Dividend investing (investing in shares of companies that pay growing dividends over long periods of time) has become quite fashionable over the last few years. For quite a while, it was passe. The reasons are quite simple. The 2008 stock market train wreck and low interest rates forced investors to look at their total return. Otherwise, it was impossible to justify any equity investments in world stock markets. The returns over the previous ten year period were crushed. Investors were heading for the doors, bailing out as fast as their parachutes would open. Given the current level of stock markets we need to re-examine the basic assumptions behind dividend investing and see if they still withstand the tests of time.
The Dividend Growth Investor has summarized his investment goals as follows:
“I will share my journey with you on my quest for achieving an increasing dividend income stream from stocks with above average dividend growth, which consistently increase their distributions over time.”
The Dividend Monk puts it this way:
“The purpose of this site is to help you build wealth and passive income alongside your active income, and ultimately, to become financially free. More specifically, this site focuses on dividend growth investing, with other asset classes and indexes for support. For years, this site has provided new investors with a basis to get started building wealth, and has provided experienced investors with free stock analysis reports and quick ideas.”
The Dividend Monk also provides you with further details at Dividend Growth Investing 101. Mr. Alden’s comments on this page are well worth reading. But the devil is in the details, for example, figuring out the entry point (price) to invest and when to get out. This is on top of the rather large issue that needs to be dealt with, which stocks do you invest in. I presume that here some readily available stock screening tools which may be used to create that list.
So our journey begins here. What is dividend investing will described more succinctly and then we will begin looking a how to select stocks to invest in, monitor them and finally when to sell them.
Just remember, each of the aforementioned websites has put dividend investing in the realm of godliness. Dividend investing will set you free. The Dividend Mantra is even more direct in using this as their sales pitch:
“Please follow my journey to financial independence and early retirement. Hopefully we can share our aspirations as we inspire each other to greatness!”
Wow! Quite the statement. Greatness. Well, I hope to be more practical. Not greatness, but making some money sustainably while at the same time preserving capital. Earning dividends in the absence of capital preservation is like emptying a bath tub without putting water back in. Soon it will run dry.