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http://www.dividendgrowthinvestor.com/
I am a long term buy and hold investor who focuses on dividend growth stocksDiversification
http://www.dividendgrowthinvestor.com/2024/09/diversification.html
http://www.dividendgrowthinvestor.com/2024/09/diversification.html<p>Some people out there want to beat the market.</p><p>As a result, many try different things, in order to achieve their goals and objectives.</p><p>One of these things they try centers around concentrating portfolios.</p><p><br></p><p>The book "<a href="https://amzn.to/3LZBahl" target="_blank">The Warren Buffett Portfolio</a>" has some interesting stats on the subject.</p><div><div>They isolated 1200 companies that displayed measurable data, including revenues, earnings, and ROE from 1979 through 1986.</div><div><br></div><div>Then they asked the computer to randomly assemble, from these 1200 companies, 12000 portfolios of various sizes.</div><div><br></div><div>The portfolios were equally weighted.</div></div><div><br></div><div><div>They had the following portfolios for which they calculated 10 and 18 year returns:</div><div><br></div><div>1. 3,000 portfolios containing 250 stocks</div><div>2. 3,000 portfolios containing 100 stocks</div><div>3. 3,000 portfolios containing 50 stocks</div><div>4. 3,000 portfolios containing 15 stocks</div></div><div><br></div><div><div>Here's what they found:</div><div><br></div><div>1. For the 250-stock portfolios the best return was 16% and the worst was 11.4%</div><div>2. For the 100-stock portfolios the best return was 18.3% and the worst was 10.0%</div><div>3. For the 50-stock portfolios the best return was 26.6% and the worst was 8.6%</div></div><div><br></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiAmpYL7hYQmZzhBP6pxKZzPy3CwLEDyQfe9vFD-e3XS4a4bMnFGN24ohG8BjVt0CiYFE-uFQoWEKOj-xMM5YTNxkwxGRm0aoDEQiXPoglrrRbQS36a0ULm0PzEIoePvDaisn4ajFKhtpn9ixY5w5RK1Fqll2cMeR6D5je9gTAGYq6tYVrypdt7Q4tI-08" style="margin-left: 1em; margin-right: 1em;"><img alt data-original-height="872" data-original-width="1106" height="505" src="https://blogger.googleusercontent.com/img/a/AVvXsEiAmpYL7hYQmZzhBP6pxKZzPy3CwLEDyQfe9vFD-e3XS4a4bMnFGN24ohG8BjVt0CiYFE-uFQoWEKOj-xMM5YTNxkwxGRm0aoDEQiXPoglrrRbQS36a0ULm0PzEIoePvDaisn4ajFKhtpn9ixY5w5RK1Fqll2cMeR6D5je9gTAGYq6tYVrypdt7Q4tI-08=w640-h505" width="640"></a></div><br><div>4. For the 15-stock portfolios the best return was 26.6% and the worst was 4.4%</div><div>These were the focus portfolios in the study, and only in this group were the best returns substantially</div><div>higher than the S&P 500.</div><div><br></div><div>For 18 year periods, findings were along a similar line</div></div><div><br></div><div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEj7Liimrooz25UjXDvH9nZcOxNIL7ADJ7ePD3kolK0plSoBgAC4UcaJ4_Q2HE6orpGImXiaTBtXzKFgU-U8pZ9cLbuL45RCpc2m7A_um6t7Nlb-6LoG21I9AkO5hm2PAnTDrUsRlayvb9AR9pLKABJVpu6BveH1q8B-kD4Ofz-o8RjnTuODxFJrUgw701Y" style="margin-left: 1em; margin-right: 1em;"><img alt data-original-height="849" data-original-width="1103" height="492" src="https://blogger.googleusercontent.com/img/a/AVvXsEj7Liimrooz25UjXDvH9nZcOxNIL7ADJ7ePD3kolK0plSoBgAC4UcaJ4_Q2HE6orpGImXiaTBtXzKFgU-U8pZ9cLbuL45RCpc2m7A_um6t7Nlb-6LoG21I9AkO5hm2PAnTDrUsRlayvb9AR9pLKABJVpu6BveH1q8B-kD4Ofz-o8RjnTuODxFJrUgw701Y=w640-h492" width="640"></a></div><br><div>These results lead to two inescapable conclusions:</div><div><br></div><div>1. You have a much higher chance of doing better than the market with a focus portfolio.</div><div>2. You also have a much higher chance of doing worse than the market with a focus portfolio.</div></div><div><br></div><div><div>The following data supports the conclusions above</div><div><br></div><div>• Out of 3000 15-stock portfolios, 808 beat the market</div><div>• Out of 3,000 50-stock portfolios, 549 beat the market</div><div>• Out of 3000 100-stock portfolios, 337 beat the market</div><div>• Out of 3000 250-stock portfolios, 63 beat the market</div></div><div><br></div><div><div>There is no free lunch in investing of course. When you take a risk, you may do very well, but you may also do worse than expected as well.