It was my very special privilege last week to speak before two investor groups in South Carolina and present my manner of stock market investing. In both instances, the presentation, lasting some 2 to 2 and one half hours in each place; it was very well received.
To reinforce my points, as a good many of those present will be reading this, I explained how that first, before anything else, the overall goal is to provide for one’s self an ever-growing stream of portfolio dividend income; the one thing that we can actually control in the marketplace. In order to do that, takes a sort-of single-mindedness that puts aside the typical notions of either trading or investing for the purpose of growing a “nest egg.”
Because both of these groups were familiar with the research and analytical product that I work with, I first demonstrated how that we use it for the purpose of “beating the market;” otherwise, really, what’s the use? In order to beat the market, we must first study the market and learn something of its characteristics for at least the past 10 years. I start with line charts having some 2,500 data bits, or 10 years worth of unique Earnings Per Share data. This EPS data is not past, reported earnings, but a daily revised-and-updated line of the past 10 years of the “analysts’ consensus of forward-looking earnings estimates” data, that they have constructed to attempt to forecast what they expect corporate earnings to look like 12 months into the future. This is the very data that Wall Street produces and uses to make its own investment decisions. And, frankly, you just cannot find this data just anywhere! It is rather highly privileged and confidential data, made available only to those willing to pay for it.
Looking at a line of this EPS data for an average of all 500 companies within the S&P 500, that line approximately doubles, looking back over the past 10 years, but with a massive collapse that was the ’08 and ’09 economic disaster that threatened to “end life on earth, as we know it.” We start with this forward-looking EPS data because it has incredible predictive power in its own right, and the evidence or proof we have of that is that both past price data, and past dividend payout data tends to directly correlate, on a near 1:1 basis. That is, an average of the 10 year price data for all the companies of the 500, and the average for all dividend payout data for the 500 both approximately double, and they both possess the same look or appearance, of having tumbled rather precipitously during the same ’08 and ’09 collapse. The one, predictive EPS data, was the cause of the other… the drop in prices and the reduction of dividend payout.
After having conducted this study of the market, and wanting to derive a safely growing portfolio dividend income, my search then goes toward individual companies that possess a very different looking EPS line; one that is the smoothest and most upwardly trending line, having the least dip during ’08 and ’09. These are the EPS lines for those companies that were least affected by outside economic forces, or the least economically sensitive to what was happening in the world around them at that time. I also added the extra requirement that, while EPS data had doubled for the average of the 500; I require that my candidates to have tripled their EPS during that same time. These became “market beaters!”
An amazing thing then happened with this smoother, better appearing, and tripling EPS line. The result, or what correlated to the better EPS line, was a price line that also tripled or better, and a dividend payout line that exhibited a continual upward climb, and also at least tripled over the very same ten-year time frame.
My point was that the EPS line generated from the data of analysts’ consensus of forward-looking earnings estimate data was the cause for, and correlated closely with, the actual price and dividend payout lines of those companies that greatly outperformed the S&P 500 Stock Market Index.
Gleaning a list of candidates having the “best appearing” EPS lines, a price that had at least tripled, and the very most attractive stair-step pattern of dividend payout the past ten-years, that had also at least tripled; I then populate a portfolio with at least 20 issues possessing these superior characteristics and try to just leave it alone, other than to conduct a daily portfolio audit to see that they are still demonstrating those very same characteristics day-after-day. It is then that the magic begins to happen!
As these companies continue to pay their quarterly dividend, they also continue to raise their dividend at a truly astounding rate, typically well into the teens, that results in an actual doubling of your dividend income from them in as little as 6, 5 or even 4 years of time! My average for all dividend increases for the past 12 months is just under 18%. And, at that rate of dividend growth, my income would double to me in only 4 years time! And, by accumulating more shares around “low-risk market entry opportunities,” as I am able, I can purposely shorten that 4-year time to frame to that which I already accomplished… when we recorded the very first doubling of our portfolio dividend income in just 25 months! This is also entirely responsible for the incredible rate of dividend income growth that I report each month, such as when I only just reported that March’s income was 72% greater than March of 2014. 72% portfolio dividend income growth in 12 months time!!! You must stop and contemplate that for just a moment.
This is the “magic” of harnessing compounding growth to your stock market investment portfolio… it is the safe-dividend growth in the teens, and the addition of more shares during the very most opportune times, when prices are lowest, and yield is highest, that super-charges, and greatly accelerates the rate at which your portfolio dividend income multiplies to you.
This is all I do. This is all that I teach. This is the one true way to be the very best at stock market investing. This cannot be improved upon. By working with the very most important and valuable data, so as so the find the very highest quality, and safest-dividend growers in the market place, you are creating a compounding growth machine that works, over time, to great multiply your dividend income, so that… in retirement, you are only taking your income, and you are not selling your shares, and spending down your retirement assets, (all the while praying to God that you don’t ever run out of money).
I’m leaving a legacy portfolio of safe-dividend growers to my children and my grandchildren. I will leave instructions as to just what it is, what it does, and how it operates, and that the very best thing that they could do with it is to… leave it alone, and do nothing to it, and just let the miracle and magic of compounding growth to continue to do what only it can do over time.
My thanks to the group leaders in Columbia and Bluffton, South Carolina for hosting me this past week. It was a wonderful time, and a lot of good things happened for a lot of fine people. Let me leave the link for the on-line PDF file for the book that started this whole ball rolling for me, as I ask them all to read the Introduction, and the first 4 chapters of The Single best Investment: Creating Wealth with Dividend Growth by Lowell Miller. I had my copy with me, and actually re-read all of that on my return flight home.
If it’s not live, when you go to click on it, just copy it into the address bar of your search engine, and it should take you there.
Here’s to your successful investing!
Harold F Crowell