Wednesday, November 20, 2019

If Only I Had Known About These Dividend Stocks...

At one time or another, we all have thought, 'If only knew this when I was younger.' I purchased my first dividend stock for income in 2003. Like many newly converted income investors, I was chasing yield. I quickly built a portfolio consisting of Real Estate Investment Trusts (REITs), Master Limited Partnerships (MLPs) and high yield, high risk stocks. My portfolio’s yield was consistently in the low to mid-teens. Eventually, after some unnecessary losses, I learned there was a better way to invest in dividend stocks. Here is what I learned...

Dividend Investing is About Future Yield, Not Current Yield

I was fortunate enough to accidentally buy some good dividend stocks and hold them long enough to figure out the "secret" of dividend investing. It is not necessarily starting with a high-yield investment, but ending up with a high-yield investment. This usually occurs by buying investments with a moderate yield, a history of growing dividends and letting time do its job.

Too often we take a short-term approach, to our long-term detriment. There is a reason we don't see infomercials selling dividend growth investment strategies. For those looking to get rich now, a disciplined approach to investing that focuses on the long-term simply isn't appealing.

Successful Dividend Investing is About Substance, Not Style

In my aggressive growth investing years, I equated dividend investing with old folks and the inept. That was simply not my style. Time and experience have taught me there are no style points awarded in building a winning investment portfolio. In the end the long-term performance (substance) of your portfolio is all that ultimately matters, not how you got there.

I find it interesting that many of the same people that complain about taking a beating in the market, are the same ones who will ridicule those of us that follow a dividend growth strategy. For me, I enjoy having a growing income and portfolio, while not having to follow the market's every move.

You Can't Beat the Herd, by Following the Herd

Through the years I have settled down quite a bit. Using well-defined investment allocations, I have set boundaries and guidelines to ensure I don't over expose my portfolio to undue risk and I employ a meticulous process when selecting investments.

Let the talking heads start a stampede to buy a stock after it has seen a significant run up. For me, I prefer to take a contrarian approach and buy stocks when they are cheaper and their yields are higher. My focus is on quality dividend growth stocks with a long record of consecutive dividend increases, such as:

Texas Instruments Inc. (TXN) is one of the world's largest manufacturers of semiconductors, this company also produces scientific calculator products and DLP products for TVs and video projectors. The company has paid a cash dividend to shareholders every year since 1962 and has increased its dividend payments for 16 consecutive years. Yield: 3.1%

T. Rowe Price Group Inc. (TROW) operates one of the largest no-load mutual fund and life cycle fund complexes in the United States, with June 30 AUM of $776.6 billion. The company has paid a cash dividend to shareholders every year since 1986 and has increased its dividend payments for 32 consecutive years. Yield: 2.5%

Meredith Corp. (MDP) publishes a suite of magazines and websites focused on food, parents and women (e.g. Better Homes and Gardens) and operates 17 local TV stations. The company has paid a cash dividend to shareholders every year since 1930 and has increased its dividend payments for 26 consecutive years. Yield: 6.4%

AT&T Inc. (T) provides telephone and broadband service and holds full ownership of AT&T Mobility. The company has paid a cash dividend to shareholders every year since 1984 and has increased its dividend payments for 36 consecutive years. Yield: 5.2%

Having starting in my 40's, I will enjoy a substantial income when I finally retire. However, if I knew in my 20's or 30's what I know now about dividend growth stocks, I would been retired for many years. The compounding power of growing dividends is tremendous. Start early, at some point time will change from your friend to your enemy.

Full Disclosure: Long TXN, TROW, MDP, T,

Related Articles
- How To Build A Sustainable High Yield Portfolio
- How To Buy Dividend Stocks At The Bottom
- 8 Stocks That Have Paid Dividends Since The 1800s
- 5 High-Yielding Dividend Aristocrats Not Afraid to Raise Their Dividends
- 3 Exceptional Dividend Growth Stocks With Quality Financials

Tags: TXN, TROW, MDP, T,