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.

Low Yield Dividend Stocks – What does it mean?

yieldIn last few weeks, I have looked at dividend stocks (aristocrats and achievers) that have dividend yields of less than 2%. There is a school of thought among dividend crowd that low dividend yields will take more than 10, 12, or even 15 years to match income from high yielding CDs or money market accounts. Furthermore, when low yield dividend stocks are compared to high yield dividend stocks, considering conservative dividend growth rates, low yielding stocks will often lag by significant amount. I agree that, mathematically, there is no argument for low yielding dividend stock providing lower income. Purely based on numbers, it is always good to go for relatively higher yield dividends stocks. In general, the cut off used by dividends investors vary such as 2% absolute dividend yield, 3% absolute dividend yield, or dividend yield higher than market (i.e. S&P500 yield).

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John Wiley & Sons – Stock Analysis for Dividend Growth Portfolio

wiley-logoJohn Wiley & Sons, Inc. publishes print and electronic products that provide content and digital solutions. It operates in three segments, viz., (1) Scientific, Technical, Medical, and Scholarly; (2) Professional/Trade; and (3) Higher Education. Segment 1 products include journals, encyclopedias, books, databases, and laboratory manuals in various publishing areas. Segment 2 products includes books, subscription content, and information services in subject such as business, technology, architecture, professional culinary, psychology, education, travel, health, religion, consumer reference, pets, and general interest. Segment 3 products focus on courses in business and accounting, sciences, engineering, computer science, math, social sciences, and other academic course material. John Wiley & Sons, Inc. was founded in 1807 and is based in Hoboken, New Jersey.

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Dividends Keep Inching Upwards

Among quite a few dividend raises this quarter, following were few selected ones that I was have been reading about as potential dividend growth opportunities.

Verizon Communication (VZ): The 2Q09 earning per share was $0.52 (vs. $0. in 1Q09).

  • The key highlight was reduced earnings on y-o-y basis (vs. $0.66 in 1Q08).
  • There was y-o-y growth in operating revenue (11.3%) and free cash flow.
  • Quarterly dividend of $0.46/share is barely getting covered with earnings. This quarter’s payout ratio is at 88%.

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