Dividend Investing stories

[kathiel]

Some of you may remember that a few years ago I wrote about explaining dividend investing to a friend.  She decided that was how she wanted to invest, so when she retired, she transferred her Thrift Savings Plan proceeds into E*Trade and got to work.  This has worked very well for her, it currently produces about $20,000 a year to augment her pension and Social Security.  She has now been retired for 10 years and is very happy with her investing.  Her younger brother came to visit at the beginning of January, and he asked me to talk about how I invest.  I did, and he wanted to look into it for himself.  Then, her younger sister called and asked about it.  She and her husband had inherited an IRA from his father and she wanted to know how to have it produce income for their retirement.  

Old timers here will remember Bruce Miller who was an active poster on the old Morningstar Dividend Investors board.  He wrote a book about dividend investing called Dividend Investing for Income ONLY.  I think it's a fine how-to book, and I recommended it to both her brother and her sister.

My friend's sister and her husband had been assigned an advisor to manage the IRA they had inherited.  The advisor had recommended investments to them, and she asked me to look at what had been recommended.  The advisor had recommended about two dozen ETFs for them.  I suggest that she read Bruce's book.  After dong so, she called me and said she spoke to the advisor about taking the dividend investing approach and said she wanted to buy high quality stocks, Dividend Aristocrats.  The adviser asked what Dividend Aristocrats were!!!  This convinced her that this was not the right advisor for them.  She found an advisor who worked with friend of hers who takes a dividend investing approach and will be transferring all of their retirement money to that advisor.

[steelpony10]

kathiel ,

     How in the heck are you Kat? I have lots of stories and a list of failures but I stay away from real solid advice by saying bring me all your financial information, I’ll give you a test etc. That stops them right there. Others I just say I invest way different then you and I’m not a professional. I do help my kids if they ask.

     I started out dividend investing for myself and parents. My parents’ portfolio which I managed lasted from 1982-2017 using mostly safe money Aristocrats and utilities. I eventually separated my portfolio into cap gains and income investments and left the safe money alone giving me 3 income streams.

      I read Bruce Millers book but I decided I needed something to pass on to a spouse and our kids if they ever needed to help her. More automatic and less hands on. I know she’ll go to a money manager though, oh well.

      Bruce once posted looking for information about CEF’s or quick dependable monthly income for his sister. I recommended PTY.

      Every time I see my nephew at a family function who has way less then zero money management skills he asks what he can invest in that would let him retire at 55. My response is always I don’t know. Others I say VTI or VOO then divide that by 25 and never ever spend more then that per year, so the more you save the more you can spend.*

       * I prefer old acquaintance to old timer. Admiral is ok also Commander..

[richardsok]

Delighted to see your post, kathie. I would tend to agree with pony in being particularly careful what to say to inexperienced wannabe investors about their windfall nest-eggs. Your opinions may be perfectly sound and, yes, you might clearly explain to them that while their dividends flow, markets WILL climb and drop -- but you have no idea how they will respond ten months later when gripped by a nasty bear market and they see 30% of their net worth has drifted away, and it's still eroding!

Chances are very good they may react in the worst possible way in the worst possible moment.

That's what happened to me. In 2006 I got the notion that I would fund an account in my wife's name and show her how to trade in it. Well, 2008 rolled around, the wife's account got butchered, of course. And I had to reimburse her losses with money out of my own account, of course. Or I'd be sleeping on the porch. Of course.

No good deed ever goes etc etc.

Well. Pleasure to read yr post. Stay well.

---------
PS. Speaking of divs, I've been newly dabbling in PFFA, PFFL, SDIV, BHP, NML and the usual Pimco suspects. But when you want to get serious, you might follow uncleharley. He makes the rest of look like we're in short pants.

[hondo]

richardsox: Enjoyed your story. Of Course. LOL, LOL

[Fearchar]

Jan 31, 2023 20:50:31 GMT kathiel said:

... she wanted to buy high quality stocks, Dividend Aristocrats.  

I had to look it up myself and found this on Wikipedia:

"The S&P 500 Dividend Aristocrats is a stock market index composed of the companies in the S&P 500 index that have increased their dividends in each of the past 25 consecutive years. It was launched in May 2005.

