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  • Building A Portfolio Part 3: Due Diligence [View article]
    Thank you Jrepasch,
    Would you like more articles in a similar to this on different companies?
    Jan 8 05:26 PM | 4 Likes Like |Link to Comment
  • Why I Support Chuck Carnevale's Preference For Valuation [View article]
    I'm not particularly enthralled with the thesis of this article, having wrestled with this exact problem last year, coming to the opposite conclusion. As a newer self-directed investor and even newer to DGI, I don't think just sitting and holding cash and waiting for the ideal entry point is a great plan. Those great cumulative dividends are fine, if you could have bought in 2006. I would own very few stocks if this were the case. I can only make my decision for now with the intent that 20 years from now the cumulative dividends will be fabulous.

    When I bought JNJ last spring I was told it was too overvalued, but others argued that cash earns me nothing. It has once since dropped near my purchase price and I added as much as I could and I will continue to add more as I have opportunity (maybe in January if the US gov't can't get it together, though everyone seems tired of that story).

    I much rather prefer the idea of nibbling small bits of the things I want (assuming they are not ridiculously overvalued, especially compared to their own average) than doing nothing, as well as being prepared to jump in big when things look rough, as I did this summer with Cdn REITs and Telcos. Sure, it's really helpful to buy quality companies at a bargain, and I hope I'll be paying attention when it happens next, but I also can't afford to endlessly sit on the sidelines while the quality companies continue to appreciate without me.

    I started buying much poorer, smaller companies to not pay premium value for the best. Also a mistake. I've backed out of most of those and am enjoying great gains even in the 'expensive' ones. These expensive ones will hold up better than the smaller cap in a correction anyway.

    My goal isn't to hit home runs every time. I don't need double digit growth added to my dividends in order to retire, I just need steady consistent growth and income to get there (ideally 9% total). I'm trying to choose the best value for the best quality I can.
    I'm starting now.
    Dec 7 03:11 PM | 4 Likes Like |Link to Comment
  • It's Time To Play Ball And Finally Do Dividend Growth Investing Right [View article]
    Excellent article, Mike. Many of the struggles, concerns and issues you address resonate significantly for me. Our investment journeys have had many, many similarities. Not long ago, I came to the conclusion that it was riskier for me NOT to own JNJ than to own it at these prices and recently Chowder's chastisement regarding TGH made me realize I was too often choosing the second string players for my portfolio with valuation being the excuse. He pointed out that is all fine and good when the market's roaring, but can have disastrous consequences in a sharp downturn.

    As we are both still in significant accumulation mode, we can take heart that there will be more money entering the portfolio for future purchases and today's purchase of KO won't be the last! We should completely expect that the market will suffer at some point (probably at several points) before we retire and that we won't buy in at the best price (hence moving in and out in part positions). Those will be fantastic buying opportunities, especially if we have our partner companies already picked out and are carefully watching. There's no way to predict when they will come, so a little cash ready to deploy is a good thing, but I'd rather have my money be working than waiting.

    I really appreciate Tim McAleenan's clear writing and I remember him saying that he looks at each name and if he wouldn't be willing to hold on in the case of a 50% drop, and buy more, why would he buy now? I also have a few names that I wouldn't be comfortable with on a 25% drop and I need to do some re-evaluation.

    Yesterday, I created a list with earnings dates on them and I plan to do some rigorous fundamental (not so fun, might drive me mental) analysis before the earnings announcement so that when earnings do come out I will know exactly what my partnership commitment level is with each one. It took me about 2.5 hours to do the last one thoroughly, so I have a few weeks worth of work ahead. But the result will be worth it and pay dividends (literally and figuratively) for years to come.

    Congratulations on making a clear decision and enjoy your flight to quality!
    Jul 12 10:08 AM | 4 Likes Like |Link to Comment
  • Weighting Your Dividend Paying Stocks: A Disciplined Approach [View article]
    I haven't worried too much yet about adjusting weightings in my portfolio as my main project this year has been diversification. I have trimmed 3 grossly overweight - double or more in size to the average - but that would hardly be considered typical rebalancing.

