = 100 shares). So if you do 1 contract, you agree to buy 100 shares, or in Skyler's case ($7,250).

    If it expires worthless, the price of KO is $72.51 or higher, there is no other fees and with 1-2 month options, the premiums (the $65 per contract) are taxed at your regular income rate.

    If the price is $72.49 or lower, there is the transaction fee of $19.99 (vs my $9.99 purchase or limit order). Your cost basis, using Skyler's example, is $72.50-$.65 = $71.85 for when you decide to sell KO in the future, if ever.

    I personally find options only become economically viable once you begin to write at a minimum 3-4 options, which means you have a pretty substantial portfolio to begin with. (Using KO, that means you have $23,000 lying around). It's discipline, you get paid to wait, and if you can nab some options on some down days, the volatility went up and the premiums go up, but you ONLY do this WITH STOCKS YOU WOULD WANT TO OWN.

    That's the forgot Skyler forgot to hammer home. Don't do it with any stock that has a good premium but you do not want in your portfolio. Also, be careful with your brokerage. I thought I was writing cash-secured puts but I never saw my money market fund move. When I called, they said I had the ability to use margin, something I didn't even want, but made more sense because they were using the rest of my portfolio as collateral.

    Jul 25, 2012. 08:58 AM | 8 Likes Like |Link to Comment
  • Actually It Is All About Total Return...Totally! [View article]
    To buddy up to Crosetti's comments, so you go for total return. You get your $2 million nest egg. Now you switch it all (and I know we wouldn't but for simplicity) into income producing assets. Congratulations. You now have a 23.8% tax hit and your 2 million is down to $1.6 million. Oops! Didn't see the tax consequence mentioned anywhere.

    Here is the other reason I like focusing on income. As one person said, it is more predictable. Second, and more importantly for me, I now have 2 areas where money is being accumulated into the portfolio. One from my own surplus from my job. Second, from the current income stream of the companies I invest into. 2 funnels going into the pot is better than relying on one.

    But good articles to think about as always.

    Apr 8, 2014. 10:57 AM | 7 Likes Like |Link to Comment
  • A New Take On The 4% Rule [View article]
    As you said, you do what lets you sleep well at night. I do what I do. It's not right or wrong; it's how we each decide to play and this is a big enough world where we can all play by different rules and it can work for everyone. My final response is this:

    Using a company like MMM, I have more confidence that they will raise their dividend for the 55th year in a row than knowing if the stock price will go up or down over the next 12 months. I'll take what I (reasonably) know because I can plan for the future that way. The only reasonable assumption I DON"T KNOW is how much they will raise the dividend for next year.

    Aug 28, 2012. 04:17 PM | 7 Likes Like |Link to Comment
  • A New Take On The 4% Rule [View article]

    The comments you make are pointing back to a total return basis, especially when you mention volatility of the portfolio. If you want to play to the whims of Mr. Market and what it says the price of CSCO is at 2:48 PM, be my guest. I will try and sum this up in 3 points which I have said on other articles, most knowingly on another article of DVK's, so I am paraphrasing:

    1) Dividends give me a return of my money, not necessarily a return on my money. Think real estate and rent.

    2) My primary goal is to look for stocks that have a history of distributing a portion of their net profits (yes, I think companies can run out of ideas that cannot increase their ROE) to start my own, personal (hopefully) inflation-beating annuity and I am starting that clock early so compounding has more time to take place. And yes, I am using history as a guide (thank you, Mr. Fish) to filter out those companies which still have low payout ratios with inflation-beating DGRs bought at a fair or what I determine as an undervalued price.

    3) To have #2 as my primary focus, I HAVE TO let the volatility of the market occur and let the market go where it may bringing the total value of my portfolio up, down or sideways on any given day.

    It's not right or wrong, Alan. The authors and responders in this section have just found the market to be too gut-wrenching otherwise and this lets most people here sleep well at night.

    My .02 reinvested

    Aug 28, 2012. 03:29 PM | 7 Likes Like |Link to Comment
  • Modern Dividend Theory Explained Part 2: Risk And Diversification [View article]
    Another way of putting it:

    Your 21st stock just had a 25% correction and is now in your buying zone. It was never in the top 20 before because you felt the price was fair value to overvalued. You've always admired the company and now it finally fell to where you would buy it.

