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  • Frothy Market, Impending Correction - What's A Dividend Growth Investor To Do? [View article]
    I got my WAG around $30 a while back and sold half around $60 so my position is mostly house money. I'll hang on for now, but I can see why the current issues might make an investor hesitate to establish a new position.

    I have noticed that every time I drive by the local Walgreen's store the parking lot has a lot of cars in it. They're doing something right.
    Aug 7, 2014. 08:04 AM | 1 Like Like |Link to Comment
  • Frothy Market, Impending Correction - What's A Dividend Growth Investor To Do? [View article]
    kefia: You are correct. I was being facetious. Some of the best stocks I own were bought during the last 20% correction.

    Todd Renfro: Thanks for the kind words. As I understand it, the phrase "significant investment experience" means a lot of my remaining hair is gray.

    Miz: I took my Panic Button into the repair shop but the quote to get it fixed was so high that I left it there and invested the money in a good DG stock instead. ;-)
    Aug 6, 2014. 07:01 PM | 7 Likes Like |Link to Comment
  • Frothy Market, Impending Correction - What's A Dividend Growth Investor To Do? [View article]
    My DG portfolio has plunged 2.4% from its peak valuation. I suppose I should be panicking, but for some strange reason I'm not. I am adding money to my cash position though, and looking for new bargains to be had when the "market melt-down" occurs.
    Aug 6, 2014. 08:26 AM | 8 Likes Like |Link to Comment
  • Retirement Strategy: The ETF Only Portfolio Vs. Buy The Dips Portfolio: Update For July [View article]
    Many thanks for the update RS. Your 'back of the envelope' experiment adds yet another straw to the camel's back regarding the edge to be had by adopting a DG-type approach vs. passive management. Of course the ETF-er's will claim that you are simply employing the wrong factors.

    I find it amusing that those who insist passive investing is better than stock picking will rarely be bothered to set up their own demonstration portfolio to prove the point concurrently with the growing number of DG adherents who are doing likewise.

    In the long run demonstrations speak louder than unsupported claims, no matter how often they are repeated. Keep up the good work.
    Aug 3, 2014. 11:39 AM | 4 Likes Like |Link to Comment
  • Dividend Investing Over The Past 7 Years Was Never Easy [View article]
    "Tough to know what to do or expect. Just look at the historical charts" - buzz33

    Those charts appear to be sloping upward over long periods of time, which is a good thing, but not the only thing. The thing those charts don't show is the increasing income which can be generated over time as well.

    Look at Proctor & Gamble (NYSE:PG). Starting 3/1/2000 (just before the dot com bust) PG paid a $0.67 per share dividend. Today the dividend is $2.56 per share. The split adjusted price in early March of 2000 was around $44, today it is nearly $80. Total return over that span has been 6.8% CAGR vs. a 4.2% CAGR for the S&P 500.

    So buying PG at the exact wrong time (market peak in 2000) has resulted in the following results over 14+ years:

    > price has nearly doubled
    > annual income has nearly quadrupled
    > CAGR has been 50+% greater than the S&P 500

    What's not to like? Imagine how much better your performance would have been if you bought those shares after the market sold off 30+%. Is waiting 14 years "too long" for most people? Probably not.

    Try researching a handful of the DG type stocks (see the portfolio holdings of Bob Wells for many examples) yourself. Go to and enter the symbols into both the Dividend Reinvestment Calculator and the Historical Annual Dividend Payout Calculator starting on March 1, 2000 through the present. Look at the returns and increased income over that time period. You may find your underlying assumptions change as a result.
    Aug 2, 2014. 11:42 AM | 1 Like Like |Link to Comment
  • Dividend Investing Over The Past 7 Years Was Never Easy [View article]
    "Also agree 100% that there is no right time to start dgi." - Dividend Growth Jedi

    I am of the opinion that NOW is usually the right time to start DGI. Time wasted is quite likely an opportunity lost.

    Given that, I will freely admit that NOW may not be the absolute best time to start, but since I can't predict whether tomorrow will be a better starting point or not, I feel that waiting to find out is a gamble I would rather not take. Conditions for starting DGI tomorrow might be worse than they are today.

    DGI is, at its core, about putting your money to work over long time periods. So long as I buy quality DG stocks at good valuations my results will improve with time. Market corrections simply increase the number of stocks with prices I am willing to pay. To start now, I only need to find one quality DG stock at a good valuation.

    If I can do that today, then why not start NOW?
    Aug 2, 2014. 10:49 AM | 2 Likes Like |Link to Comment
  • How Long Can High Dividend Growth Last? [View article]

    Thank you for assembling this data and providing it for everyone to see. The "How long can DG last" question raises an interesting view into the DGI mindset, as I see it. No one stock will be the single reason a well constructed DGI portfolio is successful.