    I agree with richjoy that the costs would be prohibitive to fine tune too much. Part of the brilliance and outperformance of DGI is the 'do nothing' aspect of the hold and monitor approach. Author after author (Lynch, Graham, Lowell) discuss that it's the costs of trading that make a speculative approach to the markets unprofitable.

    rratty: I wouldn't want to weight a portfolio based on dividends. I do like to weight based on fundamental quality as Mr. Carey suggests, though not quite so particularly with not so much rebalancing. It is definitely wise to hold some of the highest dividend payers lightly, such as the mREITs (which I don't own), but in many cases dividends are typical for sector or industry. For example retail stocks tend to pay 2-3% 2%, whereas the Canadian banks hover between 4-5%. I hold more Canadian banks right now than US retail as this is not necessarily the best time to buy into US retail. (most of my purchasing has been in the last year). Some of the higher dividend paying oil companies are excellent purchases, but you would be suggesting holding smaller positions in them than something cyclical or industrial which might pay under 2%. I'm sorry, but I just can't see that working well for the long term health and future income of my portfolio.

    Experienced DGI investors here seem to aim for a target of an average of 4% in income and seem to desire a minimum of 3% initial yield. I don't have such a minimum as I have a long time horizon until I expect to need the income (just over 20 years). This allows me to invest in something like Ford Motor, Agrium, and Visa even though they are not the usual DGI suspects...yet! I can see better days for these industries in the future and expect them to raise their dividends and who knows, maybe someday they'll be dividend champions. Meanwhile I have time to wait and can enjoy a little growth too.

    Another no-cost idea to help with rebalancing is to manipulate your DRIP programs. I haven't done this yet either, as I don't DRIP much. I am significantly accumulating into my portfolio each month and purchase new companies into it several times each quarter. Redeploying dividends with the next purchase is simple and strategic for me. Additionally my broker only DRIPs whole shares so I not able to purchase one whole share from the dividends (many of them monthly payers) into most of my positions...yet!

    Thank you for the thought-provoking article Mr. Carey. It's much appreciated.
    Jul 4 10:44 AM | 4 Likes Like |Link to Comment
  • Is Now The Time To Sell? [View article]
    Thank you, gentlemen,
    I realized a few months ago that I've been reading primarily on SA for the last year or so. It's been wonderful and stretching, and provided me with the rare opportunity to dialogue with experienced professionals and read detailed discussions on very specific topics, but it was time to broaden my horizons and get more thorough, organized, and detailed input from some recommended books. It's been excellent in shaping my thinking and I'm grateful for more suggestions! I've only read three so far in the past couple of months: Ben Graham's "The Intelligent Investor", and Lowell Miller's "Single Best Investment", and Lynch's "One Up on Wall Street" was my least favorite so far, but that doesn't mean I didn't learn a lot!

    Our own David Van Knapp's book is next on my list, but Uncommon Stocks will be after that! Feel free to recommend more. My pageview earnings are exclusively earmarked for investing expenses (incl FAST Graphs subscription) and then investing in my financial education (yeah, book allowance!). At this point in my investing career, it's the best investment I could make!
    Jun 10 06:46 PM | 4 Likes Like |Link to Comment
  • How Can One Trade Be Both Good For Me And Bad For Me? [View article]
    Richjoy, Chowder, Dave, Miz (and others). I love hearing about retirement and how much fun you're having. It gives me great hope for the future!

    And, I just now realized I'm living that dream already. I get to garden, play with my stocks, putter around the house and then I get go to work to learn lots of new things and help people out as much or as little as I want. It's great! I love my self-directed life and am never bored. Fortunately hubby is an equally happy computer programmer ("They pay me to do this!!! ha ha!") I have the TI, and am having fun working on the FI! What a blast we'll have when we have both! Keep reminding us of why we're all doing this!
    May 6 07:54 PM | 4 Likes Like |Link to Comment
  • Charlie Munger Built His Fortune By Seeking Income First, Capital Gains Later [View article]
    "My contention in this article is that income meant a whole heck of a lot to Munger in his formative years, and once he had enough passive income to satisfy his needs, his income desires took a backseat to a more general desire to create long-term wealth in the form of net worth (as opposed to income streams)."

