Differences

This shows you the differences between two versions of the page.

Link to this comparison view

Both sides previous revision Previous revision
Next revision
Previous revision
dividend_growth_strategy [2015/12/11 10:16]
tom
dividend_growth_strategy [2022/02/24 20:11] (current)
tom
Line 1: Line 1:
 ====== The Dividend Growth Strategy ====== ====== The Dividend Growth Strategy ======
 +
 +It’s the future cash flow dividend growth investors are interested in. We want our cash flow to be sound and growing. And we have discovered that as the dividend grows, the price grows also. Charles Ellis put it this way in a 1987 Forbes column: “You could invest the portfolio and get a 4% dividend return. That dividend could reasonably be expected to grow at 6% . . . the principal presumable would also appreciate at 6%.” In essence, this is what I do. (What’s Ellis’return?)
 +
 +Here is one example. In 2000, CNR’s dividend was 12⊄. As I key this in February 2022, CNR’s dividend is $2.45 per share. That’s up 15.9% a year over twenty years. On our original investment, we are now receiving over 20%. Does your retirement income grow like this? And this 20% is without counting capital gains. CNR’s price grew also, from $12 in 2001 to $143 in early 2021. The CAGR on price is 13.2% a year. It’s a double-double: as our income grew, so did our capital. A company that provides increasing cash flow becomes more valuable. We prepared a spread sheet showing year-by-year data like this on 25 companies over the last two decades. And we listed the stocks in growing yield order, showing the price increases also.
  
 {{ logo.png|Logo}}When they are at least fairly priced, I purchase certain common stocks with a long record of dividend growth and hold them for years, waiting for the dividend and the yield to grow. In the long run, yield provides most of the return. I also use yield, mainly, to determine value. A stock with a low yield and high dividend growth, for instance Alimentation Couche-Tard, is expensive. {{ logo.png|Logo}}When they are at least fairly priced, I purchase certain common stocks with a long record of dividend growth and hold them for years, waiting for the dividend and the yield to grow. In the long run, yield provides most of the return. I also use yield, mainly, to determine value. A stock with a low yield and high dividend growth, for instance Alimentation Couche-Tard, is expensive.
Line 26: Line 30:
 But...and it's a big but...do you have the patience to wait years for the dividend to grow? Can you control your behaviour and resist buying 'story stocks' which do not pay dividends? If you can, you'll be set for your retirement financing. And here's the big bonus: it will not matter if the market is down when you leave work. It's the income you'll be using. Delve into the dividend growth strategy. Learn more. This one-page PDF dividend growth example might help: [[YOC_BNS]] But...and it's a big but...do you have the patience to wait years for the dividend to grow? Can you control your behaviour and resist buying 'story stocks' which do not pay dividends? If you can, you'll be set for your retirement financing. And here's the big bonus: it will not matter if the market is down when you leave work. It's the income you'll be using. Delve into the dividend growth strategy. Learn more. This one-page PDF dividend growth example might help: [[YOC_BNS]]
  
-• **Time-Horizon Arbitrage** – We are heading into another long bear market. But don’t be concerned. The last long bear marker was in the 1970s. In 1984, luckily, I encountered dividend growth investing. The gentleman who wrote the letter to the editor of the Financial Times of Canada I happened to read, retired in 1968. His simple portfolio did unbelievably well all through the 1970s and into the eighties and beyond. Over the same period, the market did not do well. Warren Buffett did very well in that period too. From 1975 to 1982, Mr Buffett's average annual return was 34%. Thirty four percent a year! And in a flat market. How is this possible? It's sometimes called time-horizon arbitrage. We practice the strategy too. We buy quality stocks and hold them for years and years in concentrated portfolios. We exercise low turnover. That's it. The strategy is simple, but often difficult to execute. It's the future cash flow (or future dividends or earnings, if you like) that do it, that have value.  Quality companies; a concentrated portfolio; hold, hold, hold (low turnover). My own example of time-horizon arbitrage…holding quality for the long term is bns_yoc_july15.pdf (This page is inside this site)+• **Time-Horizon Arbitrage** – We are heading into another long bear market. But don’t be concerned. The last long bear marker was in the 1970s. In 1984, luckily, I encountered dividend growth investing. The gentleman who wrote the letter to the editor of the Financial Times of Canada I happened to read, retired in 1968. His simple portfolio did unbelievably well all through the 1970s and into the eighties and beyond. Over the same period, the market did not do well. Warren Buffett did very well in that period too. From 1975 to 1982, Mr Buffett's average annual return was 34%. Thirty four percent a year! And in a flat market. How is this possible? I detail some stats on this in my February 2022 blog. It's sometimes called time-horizon arbitrage. We practice the strategy too. We buy quality stocks and hold them for years and years in concentrated portfolios. We exercise low turnover. That's it. The strategy is simple, but often difficult to execute. It's the future cash flow (or future dividends or earnings, if you like) that do it, that have value.  Quality companies; a concentrated portfolio; hold, hold, hold (low turnover). My own example of time-horizon arbitrage…holding quality for the long term is bns_yoc_july15.pdf (This page is inside this site)
 ♣ Contrast the above ideas with indexing: large portfolios with a fair number of losers (non-dividend payers and high yielders) and poor income growth. “The crux of your success”, Stephen Jarislowsky says, “will be to select leading companies and holding onto them for years.” Mr Jarislowsky held his Abbott Laboratories for over 50 years. ♣ Contrast the above ideas with indexing: large portfolios with a fair number of losers (non-dividend payers and high yielders) and poor income growth. “The crux of your success”, Stephen Jarislowsky says, “will be to select leading companies and holding onto them for years.” Mr Jarislowsky held his Abbott Laboratories for over 50 years.
  
Recent changes RSS feed Creative Commons License Donate Driven by DokuWiki