Book Review: The Single Best Investment - Creating Wealth With Dividend Growth

Includes: JNJ
by: Canadian Dividend Growth Investor


Growing dividends from a portfolio of stocks serve as a compounding machine.

The stocks in this portfolio have the characteristics of high quality, high yield, and high growth of yield.

The essential ingredient in compounding is time.


The Single Best Investment Creating Wealth with Dividend Growth is about selecting stocks to provide high income, and looking in the view of long-term profitably. The first edition was published in 1999. The second edition, which I read, was published in 2006. This book is written by Mr. Lowell Miller who is the founder and president of Miller/Howard Investments. He holds a BA degree in Philosophy, and a Juris Doctor degree.

On the Miller/Howard Investments website, you can read an introduction, and excerpts from the book. The excerpts including topics of inflation, compounding, and dividend growth.

My Impressions on the Book

I consider myself new to dividend growth investing, as I have been doing it for about a year. My day job is not related to the financial industry at all. With that kind of background, as an individual investor who continues to learn on the topic of investing, I thought the first four chapters of the book to be an easy and interesting read.

  • Chapter 1 talks about the bouncing principal, that is, stock prices go up and down.

  • Chapter 2 takes an initial look on compounding and how powerful it is.

  • Chapter 3 is about building your compounding machine, the main driver of which is dividend growth. Investors building their own compounding machines only have the buy the right stocks, at the right valuations, and sit on them.

  • Chapter 4 is about choosing Single Best Investment stocks. The aggregate of these stocks make up your compounding machine (your dividend growth portfolio). Each stock in it relies on the following simple formula for high total return.

High quality

+ High current dividend

+ High dividend growth

Later on in the book, Mr. Miller talks about valuation tools, such as using Price/Sales (P/S) and Price/Earnings (P/E) ratios. Once determining that you want to buy or sell a stock from fundamental analysis, looking at charts can help you to choose a good time for that, which Chapter 7 talks about and shows some examples of relative strength and volume. These few chapters give a little taste of being more analytical about the subject of investing.

In chapter 8, Mr. Miller displays a gallery of single best investment stocks via explanations alongside Value Line charts, which is available at most libraries. The data period for the Value Line chart used in the book is from 1989 to 2006. One company I found in particular of interest is Johnson & Johnson (NYSE:JNJ) as I compare it to its current state. Mr. Miller pointed out JNJ had a good current yield of 3% with an outstanding growth of yield in excess of 15% per year at the time. Today, we can get some JNJ shares close to the 3% yield, but the average dividend growth over the 5 years has been closer to 8%. (Note I'm not saying whether JNJ is a good or bad investment right now.)

What Readers can Gain from Reading the Book

This is a good beginner's book to learn dividend growth investing. Readers can start building their compounding machines after reading this book, as it teaches investors to stay in a long-term partnership with wonderful companies instead of trading in and out of stocks, which could be more stressful.

"The Rules" in chapter 11 gives 12 general rules which serve as a good reference in buying and holding a Single Best Investment stock, using the simple formula stated earlier as the foundation.

Where did the Book Fall Short?

This book, as the title implies, only focuses on the topic of dividend growth investing. It does it well. However, as a result, the whole other universe of investing, including growth investing, momentum investing, etc. is ignored. If someone is looking to explore which type of investing suits them, this book wouldn't do it. I also think it doesn't hurt to read about topics on investing, other than dividend (growth) investing to gain a wider perspective and mindset.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.