Illustrating The Factors That Affect Dividend Growth Investing [View article]
EXCELLENT! This is the best presentation of the power of dividend growth investing I have seen. I hope all my followers read this article a couple of times and understand that the special case scenario is a real possibility.
If you read and understand this article, you will understand how DGI is a win-win scenario. If stocks go up you win with capital appreciation, if stocks go nowhere or down you win with dividend reinvestment. The lose scenario with DGI is a dividend cut or a low and slowly growing dividend. You need to pay attention to the fundamentals that support dividend growth to avoid the lose scenario including the current yield, earnings growth, debt ratios, payout ratio and free cash flow. With just a little effort, you can greatly increase your probability of achieving the special case scenario.
Thank you Dividend Growth Machine for this presentation which will help my followers understand dividend growth investing.
Taking Advantage Of Volatility - A Diversification Opportunity For Dividend Growth Investors [View article]
Montrachet,
Thank you for the excellent reply to my comment. You are correct that margin compression, strong dollar, slow growth or recession fears are being priced into the stocks in my list. They are cyclical stocks and do poorly when the economy suffers. I thought about adding this in my comment and appreciate that you added the risk factors.
My thinking is that at a P/E of 12.5 or less versus the high P/Es on the higher dividend lower growth stocks, I am willing to take that risk. Over the long run, the stocks in my buy list will likely provide higher total returns and dividend growth than slower growing stocks, especially at their current market multiples. Markets like to climb a wall of worry and there is plenty to worry about. As Peter Lynch says in "Beating the Street" - "the stocks that take you the farthest in the long run give you the most bumps and bruises along the way."
No one can predict the future, but I believe the risks are already priced into these stocks. Using SA's portfolio data, PH has a forward PE of 9.5 and a TTM P/E of 10.5. Peak earnings in 2008 were $5.73 and fell to $3.46 or 40% in the worst financial crises in nearly 100 years. Lets say earnings drop 40% next year, dropping earnings from $6.49 to $3.89. The P/E on PH would be 19.8 or nearly equal to KO. This is why I am willing to take some of my gains from KO and other higher priced stocks and buy my list. I also like to tell my followers what I am buying and selling. Every trade I've made in my portfolio has been documented in my comments.
I do own every stock on the buy and hold lists above and will continue to hold them in occasionally equal weighted rebalanced positions. I list my complete portfolio in my profile.
Taking Advantage Of Volatility - A Diversification Opportunity For Dividend Growth Investors [View article]
I still like the prospects of AFL, CVX, COP, PH, XOM, DOV, SWK, WAG, ADM, CSX, NSC, ITW, EMR, UTX, APD. All of the stocks listed before EMR have forward P/Es below 12.5. Those are bargains compared to the forward P/Es my low beta stocks like KO at 19.2, PEP 17.4, TEG 16.6, KMB 16.3, MCD 15.9, WMT 14.2, MMM 14.8.
Please do your own due diligence, but I think its still time to buy the high beta stocks with the proceeds from the low beta stocks as I first suggested on May 17.
Dividend Growth Investing: Reflections On What I've Learned, Part 2 [View article]
Excellent article Bob! I love to hear success stories like yours. I recently was explaining DGI to a near retiree who is following my comments. Hopefully he will read this article. Keep 'em coming . . .
Why Dividend Investors Should Rely On The Past [View article]
I think WAG and EMR will outperform P&G because of low valuations and good long term growth potential. I have added to P&G by rebalancing, but I'm not as excited about its near term potential. I think P&G is fairly valued right now where WAG and EMR are undervalued. Because of this, PG will probably outperform as the market has a knack for doing the opposite of what seems logical.
The U.S. Economy Sitting On The Threshold Of A New Golden Age, Part 2 [View article]
Given the premise that stocks keep up with inflation with a lag and gold outperforms in the period where stocks lag. This means that at some point you have to take your gold profits and move them into stocks to maximize your value. This can be done with rebalancing as Globalx suggests.
I chose to sell all my gold in the summer of 2011 with gold at $1,500+ and buy dividend stocks with the S&P at 1050. If you choose to hold gold, you need to decide at what point to take your profits. In the long run, gold is just a rock that is used as a store of value. Stores of value (gold, cash, bonds) do not create more economic value like owning stocks. So if you own gold, or any store of value with huge profits, don't get too greedy. Remember the saying about bulls, bears and pigs.
The U.S. Economy Sitting On The Threshold Of A New Golden Age, Part 2 [View article]
Chuck, the reason I own stocks is exactly because the FED is printing money.