There are other indexes of dividend aristocrats that vary with respect to market cap and minimum duration of consecutive yearly dividend increases.

Components are added when they reach the 25-year threshold and are removed when they fail to increase their dividend during a calendar year or are removed from the S&P 500. However, a study found that the stock performance of companies improves after they are removed from the index."

Pleasantly pleased to see SPGI made the cut!


3M MMM Industrials
A.O. Smith AOS Industrials
Abbott Laboratories ABT Health Care
AbbVie ABBV Health Care
AFLAC AFL Financials
Air Products & Chemicals APD Materials
Albemarle Corporation ALB Materials
Amcor AMCR Materials
Archer-Daniels-Midland Co ADM Consumer Staples
Atmos Energy Corp ATO Utilities
Automatic Data Processing ADP Information Technology
Becton Dickinson & Co BDX Health Care
Brown & Brown Inc. BRO Financials
Brown–Forman (class B) BF.B Consumer Staples
Cardinal Health Inc CAH Health Care
Caterpillar Inc CAT Industrials
C.H. Robinson CHRW Industrials
Chevron Corp CVX Energy
Chubb Limited CB Financials
Church & Dwight Co. Inc. CHD Consumer Staples
Cincinnati Financial Corp CINF Financials
Cintas Corp CTAS Industrials
Clorox CLX Consumer Staples
Coca-Cola Co KO Consumer Staples
Colgate-Palmolive CL Consumer Staples
Consolidated Edison Inc ED Utilities
Dover Corp DOV Industrials
Ecolab Inc ECL Materials
Emerson Electric EMR Industrials
Essex Property Trust ESS Real Estate
Expeditors International of Washington EXPD Industrials
Exxon Mobil Corp XOM Energy
Federal Realty Investment Trust FRT Real Estate
Franklin Resources Inc BEN Financials
General Dynamics GD Industrials
Genuine Parts Company GPC Consumer Discretionary
Hormel Foods Corp HRL Consumer Staples
Illinois Tool Works ITW Industrials
IBM IBM Information Technology
The J. M. Smucker Company SJM Consumer Staples
Johnson & Johnson JNJ Health Care
Kimberly-Clark KMB Consumer Staples
Linde plc LIN Materials
Lowe's LOW Consumer Discretionary
McCormick & Company MKC Consumer Staples
McDonald's Corp MCD Consumer Discretionary
Medtronic plc MDT Health Care
NextEra Energy NEE Utilities
Nordson Corp NDSN Industrials
Nucor Corp NUE Materials
Pentair PNR Industrials
PepsiCo PEP Consumer Staples
PPG Industries PPG Materials
Procter & Gamble PG Consumer Staples
Realty Income O Real Estate
Roper Technologies ROP Industrials
S&P Global Inc SPGI Financials
Sherwin-Williams SHW Materials
Stanley Black & Decker SWK Industrials
Sysco Corp SYY Consumer Staples
T Rowe Price Group Inc TROW Financials
Target Corp TGT Consumer Discretionary
VF Corporation VFC Consumer Discretionary
W. W. Grainger GWW Industrials
Walgreens Boots Alliance WBA Consumer Staples
Walmart Inc. WMT Consumer Staples
West Pharmaceutical Services Inc WST Health Care

[kathiel]

Steelpony, good to see you!

Like the rest of you, I'm very cautious about giving people advice. I tend to tell people that there are different approaches to investing, and it depends on your goals and your tolerance for watching your account balance to up and down. I'm willing to tell people what dividend investing is, but I don't recommend particular stocks.

I was chatting with a long time friend and we started talking about investing. I told her that I do dividend income investing and she said - "that's how my father invested!" She is in her mid-80s and her father father was investing that way back in WWII. It worked for him.

[Deleted]

Is this "dividend income investing" recommended for only after one has retired?

What are pros and cons of dabbling in it sooner?

[steelpony10]

Fearchar ,

          Although it is shocking to me Dividend Aristocrats were a mystery, Kat and I both started with dividend stocks. I started with Aristocrats, long time increasing dividend payers which you posted a good synopsis of and she prefers mostly pharmaceuticals as steady rising dividend payers. 

