Dividend Growth Investing Is About Total Returns

growthIt is close of five year now that I have been a long term buy and hold, and dividend growth focused investor. When I meet friends, acquaintances, or colleagues, on many occasions the discussion starts from what’s market doing today and steers towards trading/investing is nothing but a poker game. I get a sense that many of these folks think that buying (and selling) stocks is just a gamble of some kind. Irrespective of this, I believe both, trading and investing, have their own set of pros and cons depending upon what context an individual is looking at it. In the end, both trading and investing is done to make money. Some use approach of capital appreciation, some use dividend income, some do trades to generate income. The key is to have a plan and execute it with consistent results.

When it comes to dividend investing, many individuals think of high yields (perhaps Cramerica syndrome!). It shows lack of patience and tendency to read too much into the business media. They do not understand dividend growth and sustainability.

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Monthly Progress Update – September 2009

Summary for September 2009 is that I did buying to increase my annualized dividends. In addition, I also continued to add to my existing positions because I have automatic dividend re-investments for all stocks. Attached below is the summary table to reflect the status as of September 30, 2009.

September 2009

Portfolio Status Update

  • The total portfolio dividend cash flow was $1786 (up from $1612 in August 2009). This change was due to new purchases.
  • The portfolio’s total yield on cost went up to 5.21% (up from 4.82% in August 2009)

New Purchases

  • Purchased JW-A with annualized dividends of $36.00 (2.0% of total portfolio dividends). The purchase yield was 1.9%.
  • Purchased DOV with annualized dividends of $53.00 (3.0% of total portfolio dividends). The purchase yield was 2.94%.
  • Purchased WMT with annualized dividends of $44.00 (2.4% of total portfolio dividends). The purchase yield was 2.21%.

Additions to Existing Positions

  • Added SYS, annualized dividends is now $77.00 (4.3% of total portfolio dividends).

Selling – None

General Comments

  • My over exposure to AOD for total portfolio dividends is automatically getting reduced since I am not adding to my existing position. My exposure has reduced to 14.2% (from more than 20% in January 2009).
  • As we enter the last quarter of calendar year, it is almost certain now that I will miss my year end goal to reach total dividend income of $3000. I am holding on to cash expecting that there will be better opportunities (i.e. at lower price levels). Most of the stocks on my shopping list are quite above my high end of fair value buy range. Therefore, I am continuing to pursue my year end goal instead of revising the goal. I would have revisited and revised my goal if I did not have cash waiting to be deployed.

Later this week, I will publish the quarterly risk analysis.

Three Companies with Sustainable Dividends

growthEven in soft economic environment, there are companies out there that are continuing to increase dividends for their shareholders. While dividend increase is good, it is more critical to make sure we understand that companies can sustain their dividends. Following are four companies that recently announced their quarterly results and increased dividends.

Brady Corp (BRC): It is a dividend achiever and has paid increasing dividends for last 24 years. Most recent dividend increase of 2.9% was in September 2009.

The 4Q09 earning per share was $0.37 (vs. $0.64 in 4Q08).

  • The key highlight was $127million cash flow from operations.
  • For year 2009, EPS was $1.33 (vs. $2.41 in 2008) which includes all restructuring charges.
  • The 2010 earnings expectation is $1.60 to $1.80.
  • Yearly dividend of $0.70/share appears to be well covered with earnings.
  • This payout ratio is at 47% and current dividend yield is 2.30%

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Dover Corporation – Stock Analysis Shows Industrial Strength

logo DOVDover Corporation (DOV) is a diversified manufacturer of a broad range of specialized industrial products and manufacturing equipment. The company has evolved largely through acquisitions, with 79 acquisitions costing approximately $4.1 billion completed between January 2000 and December 2008. It has four operating segments: Industrial Products (33% revenue 2008), Engineered Systems (26%), Fluid Management (24%), and Electronic Technologies (17%).

DOV’s growth strategy is based on initiatives such as driving organic growth (new products, pricing initiatives, gaining market share, customer service), acquisition strategy (acquire and develop platform businesses, growth, innovation, higher-than-average profit margins), expanding globally, and improving operating efficiency.

DOV is a Dividend Aristocrat and member of Broad Dividend Achiever and has been raising dividends for last 55 years. The most recent dividend increase was in August 2009. My objective here is to analyze if DOV still continues to be a good dividend growth stock and how does it rate on my scale of risk-to-dividends.

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