    And I think your 2nd point was that this is in stark contrast to conventional investment wisdom which states that it is when you are young that you have the ability to risk and it's only as you age and approach retirement that you should should be seeking income.

    Munger had the foresight and guts to see the need for steady reliable income first. I can feel the paradigms shifting!
    Mar 12 11:51 PM | 4 Likes Like |Link to Comment
  • Transitioning To A Dividend Growth Portfolio [View article]
    What can anyone say to that? I am incredibly deeply honoured.
    My husband asked me to write, "I am in full agreement, and she makes great chocolate chip cookies too!"
    Thank you,
    Mar 1 12:22 AM | 4 Likes Like |Link to Comment
  • Newbie Lessons: Easing Into A Stock [View article]
    Welcome to Seeking Alpha, Rob. I'm glad you could relate. I highly recommend articles by Bob Wells, David Van Knapp, Dave Crosetti and Tim McAleenan among many others. You'll find very helpful people here.
    Jan 11 08:23 PM | 4 Likes Like |Link to Comment
  • Benchmarking For The Dividend Growth Investor [View article]
    The end goal is definitely dividend income in retirement: To be able to live off the 4% dividends and not have to withdraw funds for living expenses.

    However, when I started the spreadsheet I started at the other end, with what we have, added the dividends and what we planned to add, and some growth. In a way I started from the bottom to see if it was possible to work our way to the end. ie. to see if 4% of the projected number at age 65 is survivable. I was surprised to find that it could possibly be!

    (btw, I didn't include any social security (cynical of me!); we have no pensions, we've always only had matching employer contributions for dh to the retirement account, I've never had a formal job with benefits and have never paid in, (my first one starts in January!) so our losses a couple years ago we're pretty all-encompassing and what I'm trying to do is critical for our future.) Needless to say, this exercise was extremely encouraging that aggressive savings and careful investing really will pay off.

    Yes, a secondary goal is total portfolio growth, but only because without that, one can't live off 4% of it! So until we're actually living off the dividends, total portfolio value is of great importance. Once we're living off the dividends, it is only of consequence to those who will inherit it, not to us particularly. But until then, it's as critical as (or even a little more than) developing that reliable dividend income stream. As Bob Well's experience demonstrates, one can suddenly change into DGI at retirement, but he'd probably recommend not waiting to create that income stream.

    If a certain stock's value falls and there isn't a dividend or serious fundamental reason, then that acts as an opportunity to purchase more at a discount. Tim McAleenan (if I'm not mistaken) wrote an insightful article here highlighting how much more beneficial it is for you if your solid dividend paying stock dips during your purchasing years.

    Hope that fills in the blanks for you and I look forward to reading more!
    Dec 20 12:03 AM | 4 Likes Like |Link to Comment
  • What If My Stocks Crash And Burn? Part 2 [View article]
    Stops have a nasty habit of getting filled on unusual days. The most dramatic example is the flash crash a few years ago. Stops are a good strategy if you are looking to sell something. For AGU I had stops set up fairly tightly as it went up as I wanted to sell. (Then I forgot to reset them and just sold it, so it didn't even trigger a stop, not the greatest example).

    Stops are not such a great strategy if you want to hold something and enjoy, long-term, the income from it. An example I can think of is Enbridge. My first purchase was August 2011. I woke up one morning and saw that for seemingly no reason this stock that I had been watching for 6 months suddenly had a panic attack. I bought what was, for me at the time, a large position and I agonized over the decision. By the end of the day, the share price had substantially recovered and the week ended up. All those people who had stops lost their shares and probably didn't even notice for days. Instead, there were obviously many people who were eagerly taking advantage of the blowout sale. Who would you rather be?

    Since you are in the distribution phase, I would hazard a guess that your main priority is not capital gain or even capital preservation, but income. Stops will not protect your income, in fact they can easily damage it. Did ENB holders who rely on the income who had stops get back in before they had to pay more for their income? Most likely the majority didn't. That's sad and a waste. Was it helpful for preserving their capital? Not unless their stop was close and they got back in within hours. What if the crash happened the day before ex-dividend date. (I have no idea) They would lose their income that quarter as well and they would have less income if they repurchased the same dollar amount later.