           She’s a diversifier and allocator and I escaped that preferring more risk, more income for less committed resources. We both supplement other income though in retirement. Trading is rare for me she rebalances when an opportunity arises. Like me I don’t believe she has many holdings. Cash plus 17 for me.

            kathiel I guess we are old. What are they teaching these kids. Apparently not our basic foundation stuff. 🍀

            @waffle I started at age 28 with JNJ and KO, before IRA’s. You might start a separate thread to get some response to your question.

[belchingthealphabet]

Should you wait for retirement to implement a dividend-only strategy? 
It makes sense to me, what someone shared, elsewhere:

Though not yet retired, he uses bond fund dividends and dividends from BDCs to feed into his portfolio of stocks which don't necessarily pay dividends, or negligible dividends. You might consider that approach?  Then you'll still be open to the growth of equities, too.

My holdings include stocks and bond funds, including a couple of bond ETFs. I only hold stocks which offer dividends that are meaningful, not negligible afterthoughts. But I intentionally steer toward companies that are not instantly recognized. It feels to me that those outfits are an already-crowded trade.

[Deleted]

I bought the Morningstar rated 1 star with elevated risk dividend income ETF SPYD when it was falling like a knife in the spring of 2020. It has been my best performer since then.

[chang]

If we're sharing Dividend Investing stories, ok here's one (but a negative one). You'll have to google the various facts here to fill in the whole picture; I'm just giving a few details.

Back in the middle 2000s there were some popular David Dreman OEFs, mostly value funds. There was also a CEF with ticker DCS, the Dreman-Claymore Dividend & Income Fund. Very popular and well-regarded. See below a couple of sample articles from the day.

The chart is fairly self-evident. Looks like it dropped from $23 to $2. That probably wiped out a good amount of dividends. (Disclosure: I considered the fund, which traded at a nice discount, but happily never pulled the trigger.)

---

seekingalpha.com/article/15648-dreman-claymore-dividend-and-income-fund-fund-management-is-everything-dcs-is-a-case-in-point

Dreman/Claymore Dividend & Income Fund: Fund Management is Everything; DCS is a Case in Point

Usually when I write about a closed-end fund, it's because the fund is in the news for some reason, and often it's not good news. Because of this I don't get a chance to write about some of the funds that I like that are not in the news. So I've decided to write periodically about funds that I follow just for their investment merits. One of these is the Dreman/Claymore Dividend & Income Fund (NYSE:DCS).

I've been watching DCS since its inception because of its adviser, Dreman Value Management. David Dreman wrote the book on contrarian investing, and I like his philosophy of buying out of favor stocks. And most importantly, he has a really good long term track record (see KDHAX).

If I had to own an actively managed open end fund, his funds would be some of the few that I would consider. However, I think Dreman Value Management's strategy is better suited to closed-end funds. When they buy an unpopular stock, like they did with Altria (MO) a few years ago, and if it doesn't work out right away, his open end funds can be forced into selling undervalued stocks by redeeming shareholders. But with a CEF, Dreman can give his stock picks time to work out.

www.kiplinger.com/article/investing/t041-c009-s001-closed-end-bargains-beckon.html

Neer cites Dreman-Claymore Dividend & Income (DCS), which yields 5.7% and sold at an 11.8% discount as of August 22, which is wider than its average discount for 2007 of 10.1%, according to Morningstar. The fund began this year at a 6% discount, so if it piques wider interest, that discount ought to narrow some more. Since August 16, the shares are up 6.5%, so there's no reason why not.

David Dreman, who manages the fund, is one of the best-known contrarian investors. He buys widely despised stocks such as Fannie Mae and Pfizer and waits for the market to recognize their value. "Dreman's deep-value strategy tends to do very well in this type of choppy market," Neer says. Plus, his strategy is better suited to a closed-end fund anyway than a traditional open-end mutual fund. Fittingly, DCS has a better three-year performance record than open-end Dreman Contrarian Large-Cap Value fund.

[Chahta]

Feb 1, 2023 12:48:40 GMT chang said:

.......(Disclosure: I considered the fund, which traded at a nice discount, but happily never pulled the trigger.)

Maybe the discount is a warning signal for CEFs. 

