Value Investing News

Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in October, extending the streak to 16 consecutive months of increases after June 2010's decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 45 of the last 47 months.

The income statement is where you find all the metrics that The Street loves. It therefore must be the most important financial statement. Not! That title goes to the lowly cash flow statement. Ultimately cash flow is what drives the value of any financial asset, including dividend stocks.

Once again it is time for a goals/progress update. I am pleased to report that annualized dividend income increased in July, extending the streak to 13 consecutive months of increases after June 2010's decline. Since I began publicly tracking annualized dividend income in November 2007, it has increased in 42 of the last 44 months.

U.S. REITs were created in 1960 by Congress as a way for all investors to have access to large-scale, income-producing real estate accessible. This week week, I screened my dividend growth stocks database for REITs with a yield at or above 5% and have increased their dividends for at least 10 consecutive years. The results are presented below:

You can’t spend earnings! At first glance, this seems like an odd statement, possibly even incorrect. However, it is not only correct, but an important axiom for all types of investors. Through fraud and manipulation financial statements can be made to look quite impressive, but the cash that arrives in your brokerage account is real.

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It’s human nature for new income investors to focus on yield. Many eventually learn that above average yields often carry an above average risk of a dividend cut, loss of invested capital or both. People involved in extreme sports/hobbies, such as base jumping, hang gliding and shark diving, do things to minimize risk and protect themselves.

Investing in Dividend Stocks is a long-term strategy. Frequent buying and selling of dividend stocks can significantly increase your expenses and taxes, thus lowering your returns. A growing dividend is a strong indication of a company’s increasing intrinsic value. Great companies that increase dividends tend to have rising share prices over time.

There is a reason that most mortgages are paid monthly and not quarterly. Banks are looking for reassurance the payments will continue to come in. In much the same way, many investors find comfort in owning stocks that pay monthly dividends. There are several advantages to receiving dividends each month over the traditional quarterly, semi-annual or annual dividends.

As I have stated many times, my goal is to create an ever growing income stream from dividend stocks. Secondarily, it is my desire to beat the S&P 500 over time. With that said, I rarely look at the capital performance of individual stocks. However, I recently sorted my portfolio by Total Gain % (total gain/basis) and was mildly surprised at the top performers.

I have always had a requirement for a minimum dividend yield, whenever I have analyzed and purchased dividend stocks. The reason for this requirement was to provide with at least some dividend income in case the stock stopped increasing distributions for some reason.

My goal as a dividend growth investor is to build a steadily increasing income and not necessarily to outperform the market via capital gains. However, as numerous research projects have shown, a conservative dividend-based investment strategy has consistently outperformed the market over time.

When it comes to dividends, investors either immediately grasp the concept or dismiss it altogether. After all dividend payments are more stable than price returns. In addition to that, dividends have accounted for 40% of average annual total returns since the 1920s. Reinvested dividends on the other hand have accounted for over 90% of total stock market returns since 1871.

One asset class that dividend investors could use in order to diversify their portfolios is real estate. The sector includes rental real estate on residential buildings, offices, malls etc. Owning a piece of rental real estate outright however comes with headaches, such as dealing with tenants and not being properly diversified.

If income investing
were as simple as picking the stock with the highest yield, everyone would be an expert. Most assume (rightfully so) that yield is heavily influenced by risk, but much more goes into determining yield. Below are several important factors that influence a stock’s yield, along with some illustrative examples:

In the U.S. and Canada, most companies pay dividends quarterly. In other parts of the world, it is not uncommon for companies to pay an annual or a semi-annual dividend. That is not to say that North American companies sometimes choose not to pay quarterly dividends. Though I prefer quarterly dividends, there is something more important than frequency...