Money is just a store of value for prior labor or investment. As the FED prints dollars the existing money is worth less, and in the extreme worthless. FED printing is a hidden tax on those who hold dollars and bonds that pay out a fixed amount of dollars. Its a tax on the holder's prior labor as that stored value is worth less.
When you own a stock, you have the rights to the value created by the company paid out in whatever unit is used as a store of value at the time of payment (dollars, euros, gold, seashells . . .) I would much rather have rights to the productive capacity of a business when the value of money is in question than cash and bonds. History has shown (Germany) that owning the rights to production maintains your store value of the currency although with a lag. I remain optimistic that holding the profit rights of successful companies will get me through rough patches that will occur and therefore agree with your premise to own stocks in the current environment.
Buffettisms To Focus Your Investment Strategy [View article]
My five core positions must be those with the highest P/E's that are still in my portfolio which includes KO, PEP, PG, KMB, MCD. Let's see . . . food, drink and toilet paper . . . I think these things will be around longer than me.
Is There A 'Perfect' Investment For Every Market? [View article]
Dave, I had consternations about what to say about this excellent article because of #2 being incorrect as written. Hopefully everyone will read this thread and understand to buy bonds in falling rate environments, not rising rate environments.
What A Perma Bull Portfolio Looks Like [View article]
Tim, Today I had a conversation with a friend about building a Perma Bull Portfolio similar to what you describe here. Over half of the stocks you list are in my Perma Bull Portfolio. I like the way you think!
On Its 30th Anniversary, Get Your Dividend Portfolio Rolling With Norfolk Southern [View article]
Count me in on this one. Long NSC, CSX & UNP - a few of the handful of stocks that aren't Dividend Aristocrats in my portfolio. If you are optimistic about the future of the U.S., railroads need to be considered for your portfolio.
A Bond Allocation For Your Dividend Growth Portfolio [View article]
Bob, Good article that follows how I would manage other peoples money as a fiduciary. But, for my personal portfolio, I am 100% in dividend growth stocks. Please read the rest of my comment before knocking a 100% equity portfolio.
Many dividend growth stocks are less volatile than the S&P 500. By focusing on the beta in your portfolio, you can lower the volatility in your 100% equity portfolio to be equal to or lower than a 65% SP500 / 35% shorter duration bond fund portfolio. For example, a 100% equity portfolio in low beta dividend growth stocks such as KMB, MCD, PEP, PG, ABT, WMT, KO and JNJ, with betas below 50, performed very well in 2008. A beta of 50 means the stock should only fall half as much as the S&P500.
In 2008, the above 100% stock portfolio's total return was -8.3% as the S&P500 returned -36.8%. A 66% SP500 33% VBMFX portfolio returned -22.9% for the same period. A 66% SP500/ 33% TLT portfolio returned -14.2% in 2008. As you can see, a 100% stock portfolio is not as radical as it sounds when you manage the beta in the portfolio. In this low interest rate environment, I feel very good with my 100% dividend growth stock portfolio with a managed level of beta.
Returns were calculated from the low-risk-investing website.
KO is one of those stocks that is difficult to get into because it rarely goes on sale. If you are lucky enough to get into it at a fair valuation, it then becomes difficult to sell even when it is overvalued because it may be years before you can get back in. If you bought it right, your original investment is getting a good return with compounding dividends and therefore does not need to be sold. I'm not a buyer of KO right now, but I will hold my current shares.
Illustrating The Factors That Affect Dividend Growth Investing [View article]
If you read and understand this article, you will understand how DGI is a win-win scenario. If stocks go up you win with capital appreciation, if stocks go nowhere or down you win with dividend reinvestment. The lose scenario with DGI is a dividend cut or a low and slowly growing dividend. You need to pay attention to the fundamentals that support dividend growth to avoid the lose scenario including the current yield, earnings growth, debt ratios, payout ratio and free cash flow. With just a little effort, you can greatly increase your probability of achieving the special case scenario.
Thank you Dividend Growth Machine for this presentation which will help my followers understand dividend growth investing.
Taking Advantage Of Volatility - A Diversification Opportunity For Dividend Growth Investors [View article]
Thank you for the excellent reply to my comment. You are correct that margin compression, strong dollar, slow growth or recession fears are being priced into the stocks in my list. They are cyclical stocks and do poorly when the economy suffers. I thought about adding this in my comment and appreciate that you added the risk factors.
My thinking is that at a P/E of 12.5 or less versus the high P/Es on the higher dividend lower growth stocks, I am willing to take that risk. Over the long run, the stocks in my buy list will likely provide higher total returns and dividend growth than slower growing stocks, especially at their current market multiples. Markets like to climb a wall of worry and there is plenty to worry about. As Peter Lynch says in "Beating the Street" - "the stocks that take you the farthest in the long run give you the most bumps and bruises along the way."