[win1177]

I started dividend investing very young, late teens, so I believe you do NOT have to wait until “retirement” to be a dividend growth investor. I started under the tutelage of my maternal grandfather, who was a lifelong investor who followed an “Ben Graham” approach. And I’ve continued with DGI being the “core” of my approach. I have added other philosophy’s (high growth, tech., etc.) with a varying degrees of success, but if you look at our portfolio it is composed of primarily dividend growth companies, mainly dividend aristocrats, achievers, etc. Have three “non- dividend” payers, GOOG/ GOOGL, BRK.B, AMZN.

I ALWAYS look for a “moat”, preferably a wide moat, and prefer at least five years of dividend growth. If a dividend is cut, I strongly consider selling but not always. Also believe valuation is extremely important, preferring to buy when DG stocks are priced very low. Have 43 total stock positions, which vary from 0.5% (COST) to 7% (XOM) of our portfolio. Fortunately, our dividend income has replaced my work income, allowing me to retire one year ago, so it’s been VERY successful!

As far as “advice” to others, I am VERY careful about that, as few people have the willingness to ride out a bear market. Many say they will hold, but then panic when the you know what hits the fan.

Win

[bobfl]

Jan 31, 2023 22:09:05 GMT richardsok said:

 Well, 2008 rolled around, the wife's account got butchered, of course.

Same here. I advised the widow of a 36 year old friend who died suddenly. Then 2008 rolled around.
Not pleasant.

[kathiel]

I did not wait until retirement to buy dividend stocks. Earlier on I bought a wide variety of stocks. I loved those tiny biotech companies. They were gambles - sometimes I made goodly amounts, sometimes I lost it all. As I got older, I knew I had to stop gambling with my portfolio. So it was more a matter of changing the balance of what I was investing in. At some point, I decided to only buy stocks that paid a dividend. Now, they didn't have to pay a big dividend (I bought Apple) but they needed to pay some dividend. A couple of years before I retired, I figured out how much income I needed from my portfolio, and aimed to get that much in dividends. Now my goal is to bring in my RMD in dividends from my Rollover iRA. My Roth, I'm not withdrawing from.

I think it makes sense to buy different kinds of stocks when you are younger, as you can then observe how they behave. While you can do that without buying the stocks, I find it makes more of an impression if I have "some skin in the game."

I've never used a financial advisor.

[bobfl]

Feb 1, 2023 17:54:16 GMT kathiel said:

I've never used a financial advisor.

I actually paid one advisor at the beginning. He was the top expert in preferreds. His office was 600 miles away, so only met him in person once at a conference. I learned so much by talking to him regularly. What I paid him I considered my fee for an education. After a year I went solo.

A trivia fact:
"There are over 203,791 finance advisors currently employed in the United States. "
Source: Finance Advisor Demographics and Statistics In The US - Zippia

My brother-in-law picked an advisor, when he was the executor on my father-in-law's estate, based on the fact that he baked fresh cookies in his office. I thought the advisor was very shady.

[chang]

Jan 31, 2023 22:09:05 GMT richardsok said:

---------
PS. Speaking of divs, I've been newly dabbling in PFFA, PFFL, SDIV, BHP, NML and the usual Pimco suspects. But when you want to get serious, you might follow uncleharley. He makes the rest of look like we're in short pants.

richardsok : Just curious, I know we discussed BHP on another thread, but I recall you also bought RIO last year, about the same time that I did. I'm holding it (and will try to ride out the inevitable volatility) ... are you also an owner still?

Edit: my RIO position is up 26.9%, and dollar-wise I would be comfortable adding another tranche. That's why I raised the question about BHP ... I am ready to add to one or the other.

[richardsok]

Feb 1, 2023 19:42:33 GMT chang said:

Jan 31, 2023 22:09:05 GMT richardsok said:

---------
PS. Speaking of divs, I've been newly dabbling in PFFA, PFFL, SDIV, BHP, NML and the usual Pimco suspects. But when you want to get serious, you might follow uncleharley. He makes the rest of look like we're in short pants.

richardsok : Just curious, I know we discussed BHP on another thread, but I recall you also bought RIO last year, about the same time that I did. I'm holding it (and will try to ride out the inevitable volatility) ... are you also an owner still?