    Even if you could find the one 'super-stock' that grew dividends at 20+% CAGR for 30 years, you wouldn't put all your money into that lone stock. A well devised DGI plan will diversify among many quality companies, some with faster growth rates, some slower. Overall the portfolio dividend growth rate (DGR) will have a difficult time exceeding 10% CAGR for decades-long stretches without adding more investment capital. In addition, over about a 15 year period a high yield will produce more income than a high DGR. That higher income will purchase more shares and generate dividend growth through higher share counts.

    The beauty of DGI is that you can apply both methods at the same time. If you can grow TR by 8+% annually you will likely outperform the SPX over time (and by extension more than 80% of professional money managers). Application of the Chowder Rule can help winnow the eligible stocks into ones which will give you an extra margin of safety for meeting your goals. If you focus on buying stocks with a 12+% Chowder Rule you should be able to exceed that 8% TR goal for very long stretches of time.

    Slow and steady wins the race. I don't need to own the "best" stock. I just need to own a sufficient number of "good enough" stocks to get to my goal. Your data shows that no one stock can continuously be the Wonder Investment of All Time. A wise investor will take that lesson to heart and simply try to assemble a portfolio that will grow steadily for years to come.

    And every now and then one of your stocks will have a significant burst of DG over a few years' span providing you with a chance to engage in wishful what-iffing, before returning to normalcy.
    Jul 26, 2014. 10:02 AM | 9 Likes Like |Link to Comment
  • No Fees Please! Create Your Own 'Mini-ETF' [View article]
    "never thought you'd see those words in an SA comment, did ya?" - giorgiolb

    I prefer my déclassé in a bowl with chocolate syrup on top and gauche on the side.
    Jul 24, 2014. 07:02 AM | 3 Likes Like |Link to Comment
  • Second Quarter Portfolio Review: Building Dividend Growth And Quality [View article]
    "You cannot make dimensional inconsistencies disappear by hand-waving." - ij_fritz

    It's a Rule of Thumb used to estimate TR. Notice that migdu uses the phrase "conservatively estimate". Ignoring the compounding effect is 'being conservative'.

    The 'horse sense' thought process goes like this:

    Market participants currently value Stock ABC at a yield of Y%. If the dividend payment grows at DG percent CAGR, then the price of ABC will also need to grow at DG percent to maintain a yield of Y% over time.

    Given that, it is a conservative estimate over long time intervals to equate price growth with dividend growth. Therefore, TR can be estimated as the sum of Yield and Dividend Growth (which is a conservative estimate for Price Growth).

    Now the yield on most stocks varies within a range over time, so the estimate won't be exact and it will change constantly, but for a long term DG investor the estimate can be used in a reasonable fashion to construct a portfolio of stocks that should attain a threshold TR over time, barring significant changes in the business operations.

    Examine Chowder's Project 3 Million:

    His approach is summarized as follows:

    "To contribute $500 per month to the portfolio, plus 5% of income (no match) to the Thrift Savings Plan (NYSE:TSP), look to earn 8.25% annually, compounded over 40 years"

    Chowder has stated elsewhere that he uses a Chowder Rule (Yield + Dividend Growth Rate) of 12% to pick stocks which have a TR margin of safety to achieve his goal of 8.25% TR CAGR.

    Yes, we know the units don't match, but it works as a general tool for planning purposes and it's easy to do.
    Jul 20, 2014. 02:25 PM | 6 Likes Like |Link to Comment
  • Second Quarter Portfolio Review: Building Dividend Growth And Quality [View article]
    I'll add my thanks to those of everyone else. Looks like you have exceeded your initial goals handily.

    Your performance is reinforcing DVK's demonstration portfolio to show that an involved individual investor CAN outperform an index benchmark over time using DGI principles. Your risk adjusted return exceeds the SP500 by roughly 1/3 and you are yielding near 5% vs. 2% for the SP500.

    There seems to be something to this DGI 'Stock Picking' method. My guess is that the facts will continue to support that conclusion going forward.

    I'll wish you continued good luck with your portfolio, but it appears that you've figured out how to manufacture your own luck in that regard. Keep on keepin' on.
    Jul 19, 2014. 01:01 PM | 2 Likes Like |Link to Comment
  • Second Quarter Portfolio Review: Building Dividend Growth And Quality [View article]
    "I replaced LO with HCP, a healthcare REIT with a better yield and much better valuation." - DVK

    I copied DVK because what he did made a lot of sense to me. I was fortunate enough to sell LO just below peak prices and pick up HCP on a momentary dip. Since then LO is down and HCP is up, and my future dividends will be a bit higher than they were. So far, so good.
    Jul 19, 2014. 10:46 AM | 3 Likes Like |Link to Comment
  • Dividends Don't Matter In Retirement Either [View article]
    "Bondholders are also higher up the ladder when it comes to getting paid, compared to shareholders." - Nelson Smith

    Tell that to the former, pre-2008, secured GM bondholders. They got squat while the unsecured Union got the money. The days of following the law when markets are under financial duress are long gone. The fact that you receive your $0 share a few minutes before the former shareholders received their $0 share won't really matter in any fashion except an academic one.