No one can predict the future, but I believe the risks are already priced into these stocks. Using SA's portfolio data, PH has a forward PE of 9.5 and a TTM P/E of 10.5. Peak earnings in 2008 were $5.73 and fell to $3.46 or 40% in the worst financial crises in nearly 100 years. Lets say earnings drop 40% next year, dropping earnings from $6.49 to $3.89. The P/E on PH would be 19.8 or nearly equal to KO. This is why I am willing to take some of my gains from KO and other higher priced stocks and buy my list. I also like to tell my followers what I am buying and selling. Every trade I've made in my portfolio has been documented in my comments.
I do own every stock on the buy and hold lists above and will continue to hold them in occasionally equal weighted rebalanced positions. I list my complete portfolio in my profile.
Taking Advantage Of Volatility - A Diversification Opportunity For Dividend Growth Investors [View article]
Please do your own due diligence, but I think its still time to buy the high beta stocks with the proceeds from the low beta stocks as I first suggested on May 17.
Dividend Growth Investing: Reflections On What I've Learned, Part 2 [View article]
Taking Advantage Of Volatility - A Diversification Opportunity For Dividend Growth Investors [View article]
Why Dividend Investors Should Rely On The Past [View article]
The U.S. Economy Sitting On The Threshold Of A New Golden Age, Part 2 [View article]
I chose to sell all my gold in the summer of 2011 with gold at $1,500+ and buy dividend stocks with the S&P at 1050. If you choose to hold gold, you need to decide at what point to take your profits. In the long run, gold is just a rock that is used as a store of value. Stores of value (gold, cash, bonds) do not create more economic value like owning stocks. So if you own gold, or any store of value with huge profits, don't get too greedy. Remember the saying about bulls, bears and pigs.
The U.S. Economy Sitting On The Threshold Of A New Golden Age, Part 2 [View article]
Money is just a store of value for prior labor or investment. As the FED prints dollars the existing money is worth less, and in the extreme worthless. FED printing is a hidden tax on those who hold dollars and bonds that pay out a fixed amount of dollars. Its a tax on the holder's prior labor as that stored value is worth less.
When you own a stock, you have the rights to the value created by the company paid out in whatever unit is used as a store of value at the time of payment (dollars, euros, gold, seashells . . .) I would much rather have rights to the productive capacity of a business when the value of money is in question than cash and bonds. History has shown (Germany) that owning the rights to production maintains your store value of the currency although with a lag. I remain optimistic that holding the profit rights of successful companies will get me through rough patches that will occur and therefore agree with your premise to own stocks in the current environment.
Buffettisms To Focus Your Investment Strategy [View article]
Is There A 'Perfect' Investment For Every Market? [View article]
What A Perma Bull Portfolio Looks Like [View article]
A Bond Allocation For Your Dividend Growth Portfolio [View article]
On Its 30th Anniversary, Get Your Dividend Portfolio Rolling With Norfolk Southern [View article]
A Bond Allocation For Your Dividend Growth Portfolio [View article]
Many dividend growth stocks are less volatile than the S&P 500. By focusing on the beta in your portfolio, you can lower the volatility in your 100% equity portfolio to be equal to or lower than a 65% SP500 / 35% shorter duration bond fund portfolio. For example, a 100% equity portfolio in low beta dividend growth stocks such as KMB, MCD, PEP, PG, ABT, WMT, KO and JNJ, with betas below 50, performed very well in 2008. A beta of 50 means the stock should only fall half as much as the S&P500.
In 2008, the above 100% stock portfolio's total return was -8.3% as the S&P500 returned -36.8%. A 66% SP500 33% VBMFX portfolio returned -22.9% for the same period. A 66% SP500/ 33% TLT portfolio returned -14.2% in 2008. As you can see, a 100% stock portfolio is not as radical as it sounds when you manage the beta in the portfolio. In this low interest rate environment, I feel very good with my 100% dividend growth stock portfolio with a managed level of beta.
Returns were calculated from the low-risk-investing website.
The U.S. Economy Sitting On The Threshold Of A New Golden Age, Part 1 [View article]
KO is one of those stocks that is difficult to get into because it rarely goes on sale. If you are lucky enough to get into it at a fair valuation, it then becomes difficult to sell even when it is overvalued because it may be years before you can get back in. If you bought it right, your original investment is getting a good return with compounding dividends and therefore does not need to be sold. I'm not a buyer of KO right now, but I will hold my current shares.