    Just a thought.
    May 23, 2012. 10:17 PM | 7 Likes Like |Link to Comment
  • Retirement's 4% Rule: Why Mr. & Mrs. Income Don't Need It (Part 1) [View article]

    I would start with 4 or 5 stocks. Too many stocks and your commissions start eating you alive. I'll give you about 10 to start thinking about (some I do own, some I am waiting for the market to tank again):

    Make sure to use a brokerage that free reinvestment of dividends (Schwab, TDAmeritrade). Stay with big companies to start that have proven the test of time. Do an excel spreadsheet and you think the #s are wrong on what the income can be but it is correct.

    Hope that helps.
    Aug 29, 2011. 02:48 PM | 7 Likes Like |Link to Comment
  • An Open Letter To My Kids - Prepare For Your Future Now [View article]

    I agree with all the comments above. I wrote a book about DGI. It's not published anywhere, but solely for the benefit of my kids to understand the basic tenets of DGI. Some people have asked for it and I have emailed to whomever asked and of course, the articles that have come out since I wrote this have put my book to shame. But it's there for them to read.

    I have started letting my older child, now 8, understand dividends around 6.5 yo. We went to MCD and I told him that he is an owner of MCD. His eyes nearly exploded out of his head when I told him. And then I said that they give you enough money every 3 months that you could buy you and your brother's Happy Meals today. Of course, his next response was," Well, where's my money? I want it." I explained that if we keep it in place we will own a little more MCD for when they hand out money 3 months later. So he does understand he has to wait to get to it.

    And yes, he has more than just MCD. But I figured he and his brother have time. Put a little in there and see how the next 50 years plays out.

    Sep 16, 2013. 07:29 PM | 6 Likes Like |Link to Comment
  • At What Price Should You Buy A Dividend Growth Stock? [View article]

    I understand your conflict but why are you holding the company? Are you holding the company for the price appreciation and the dividend is a nice add-on, OR are you buying the company for the potential of increasing income and whatever the price is at any period of time does not matter to you? There have been comments made that "the price has gone up so much that it is worth 5 years of dividends in capital appreciation." That's great. What are you going to substitute it with? After taxes paid, will you now have the at least the same amount of income coming in from your new stock as if you held on to the old one?

    I am not chastising your opinion. I am just trying to articulate what every investor struggles with: When do I buy? When do I sell? What do I have to replace the old stock with if I do sell? Is the QUALITY of the new company as good or better than the stock I just had? Do I have time to actively monitor through the day if I am that nervous about a certain position? Can I use puts and calls to buy or sell a position of a stock that I think is a fair price? Lots of questions with no easy answers.

    Aug 27, 2013. 04:06 PM | 6 Likes Like |Link to Comment
  • Not All Dividend Increases Are The Same: 2 Dividend Trends That Can Make A Difference [View article]
    Though I understand the premise, something in my mathematical/science brain says the percentage on the dividend growth rate has to decrease over time.

    2 stocks just raised their dividend $.10 per share for the year.

    Stock A's dividend went from $.20/yr to $.30/yr (a 50% increase)
    Stock B just went from $1 to $1.10/yr (only a 10% increase)

    As someone else mentioned, it says nothing about yield, nothing about total dividends paid, just one facet of a complex issue.
    Apr 30, 2013. 03:59 PM | 6 Likes Like |Link to Comment
  • The Art Of Finding Rock Solid Retirement Stocks [View article]

    We are probably close in age, but your picture makes you look a a guess about 5 years youunger than me. I invested in grad schol during the .com boom in the late 90s. One of my classmates took $50K up to $750K (on paper) and we graduated and he had about $150K. This was while trading in-between or even skipping classes because that was a better investment of his time than school was.

    The second time was 2008-2009. Depending on your timeframe, you started investing in 2007 or you started investing mid 2009 and your opinions are totally different than mine on what an investment should be used for.

    Remember what my (still living) gradmother mentions to me - it's all about the cash flow. She doesn't consider her "net worth" when paying for her phone bill and her doctor(s) bills. She looks to see if it fits into her budget. That's what the game is all about - making these investment "annuity-like" that can grow with or exceed inflation. The earlier you do it, the more compounding via DRIPping/reinvestment of dividends will help you greatly.

    Best of luck
    Jun 29, 2012. 02:58 PM | 6 Likes Like |Link to Comment