</div><div><br></div><div>In other words, if you concentrate in good companies, you can do very well. But, if you chose poorly, you'd not do as well</div></div><div><br></div><div><div>The study does show that you do need to choose companies for your portfolio intelligently</div><div><br></div><div>But it does put into perspective the trade-offs experienced by investors who decide to concentrate or diversify.</div></div><div><br></div><div>Where do I stand on the subject?</div><div><br></div><div>I believe in wide diversification, limiting initial exposure per company, but letting winners run. This is essentially the Coffee Can Portfolio principle in a nutshell. I am thinking of starting with at least 50 to about 100 companies. I start by investing a certain amount per company that fits my entry criteria and then keep adding to it, for as long as it fits my entry criteria. I do limit how much I would put in a given company at cost to about say 3% of portfolio value. I hold on for as long as possible, until it hits my exit criteria (dividend cut or acquisition). That could happen 1 month after investment or 50 years later. I cut the losers short, but let the winners really run. I do not rebalance or sell because a stock is up. I hold. I have a very low annual portfolio turnover. I start out very diversified, but let the portfolio concentrate on its own.</div><div><br></div><div>I am selective about what I invest in however, as the only companies in my portfolio should be the ones that hit my entry criteria. Experience has taught me that I do not know in advance which one of those companies will be the best performer, and which one would be the worst. I do know that a well diversified portfolio should do ok over time, and while the prices will fluctuate, the dividends would be paid on time, and increased too. </div><div><br></div><div>I have built my portfolio one company at a time, over time, brick by brick. So those 50 - 100 companies are not bought right away typically. Different companies and industries are available at good prices at different times. Hence, building a well-rounded diversified dividend growth portfolio takes a few years to accomplish. Given that the typical accumulation phase can be a couple of decades, that's not really a problem.</div><div><br></div><div><br></div>
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Wed, 25 Sep 2024 01:00:00 -0700Dtext/htmlhttps://www.dividendgrowthinvestor.com/2024/09/diversification.htmlFive Dividend Achievers Raising Dividends Last Week
http://www.dividendgrowthinvestor.com/2024/09/five-dividend-achievers-raising.html
http://www.dividendgrowthinvestor.com/2024/09/five-dividend-achievers-raising.html<p>I invest in Dividend Growth Stocks. These are companies that have managed to increase dividends for many consecutive years in a row. </p><p>This is not a small achievement. Out of thousands of companies that are traded in the US, there are about 500 or so that have managed to increase annual dividends every single years for a decade.</p><p>In order to get there, a company has to have increased earnings for a while. Getting to a ten year streak of consecutive annual dividend increases is typically an end result to a company with a unique business model, with some solid competitive advantages, which can deploy capital at high rates of return, but cannot deploy all capital at those rates. It ends up gushing a ton of cash, showering shareholders with a rising stream of cashflows. </p><p>In general, companies that initiate dividends and raise them have tended to do well over time. This <a href="https://www.blackrock.com/us/individual/literature/product-brief/ishares-core-dividend-growth-etf-product-brief-en-us.pdf" target="_blank">study from Blackrock</a> found that dividend growers and initiators did better than dividend cutters & eliminators between 1979 and 2023. Those dividend growers also did better than non dividend payers as well as better than S&P 500. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEi6MAo5ZqlJ-9Jt0CQSteD4gdj4hSa3y4tN5zL-YGFx4BSv2An-UCjiR9AUxkO1FPcaZaHv0UxGD9b2MhurNgCqJuGeKkFR6hup05YAIC3L4vnpQixmZOnsIuj10BgbjFi68UEnbXtFdJUTlwABp0WLyrKjSi0tl7f-UFf-Z-Et9KE7SIWP4Je1NGCXAMk" style="margin-left: 1em; margin-right: 1em;"><img alt data-original-height="314" data-original-width="591" src="https://blogger.googleusercontent.com/img/a/AVvXsEi6MAo5ZqlJ-9Jt0CQSteD4gdj4hSa3y4tN5zL-YGFx4BSv2An-UCjiR9AUxkO1FPcaZaHv0UxGD9b2MhurNgCqJuGeKkFR6hup05YAIC3L4vnpQixmZOnsIuj10BgbjFi68UEnbXtFdJUTlwABp0WLyrKjSi0tl7f-UFf-Z-Et9KE7SIWP4Je1NGCXAMk=s16000"></a></div>Of course, our friendly legal department is here to remind us that we need to insert the past performance disclaimer here. Hi Bob.<p>Anywho, as I mentioned above, I invest in Dividend Growth Stocks.</p><p>I review dividend increases as part of my monitoring process. This exercise helps me monitor existing holdings and also to identify new investments for potential research.</p><p>I typically focus my attention on the companies that have managed to increase for at least a decade. Over the past week, there were five companies that BOTH managed to increase dividends last week AND also have a ten year track record of increasing dividends. These companies include:</p><p><br></p><p><b>IDACORP, Inc. (IDA)</b> engages in the generation, transmission, distribution, purchase, and sale of electric energy in the United States.</p><p>The company increased quarterly dividends by 3.60% to $0.86/share. This is the 13th consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>. Over the past decade, it has managed to grow dividends at an annualized rate of 7.40%. </p><p>Between 2014 and 2023, the company managed to grow earnings from $3.86/share to $5.15/share.</p><p>The company is expected to earn $5.39/share in 2024.</p><p>The stock sells for 18.97 times forward earnings and has a dividend yield of 3.36%.</p><p><br></p><p><br></p><p><b>Investar Holding Corporation (ISTR)</b> operates as the bank holding company for Investar Bank that provides a range of commercial banking products to individuals, professionals, and small to medium-sized businesses in south Louisiana, southeast Texas, and Alabama in the United States.</p><p>The company raised quarterly dividends by 5% to $0.105/share. This is the tenth consecutive annual dividend increase for this newly minted <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>. The company has managed to grow dividends at an annualized rate of 20.80% over the past five years. </p><p>Between 2014 and 2023, the company managed to grow earnings from $0.98/share to $1.69/share.</p><p>The company is expected to earn $1.49/share in 2024.</p><p>The stock sells for 13.20 times forward earnings and has a dividend yield of 2.14%.</p><p><br></p><p><b>JPMorgan Chase & Co. (JPM)</b> operates as a financial services company worldwide. It operates through four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM).</p><p>The company raised quarterly dividends by 8.70% to $1.25/share. This is the 14th consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>. The company has managed to grow dividends at an annualized rate of 11.50% over the past decade. </p><p>Between 2014 and 2023, the company managed to grow earnings from $5.33/share to $16.25/share.</p><p>The company is expected to earn $17.60/share in 2024.</p><p>The stock sells for 12 times forward earnings and has a dividend yield of 2.37%.</p><p><br></p><p><b>Microsoft Corporation (MSFT)</b> develops and supports software, services, devices and solutions worldwide. </p><p>The company raised quarterly dividends by 10.70% to $0.83/share. This is the 20th consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>.</p><p>Over the past decade, it has managed to grow dividends at an annualized rate of 11.10%. </p><p>Between 2014 and 2023, the company managed to grow earnings from $1.49/share to $11.86/share.</p><p>The company is expected to earn $13.16/share in 2024.</p><p>The stock sells for 33 times forward earnings and has a dividend yield of 0.76%.</p><p><br></p><p><b>Texas Instruments Incorporated (TXN) </b>designs, manufactures, and sells semiconductors to electronics designers and manufacturers in the United States and internationally. The company operates through Analog and Embedded Processing segments. </p><p>The company increased quarterly dividends by 4.60% to $1.36/share. This is the 21st consecutive annual dividend increase for this <a href="http://www.dividendgrowthinvestor.com/2011/01/dividend-achievers-offer-income-growth.html" target="_blank">dividend achiever</a>. Over the past decade, it has managed to grow dividends at an annualized rate of 16.70%. </p><p>Between 2014 and 2023, the company managed to grow earnings from $2.61/share to $7.13/share.