Edit: my RIO position is up 26.9%, and dollar-wise I would be comfortable adding another tranche. That's why I raised the question about BHP ... I am ready to add to one or the other.

Let this be Exhibit A when someone accuses you of being smarter than I am.  I sold at a 10% gain.   Thought I needed more dough for the Pimcos.

Duh.

[anitya]

Jan 31, 2023 23:54:50 GMT Fearchar said:

Jan 31, 2023 20:50:31 GMT kathiel said:

... she wanted to buy high quality stocks, Dividend Aristocrats.  

I had to look it up myself and found this on Wikipedia:

"The S&P 500 Dividend Aristocrats is a stock market index composed of the companies in the S&P 500 index that have increased their dividends in each of the past 25 consecutive years. It was launched in May 2005.

There are other indexes of dividend aristocrats that vary with respect to market cap and minimum duration of consecutive yearly dividend increases.

Components are added when they reach the 25-year threshold and are removed when they fail to increase their dividend during a calendar year or are removed from the S&P 500. However, a study found that the stock performance of companies improves after they are removed from the index."

Pleasantly pleased to see SPGI made the cut!


3M MMM Industrials
A.O. Smith AOS Industrials
Abbott Laboratories ABT Health Care
AbbVie ABBV Health Care
AFLAC AFL Financials
Air Products & Chemicals APD Materials
Albemarle Corporation ALB Materials
Amcor AMCR Materials
Archer-Daniels-Midland Co ADM Consumer Staples
Atmos Energy Corp ATO Utilities
Automatic Data Processing ADP Information Technology
Becton Dickinson & Co BDX Health Care
Brown & Brown Inc. BRO Financials
Brown–Forman (class B) BF.B Consumer Staples
Cardinal Health Inc CAH Health Care
Caterpillar Inc CAT Industrials
C.H. Robinson CHRW Industrials
Chevron Corp CVX Energy
Chubb Limited CB Financials
Church & Dwight Co. Inc. CHD Consumer Staples
Cincinnati Financial Corp CINF Financials
Cintas Corp CTAS Industrials
Clorox CLX Consumer Staples
Coca-Cola Co KO Consumer Staples
Colgate-Palmolive CL Consumer Staples
Consolidated Edison Inc ED Utilities
Dover Corp DOV Industrials
Ecolab Inc ECL Materials
Emerson Electric EMR Industrials
Essex Property Trust ESS Real Estate
Expeditors International of Washington EXPD Industrials
Exxon Mobil Corp XOM Energy
Federal Realty Investment Trust FRT Real Estate
Franklin Resources Inc BEN Financials
General Dynamics GD Industrials
Genuine Parts Company GPC Consumer Discretionary
Hormel Foods Corp HRL Consumer Staples
Illinois Tool Works ITW Industrials
IBM IBM Information Technology
The J. M. Smucker Company SJM Consumer Staples
Johnson & Johnson JNJ Health Care
Kimberly-Clark KMB Consumer Staples
Linde plc LIN Materials
Lowe's LOW Consumer Discretionary
McCormick & Company MKC Consumer Staples
McDonald's Corp MCD Consumer Discretionary
Medtronic plc MDT Health Care
NextEra Energy NEE Utilities
Nordson Corp NDSN Industrials
Nucor Corp NUE Materials
Pentair PNR Industrials
PepsiCo PEP Consumer Staples
PPG Industries PPG Materials
Procter & Gamble PG Consumer Staples
Realty Income O Real Estate
Roper Technologies ROP Industrials
S&P Global Inc SPGI Financials
Sherwin-Williams SHW Materials
Stanley Black & Decker SWK Industrials
Sysco Corp SYY Consumer Staples
T Rowe Price Group Inc TROW Financials
Target Corp TGT Consumer Discretionary
VF Corporation VFC Consumer Discretionary
W. W. Grainger GWW Industrials
Walgreens Boots Alliance WBA Consumer Staples
Walmart Inc. WMT Consumer Staples
West Pharmaceutical Services Inc WST Health Care

Some on this list pay approx 2% Div.  I would go for an ETF that looks to 15 yr Div growth and Div payment of at least 3% or some reasonable threshold Div.