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How Your Dividend Portfolio Can Survive Disruptive Tech

Apr. 02, 2021 11:48 AM ETSPYD, LOW, HD, TSCO, ACLLF, T, ACO.X:CA21 Comments


  • Income investing is a popular and time-tested approach to generating wealth over the long term.
  • However, many popular income investments are now at risk due to the rise of disruptive innovation.
  • What income investors should do.
  • Looking for more investing ideas like this one? Get them exclusively at High Yield Investor. Learn More »
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Dividend investing is a popular and time-tested approach to generating wealth over the long term.

In fact, dividend paying - and especially dividend growing - stocks, have a track record of absolutely crushing the stock market (SPY) (DIA) (QQQ):


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This article was written by

Samuel Smith profile picture

Samuel Smith is Vice President of Leonberg Capital, he has a diverse background that includes being lead analyst at several highly regarded dividend stock research firms. He is a Professional Engineer and Project Management Professional and holds a B.S. in Civil Engineering & Mathematics from the United States Military Academy at West Point and has a Masters in Engineering.

Samuel leads the investing group High Yield Investor investing group. Samuel teams up with Jussi Askola and Paul R. Drake where they focus on finding the right balance between safety, growth, yield, and value. High Yield Investor offers real-money core, retirement, and international portfolios. The services also features regular trade alert, educational content, and an active chat room of like minded investors. Learn more.

Analyst’s Disclosure: I am/we are long ACLLF, PLTR. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (21)

Dividends wasteful? Are employee salaries wasteful? CEO salaries wasteful? If I "own" a company then I want PAID to own it. Stockholders anymore are just considered suckers.
Samuel Smith profile picture
@jasonjones when innovation is needed to remain competitive, bleeding cash from the balance sheet to pay dividends is considered wasteful.
HardytheTrader profile picture
The best dividend growers are almost all tech stocks from the semiconductor industry. Its crucial to be in tech nowadays
bryan555 profile picture
One interesting way to play this is closed end funds such as BSTZ and BMEZ, which invest in cutting edge technology, but pay substantial dividends. Could include AIO and STK in that category, too.
@bryan555 STK is en exceptional asset. However it’s great increase in the last year
GDPPP profile picture
A dividend portfolio can survive disruptive tech only through:

1) Innovation, which means adapting to changing consumer and business trends
2) Reinvesting a portion of those profits/cash flows into R&D and bolt on acquisitions that increases or keeps ROIC above market averages for a long time and
3) Finally getting rid of low margin business segments (before they turn to commodity products and are subject to pricing pressures).
4) Use effective distribution channels and see if it makes sense to go DTC
pascout profile picture
I think that there is space for both traditionnal and « disruptive » businesses. Several of these new companies are providing business services. They help consumer businesses deliver their services and goods at better cost and quality. But when I look at my top expenses and people around me, the highest amounts go to shelter (mortgage, utilities, maintenance), food, cars with fuel and maintenance, medicals (drugs, healtcare), etc. These goods and services are still mainly provided by traditional businesses and there is new competition for sure. But, the new businesses won’t be wiping the profits of the traditionnal ones for a good time, at least most of them. It makes no sense for Google, Microsoft, Servicenow, or Zoom that GM, Shell, Walmart and CVS die. They are their customers. Their purpose is to help them become better. Of course there are changes. And these companies make enough profits to return some to shareholders and evolve. It depends more on management culture and vision than external forces. At least to a point. So I think that people thinking that the « new » economy will be wiping the « old » one soon have it wrong. But, management is better not be sleeping at the wheel for sure.
Samuel Smith profile picture
@pascout thanks for sharing those good points. To be clear, I agree that there are companies that have business models that allow them to innovate and return capital to shareholders. The real issue lies with those businesses that leverage up in order to try to do both.
I think your article can be summarized by seeing the Forrest and Not the Trees.
Someday the forrest maybe gone due to over harvesting the tree.

To prevent that unfortunate occurrence you must establish an "arbor like "
culture ; one of the present and of course the future.

A Dividend Investor has an " arbor like" mentality that only can see today and tomorrow will be his new found forrest of dividend harvest.
Samuel Smith profile picture
@manfac interesting analogy. Thanks for sharing.
Stick with value for the long run. There are some disruptive players that become obvious after like Amazon that are worth investing in but most “disruptive” tech is code for “we don’t make money but we’re killing an industry by surviving on investor money while selling sh*t at a loss”. Those things won’t last but are nice momentum plays if you’re comfortable in that area. Reward may be high but so is risk.
There are few income ideas that make sense right now. QCOM, ABBV....and I hate to say it but you mentioned it....I’m tempted by KMI.
Samuel Smith profile picture
@dynx thanks for sharing your view!
User 21925891 profile picture
I am mostly in value oriented dividend growth stocks, but have taken advantage of the recent downturn in disruptive growth through the ARK ETFs. There's room in the portfolio for both.
PlumberMD profile picture
Nice article. I’m concentrated heavily in Value currently. Energy and Tobacco. I read earlier today that Hwang from Archegos is very close to Wood from Arkk. I’m very concerned ARKK and Wood are using same risky leverage techniques as Hwang did. If ARKK implodes, that will set off a major Tech correction that’ll dwarf the Dot Com Bubble sell off. Any thoughts on this?
Samuel Smith profile picture
@PlumberMD I am not aware of any leverage use from ARK.
Retire2020 profile picture
@Samuel Smith Thanks for the timely reminder for income investors like me. Interestingly you use ROIC as a factor instead of ROE. Are there any particular advantages of using ROIC? Appreciate your thoughts. Thanks and all the best.
Samuel Smith profile picture
@Retire2020 both are useful and it really depends on the business model being assessed. ROIC in general is better because it removes the impacts of leverage and simply measures the profitability of the capital being deployed.
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