Eddie Herring

Dividend growth investing, long-term horizon, value
Eddie Herring
Dividend growth investing, long-term horizon, value
Contributor since: 2012
"I tend to look at D&I from the perspective of what they teach you in grad school, which is dividends are irrelevant."
Grad school ain't what it used to be...
DN
Terrific article. You thought through what you wanted to accomplish, developed a plan and followed through on it. For me, retirement is sweet. I've been retired for almost 8 years now and it's only gotten better. Hope it has for you as well.
Hope to see many more articles from you. Take care and best wishes,
Eddie
Bob
Good info. You brought up a good point about past performance. My attitude about the investment maxim "past performance is no indicator of future performance" is that it was written by the legal department of some investment brokerage to protect them from unhappy investors. When I used to write legal (commercial) documents I always referred to them as weasel words.
We all know, or should know, intuitively that the future is not guaranteed. But past performance may very well place odds in our favor. A company that has raised dividends 50 years in a row is more likely to continue doing that than a company that has never paid dividends at all. A company that has a consistent record of profitability is more likely to continue that than one that is inconsistent. That's not rocket science, it's just common sense.
There's some amount of truth in that past performance is not a guarantee of future performance, but the statement, along with many of Wall Street's maxims, should be taken in context and with a certain amount of "grains of salt." You were right to ask what if it is.
Another way to think about it is that the safety measures we take are based on past performance. Anyway, good article. Hope you're doing well. Take care,
Eddie
Dave
Absolutely excellent article. Should have been an editor's pick but more importantly, it is a reader's pick, as substantiated by the comments above.
One would think that Buffett's "Superinvestors" speech and other examples over the years would have provided enough evidence to academia that there is value in stockpicking but as SDS relayed above, "whose bread I eat his song I sing."
IMO, the value of stockpicking, whether through DGI or other methodologies, comes from adhering to specific principles, some of which you mentioned, including buying at value, quality of the business, competitive advantages, managing position sizes, controlling risk, patience, etc. But again IMO, following those principles presents difficulties for many investors because of the emotions prevalent in investing, such as fear and greed.
Again, excellent article!
Eddie
Bob
Good update to a solid plan.
All the best,
Eddie
Mike
You write like you might have written once or twice. HA!
Enjoyed the article. I hope AAPL applies for membership (meets the requirements) and joins that Dividend Aristocrat Club we value so much. I'm looking to pick up some more as well.
Eddie
DS
Very enjoyable read. In some areas I keep things very organized and in others not so much. But reading your article reminded me of something that happened when I went through basic training in the service.
We had to keep all of our belongings arranged in a certain way and ready for inspection. That meant everything. I had a pair of the old white military boxer shorts (veterans will relate to this) that I had never worn and had them folded perfectly and sitting on top of the others that had been worn, washed, and folded and that looked worn, washed, and folded. I thought having that nice crisp pair on top would help me pass inspection. Plus it hid the worn ones.
We had an unplanned inspection and the drill sergeant came to my locker and zeroed in on that pair of boxers. He knew exactly what I was doing and said, "isn't this cute?" Picking them up and shaking them out, he handed them to me and said "start using those."
Anyway, thanks for the good read and thanks for jogging my memory to an event well over 40 years old.
Eddie
Bob
I think your comment is a good illustration of perspective. For the person living off dividends, and dependent on their portfolio, they want stability and dependability so they tend to want price drops to be short lived. But for the buyer who has been wanting to load up on energy companies, this is what they've been looking for. It has always seemed ironic to me that in the market what makes one person depressed makes another ecstatic.
Eddie
Rose
It always helps me in these situations to remember we've been here before. With that in mind I try to focus on the qualitative aspects of the companies I own or want to own. And watching those dividends. :)
Take care,
Eddie
Mike
I agree it's not easy, especially when you see them continue to decline in price after you buy. But that's part of our struggle as investors. We don't know how much they're going to decline in price and we only know when a bottom has been found after the fact. I've been adding them at these prices because I believe their intrinsic value is higher than what they're currently priced at and my belief that they're both quality companies who will still be in business generating profits 10 years from now. As they say, time will tell.
Eddie
Bob
Good update. As you know we have some similarities in our portfolio. I think you hit on 3 things in your article that need to be emphasized, which is 1 - to have some key metrics to focus in on when evaluating companies for consideration in the portfolio; 2 - don't chase yield - lots of people have gotten burned by chasing after those high yields; and 3 - don't overpay. Buying at the right valuation will make a huge difference in results.
With the weakness in oil I've been adding to my positions in two of the 3 oil majors I own, XOM and CVX. Looking to add to COP also but just haven't pulled the trigger yet. Also added to my KMI position.
Take care and best of luck,
Eddie
"once interest rates rise what happens to dividend growth stocks?"
While I think there will be some variation in regard to specific companies, in general I think the same thing will happen that happened with a rise in inflation, I addressed that in an article last year (link here http://bit.ly/1M14lg3). I haven't researched it so its obviously just speculation on my part. If memory serves me correctly though interest rates also rose during the period of high inflation in the aforementioned article and dividends for the most part held up well. I'm going by C corps also which leaves out REIT's, BDC's, MLP's and so forth. And again, I stress that it's just my gut speaking.
Eddie
Bob
Well written article and really good food for thought. Should be an excellent series and the commentary is already showing good results. Take care,
Eddie
Robert
Nice work. I think the answer to the question posed in the title can only be "it depends." Which, by the way, is the answer to just about every investing question concerning methodologies, tactics, strategies, etc.