    If the company whose bonds you hold were a counter-party to many derivative contracts prior to going bankrupt you will discover the derivative counter-parties are now first in line to get whatever money remains after the courts, lawyers, and government get theirs. At best your bonds will be converted to equity in the newly reorganized company.

    Then NEW bonds will be issued that have precedence over your converted and watered down shares, until such time as the reorganized company enters into more derivative contracts during the course of business. Then you'll be all set to watch the entire process repeat from the lowest rung on the receivership ladder.
    Jul 17, 2014. 07:08 PM | 3 Likes Like |Link to Comment
  • Are There Any Blue Chip REIT Bargains? [View article]
    "On Friday, when LO's price spiked on merger mania (with RAI), I sold it and used the proceeds to buy HCP." - DVK

    After seeing Dave's comment and doing a little thinking over the weekend, I pulled out my copy-cat manual and made the same trade at the open on Monday. Sold all my LO with a nice gain and used the proceeds to buy HCP.

    Since then, LO has dropped by at least 8% while HCP has gone up about 1%, My dividends are higher and I kept nearly all of the LO capital gain attributable to the buyout rumors too.

    I'll be the first to admit my action wasn't the culmination of a brilliant plan. It's much more likely I am now high on the qualifying list for "Dumb Luck Trade of the Month".

    But ..... I'll take it. :-) 'Better lucky than good' I always say. Thanks a bunch DVK!!
    Jul 15, 2014. 07:21 PM | 6 Likes Like |Link to Comment
  • Fallen Dividend Champions: I Still Have No Fear Of A Market Crash: Part 2 [View article]
    "Look at this way. Walmart is negotiating a lower price for you. You don't have to to anything but show up at the store and buy items at a lower price. They do all the heavy lifting for you. What's wrong with that? Unless you like paying 15-25% more at other retailers" - snoopy44

    While this is true, it is also true that there are factors other than price that matter to discriminating shoppers.

    A businessman who charges $200 per hour for his time would be better off economically buying a loaf of bread at a 7-11 for $7.00 than the same loaf of bread at Wal-Mart at $4.00, if it saved him 20 minutes of standing in line at the checkout counter.

    He could earn an extra $66.66 during that 20 minutes if he could allocate the time to work instead of standing in line getting paid nothing. That far outweighs the extra $3.00 cost of the bread.

    As for the whole minimum wage issue, my personal opinion is that Wal-Mart should leave wage scales where they are and implement a pro-rata bonus program based on the profitability of the store / department / percentage of hours worked for each hourly employee. That way everyone working "on the clock" shares in the success of the business.

    Why should bonuses be restricted to management only?

    If you look into the data, the percentage of hourly Wal-Mart workers paid minimum wage in 2010 was 0.6%. In fact, 78.9% of hourly workers were paid over $9.00 / hour.

    Even so, Wal-Mart could raise prices 0.5% and reduce profits by an equal dollar amount and afford to pay every hourly employee $12.00 / hour. A sliding scale profit sharing plan amounting to 1% to 3% of profits for hourly employees would hardly be noticed.

    But that's just me talking out loud.
    Jul 13, 2014. 09:18 PM | 3 Likes Like |Link to Comment
  • Where Are The Digital Shorts Now? [View article]
    "Why do you say that? Because I'm poking holes in your theory?" - donkengen

    No, because it appears you are missing the point, IMHO.

    Data centers provided by specialized businesses will provide a more cost efficient capability than most other businesses can provide for themselves, whether you believe it or not.

    Humans have realized that the Division of Labor would lead to higher economic output and better standards of living since Plato wrote about the topic around 2,400 years ago.

    Fortunately those better standards of living are enjoyed by the entire population in some degree, even those people who don't grasp the concept.

    As another simple example, despite my Master's Degree in electrical engineering, and 30+ years of technical experience it would take me many months to figure out how to build a wireless router that worked properly. Fortunately there are a handful of specialized companies that will sell me one much better than I could build for under $100, any time I care to buy it. Division of Labor provides me that benefit for a cost much lower than I would have paid by doing it myself.

    Likewise, if I were a small startup ISP owner, I'd probably be willing to pay a lease of a few thousand dollars a month to have DLR provide Data Center services, rather than spend hundreds-of-thousands of dollars of my own money to build the same capability from scratch. The cost of those "wires in a warehouse" is much lower for me when DLR can build them in volume and spread the overhead cost over many clients. Additionally, I can upgrade my service at any time for a cost much lower than I could ever achieve myself.

    If you don't believe it, try living life as a fully self sufficient individual who makes all his own tools and doesn't contract anything out to another party. You'll soon discover why the majority of today's society have a better standard of living than European royalty from the middle ages could have dreamed of.
    Jul 13, 2014. 08:56 PM | 2 Likes Like |Link to Comment