Tuesday, February 15, 2022

One Dividend Stock That I Will NEVER Lose Money On

Wouldn't it be nice to buy stocks that only had upside. While we are wishing why don't we add in predictable earnings, predictable dividends and, of coarse, we don't want to pay a premium for this investment. Does this sound unrealistic? Possibly, at face value, but there is a way to accomplish this. It won't happen overnight, but it can be done. Here is how I have been able to do it...

Start With Quality Stocks

Just as 'better ingredients make a better pizza', higher quality stocks provide more predictable dividends and an increased chance of becoming one of these Golden Stocks. As with any income investment, I look for stocks that have consistently increased their dividends for many consecutive years and operate in businesses that do well over all parts of the economic cycle.

Add In A Generous Portion Of Time

This is not an overnight process. Most good things are worth waiting for. If you are to establish a long-term relationship with a stock, it better be a quality stock. Time is a powerful force, with it we can overcome poor choices, poor timing and bad decisions. Without it, we immediately are forced to pay for our indiscretions.

Strategic Selection Of Entry And Exit Points

Just typing the above made the hair on the back of my neck stand up -- It sounds too much like market timing, for which I have no use for. However, all successful strategies have an element in them that encourages investors to buy low and sell high. Consider how asset allocation works. When one sector experiences a decline, the investor will buy that sector to keep his or her allocation in balance. Later when it rises, the investor may be forced to sell to rebalance their allocation. In much the same way, I tend to smile a lot when the market is crashing-and-burning. It is at these times when truly great stocks are being traded and rock-bottom prices. As we will see, these purchases are more quickly turned into Golden Stocks.

Golden Stocks

So what exactly is a Golden Stock? The concept did not originate with me, and others have different names for it, including 'zero-basis stock.' I don't care for that name since, in reality it is nearly impossible to hold a stock with zero basis (at least the way the IRS calculates basis). A Golden Stock is one in which I have fully recovered my entire investment either through dividends or from partial liquidation or a combination of both. In my income portfolio, I am currently holding one Golden Stock with several more going Golden in the next 24 months:

Main Street Capital (Main) | YOC: 10.3% | Yield: 5.8%
This stock was originally purchased in July 2012. I never bought any more, but just collected the dividends. Proceeds from the dividends received, now account for 102.2% of my original investment.


Needless to say, the statement that I will NEVER lose money on my Golden Stock is predicated on not purchasing any additional shares, which may or may not be the case. These stocks have already paid for themselves once, and given the right circumstances, I would be willing to let them do it again. Dividend growth stocks are truly stocks that pay you to own them.

Full Disclosure: Long MAIN, 

Related Posts

Tags: MAIN,