Eddie
Bob
Nice work. Illustrates nicely how important it is that if one elects to be a self-directed investor it is essential they carefully select their positions to support their goals. Take care,
Eddie
Mike
Sweet! Hope it gets sweeter.
Eddie
DS
I am flattered to be included in with the fine authors you referenced. You are also to be commended for the help you have provided to investors over the years. Keep up the good work. Best wishes,
Eddie
Nicholas
Great interview and excellent series.
Rich
What can I say but echo the other compliments above? You are one of the more astute voices I listen to on SA and always value your comments.
Eddie
"In other words, which own the stocks they have selected?"
I eat my own cooking. In Part 1 I selected KO and it is my largest position. In Part 2 I selected AAPL and I also currently own it.
Eddie
Mike
Great article idea and thanks for including me. The commentary where individual choices are dissected and attacked/defended is the real "meat on the bones" in my opinion. I absolutely love Tim and Brad's exchange because they're both eloquent and passionate defenders of their selections and provide enlightening ideas. And a shout-out to giorgiolb for my belly laugh for the day.
I'll add that what went in to my thoughts on my selection was that the idea of only owning one company meant that (1) I had to own it for the rest of my life and (2) I would not be able to change it, so no do-overs which means if I make a mistake I live with that mistake. If you think about it in those terms, and you think (hopefully) of your life extending out 25 years or more, then your selection has to be one that you think will let you live somewhat at ease with your choice for a really long time. It's like going nuclear, you want to be really sure before you pull the trigger.
Thanks again,
Eddie
TSS
It would be appreciated if you would post on SA the next time you're going out on the water so we'll all know to take profits beforehand. HA! just kidding.
Eddie
Chowder & Dave:
These back testing strategists remind me of the definition of a consultant I heard one time: A person that can tell you 50 ways to pick up women but never knows where any are.
Eddie
Hi, Bob:
A good thought provoking article. I believe that one should always monitor their investments to ensure they're achieving the objectives one set for them. I also agree that when one loses confidence in an investment it's time to take a hard look at it in the light of one's business plan goals and objectives. The trick, in my opinion, is to make sure that it's in light of the long term plans, and that the criteria to do so is based on long term fundamentals, not necessarily a reaction to short term performance. I'm not saying that's what you're doing, just expressing a thought in general.
Anyway, I haven't had much time for reading and commenting lately but I did enjoy the article. Hope you're doing well. Take care,
Eddie
"They can pry my unrealized gains from my cold dead fingers"
Robert
Or the new slogan could be "They can pry my unrealized gains from the electronic airspace in to which they evaporated."
O2F
I wholeheartedly agree with your premise that you need to think like a businessman when you're operating your portfolio business. And thanks for the link to my article. Best wishes,
Eddie
Bob
Good questions you have asked and answering them could very well be an article in itself. As I read through them I kept thinking, "well that depends on what your circumstances are, or what your goals are, or what your income needs are," and so forth.
You've already started a good dialogue in the comments section. It's going to be an interesting conversation. Thanks for starting it.
Eddie
Scott
Very good discussion concerning goals and the need for having them. I am a firm believer in goal setting and I've used goals in both my personal life and professional life.
When I was in my 40's I set a goal to be financially able to retire by the age of 53. I then listed sub-goals that I needed to accomplish in order to arrive at that higher goal. Accomplishing those sub-goals helped me to remain focused on the larger goal.
It's fairly easy, and quite common, to set lofty goals but then to not remain focused on them, sort of like letting them slip to the back of our mind, where they eventually become forgotten.
To keep my mind focused on my goals, I carried an index card in my pocket with my goals on them, including the sub-goals, so that they would constantly remind me of what I was trying to accomplish. Then I would update the card by checking off a goal that had been accomplished. I don't know how many index cards I went through over the years but it was a lot. I'd wear them out and then re-write each goal again on the card.
I attended classes on goal setting and read a number of books on them. Those classses, the books, and frequently reading the index card to remind myself where I was headed helped me to stay focused like a laser beam on that goal.
I reached my goal of being financially able to retire at the age of 53 although I kept working for another year and retired in April 2008 at the age of 54. Goal setting works but we have to remain focused on it.
Today we have phones, tablets, and other tools that can be used to help keep us focused on our goals. But, as Bruce Miller listed above, we have to identify those steps that are required to help us get to that overall goal.
Hey, if I can do it, anyone can do it. Best of luck with your goals, Scott.
Eddie
Paul
Very well written and researched article. We have in common the practice of observing and studying Buffett's history. I believe I've learned a lot from his writings. Haven't agreed with everyone he does or says, nevertheless I acknowledge his skills and want to absorb as much as I can.
Eddie
Med
You're welcome. Hope it helps.
Eddie
Chump, I'm not familiar with that error message but let's check something first. Go to Excel Options and then Add-Ins. Look and see if it shows under the Active Application Add-Ins the "Stock Market Functions Add-In." It should show it and the location on the computer it's in if its set up correctly. The location should be something like C:\SMF\RCH_Stock_Marke... and then the type would be Excel Add-In.
If that's not there then that's the problem. It means the download of the zipfile didn't install correctly. If it is there then it may be in the formula settings.
Eddie
To All:
SA is leaving out a portion of the formula above for the number of days holding a position. It should be =TODAY immediately followed by an open parenthesis and then close parenthesis and then followed immediately by the minus sign and the cell location. There are no spaces in between any of it.
Eddie
MLBerk
Thanks. And thanks for the additional info.
Eddie