</p><p>The company is expected to earn $5.29/share in 2024.</p><p>The stock sells for 38.45 times forward earnings and has a dividend yield of 2.67%.</p><div><br></div><div>Relevant Articles:</div><div><br></div><div>- <a href="https://www.dividendgrowthinvestor.com/2024/08/seven-dividend-growth-stocks-rewarding.html" target="_blank">Seven Dividend Growth Stocks Rewarding Shareholders With Raises</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2024/09/six-dividend-growth-stocks-rewarding.html" target="_blank">Six Dividend Growth Stocks Rewarding Shareholders With Raises</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2024/09/four-dividend-growth-stocks-raising.html" target="_blank">Four Dividend Growth Stocks Raising Dividends Last Week</a></div><div>- <a href="https://www.dividendgrowthinvestor.com/2024/09/two-dividend-raises-from-last-week.html" target="_blank">Two Dividend Raises From Last Week</a></div><div><br></div>
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Mon, 23 Sep 2024 01:00:00 -0700Dtext/htmlhttps://www.dividendgrowthinvestor.com/2024/09/five-dividend-achievers-raising.htmlAltria and Microsoft - returns over the past decade
http://www.dividendgrowthinvestor.com/2024/09/altria-and-microsoft-returns-over-past.html
http://www.dividendgrowthinvestor.com/2024/09/altria-and-microsoft-returns-over-past.html<p>Microsoft (MSFT) and Altria (MO) grew Free Cash Flow/share at roughly comparable rates between 2013 and 2024.</p><p><br></p><p>Each company has delivered different total returns since the end of 2013 however.</p><p><br></p><p>Microsoft delivered a total return of 1305%.</p><p>Altria delivered a total return of 155%.</p><p><br></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEgx1alXm-loOpEHUEvl6HNrcH3st4k5bVFWFFwIvjkUE2ziiFm2IKBVY9PwA6a5iJBYCXRKHzgY6ey1D7JuH4B7H21avwbOV3pGy6T5-v0gOK3OfprFq7CYkxPGz4ASuMrk1v1d60PWAjguDgYPYyIWPKxKCPn_t5pqg_4T0i9mvbREW_TffWnTUtvO080" style="margin-left: 1em; margin-right: 1em;"><img alt data-original-height="444" data-original-width="997" src="https://blogger.googleusercontent.com/img/a/AVvXsEgx1alXm-loOpEHUEvl6HNrcH3st4k5bVFWFFwIvjkUE2ziiFm2IKBVY9PwA6a5iJBYCXRKHzgY6ey1D7JuH4B7H21avwbOV3pGy6T5-v0gOK3OfprFq7CYkxPGz4ASuMrk1v1d60PWAjguDgYPYyIWPKxKCPn_t5pqg_4T0i9mvbREW_TffWnTUtvO080=s16000"></a></div><p><br></p><p>It's important to think about the sources of total returns. In general, total returns are a function of:</p><p><br></p><p>1. Dividends</p><p>2. EPS Growth/FCF Growth</p><p>3. Changes in valuation</p><p><br></p><p>The first two items are the so called fundamental returns. They are very important in the long-run, but not as much in the short run.</p><p>The last item is the speculative return. Its impacts are very pronounced in the short-term, but negligible over the really long-run</p><p>It is important to understand where returns comes from.</p><p><br></p><p>Let's break it down:</p><p><br></p><p>Microsoft grew FCF/Share from $3.22 in 2014 to $9.97 in 2024, which is a 210% increase .</p><p>The valuation multiple increased from 11.60 times FCF in 2014 to over 44 times FCF in 2024.</p><p><br></p><p>Altria grew FCF/Share from $2.12 in 2013 to $6.07 in 2023, which is a 186% increase.</p><p>The valuation multiple shrunk from 18 times FCF to 8.30 times FCF.</p><p><br></p><p>The remainder of fundamental total returns for each is explained by dividend reinvestment.</p><p><br></p><p>One share in Altria from end of 2013 turned to 1.92 shares through DRIPs today.</p><p>One share in Microsoft from end of 2013 turned to 1.19 shares through DRIPs today.</p><p><br></p><p>Ultimately, Microsoft delivered a higher total return because its valuation multiple expanded, while Altria's valuation multiple shrank.</p><p><br></p><p>I hope you enjoyed this!</p>
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Fri, 20 Sep 2024 08:40:00 -0700Dtext/htmlhttps://www.dividendgrowthinvestor.com/2024/09/altria-and-microsoft-returns-over-past.html