    One of the things I have mentioned multiple times in the last few articles is that I am awaiting a correction to buy. As you are in the distribution phase, you may not have a lot of cash on hand to buy, but maybe you are buying some through DRIPs. If a well-known DGI name (pick any one: JNJ, MCD, GIS) fell 20% tomorrow because of general market instability and stayed at that level for months, would you really want it to trigger a sell? The company is not in trouble, the dividend is not at risk, it might really make no difference to you. I would be buying. But you might actually not want to sell, you might want the chance to reinvest your dividend at a discount and create a little bit more income.

    In the past I tried 'gamed' my portfolio. I would sell something I thought was about to pull back and then buy back a few percent lower, boosting my income. It seemed like a good idea, but really it was less successful than when I traded, and even more stressful. When I traded, I would buy and then need to time the sell. When I gamed my portfolio, I had to time the sell, and then the buy back too, not nearly as successful. In a way, this is what you are trying to do. You are picking an arbitrary sell price, then you will have to buy your income back. In my opinion, you are better served carefully building your portfolio in the first place: choosing quality companies with which to partner for years to come. I wish someone had told me that years ago....oh wait, they did. (David Crossetti, David Fish, David van Knapp, etc) I just wish "someone" would have listened to them earlier (ok, I did, it just takes time to really understand and implement it)! I wrote a "building a portfolio" series outlining what I learned.

    Alan, I wish you great enjoyment of life in your retirement and I hope your portfolio provides all that you need.
    Apr 11 03:18 PM | 3 Likes Like |Link to Comment
  • What If My Stocks Crash And Burn? Part 2 [View article]
    Hi Hilo,
    I feel just a little silly that I did not even to think of comparing my portfolio to the S&P. I was really only trying to compare it to the 50% in the question. However, if the SPY had a line on my chart it would have fallen 45% (compared to my 34%).

    In general, I do not compare my results to the S&P, I really don't care what it does or if I do better or worse than it. This may really not be the place to confess that I'm really not "seeking alpha" at all. (oops) I'm seeking financial freedom for retirement and beyond (maybe even for generations). The only important benchmark for me is the targets that will get me there.

    Beta is something that I am concerned about. That sounds just a bit contradictory as both are comparing to the market, but the purpose of the comparison is different. I'm not comparing for the purpose of judging over/underperformance, but for the purpose of managing risk. The companies I more recently ditched, WU & AGU have a beta of 1.45 & 1.28 respectively.

    I love that your portfolio has more 'up' on the up days and less 'down' on the down days. It REALLY does not get better than that. Just brilliant. (also sounds like too much tracking and calculation for me at this time of year)

    I'm hoping for a delightful little slightly-scary-not-too... market panic myself.

    BTW, HiloBeMagical, I smile at your username every time. It truly is.
    Apr 11 02:33 PM | 3 Likes Like |Link to Comment
  • What If My Stocks Crash And Burn? Part 2 [View article]
    You are very right Craig, this article lacks metrics and they are extremely important. My articles and comments tend to be much longer than the average as it is and I try to stay directly on topic. Since the question was how I would react to a 50% correction, the purpose of the first half of the article was to evaluate the likelihood of a panic (emotive) sell. I wanted to bring in a discussion of beta as well, but also left it out. A ratings column added to the chart could have been very helpful. Thank you very much for the other suggestions, I will implement them.
    Apr 11 02:01 PM | 3 Likes Like |Link to Comment
  • What If My Stocks Crash And Burn? Part 2 [View article]
    Yes, definitely.
    And another of my favorites from Craigs outstanding comment is,
    "My perspective is that the stability of the dividend income and the ability to increase it is paramount. One does not want a big drop in dividend income and a big drop in price. Selling "seed corn" to live on at rock bottom prices would be very painful"
    Apr 11 01:46 PM | 3 Likes Like |Link to Comment
  • April Showers Bring... Dividend Growth, Joy And Fun! [View article]
    I completely love this train of thought. My portfolio is not handing out Franklins on a daily basis yet, but at least there is such a thing as a free lunch!
    Apr 10 10:24 AM | 3 Likes Like |Link to Comment