Dividend Growth Investing, Retirement Income, Stock Market Investing

No More Outperformance

With the prospect of rising interest rates, comes the further prospect of a strengthening dollar. These two scenarios have been unfolding before us. As rates should rise, and the USD should strengthen, these provide all new headwind against our particular kind of large, multi-national, safe-dividend growing type of stocks.

This should not be of concern to a safe-dividend growing stock investor. The reason is at once both simple and obvious. In a very real sense, while we want the business prospects of our companies to remain strong and do well; we do not want our share prices to rise any great amount… Whut?!?!? That’s right. We’d like for our share prices to be low, and to remain low for as long as possible.

Our investment style of seeking safe-dividend growth is predicated upon the idea that our yield to us is based upon dividend divided by price. Our yield to us is best or highest, when price is lowest. Therefore, we should prefer prices of our kind of stocks to go out of favor, and no longer be outperformers and market leaders. Whenever they are, we are paying more for our shares than is ideal!

Let interest rates rise somewhat. Let the dollar strengthen somewhat. Let our share prices lag other kinds of companies. Just as long as our dividend does not come under pressure. As long as dividend safety, and dividend growth get to remain intact, we’re good! Do you see that? It all makes sense in a rather perverse sort of way, doesn’t it?

Ignore everything else, and concentrate only upon finding the safest-dividend growing stocks. They will be large companies. They will likely be multi-national corporations. They will just as likely pay a rather small dividend and yield in relation to its share price… but, that dividend is small because it is so safe, and because it gets raised annually at such a goodly rate; a rate typically well into the teens, which results in a doubling of their dividend income in as little as 4 or 5 years time. This causes those shares to be highly desired, hence their typically higher share price, resulting in a lower, but eminently safe and rapidly growing yield.

And, that, my friend, is the very secret or key to our strategy. I want income in my retirement. I am investing for that income now… just like the large trust companies and insurance companies do with their monies allocated to stocks. They don’t care for anything else, and neither should we! I’ll begin sharing with you how I do that, in detail, soon.

Here’s to your successful investing!
Harold F Crowell

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One thought on “No More Outperformance

  1. Neil Cawley says:

    Well written Harold!
    Not only do I fully agree, but I have cut and pasted this into MSWord and printed it out so as to have it in front of me. Only change that I made is USD to simply “dollar” as it applies equally to me up here, north of the border. Our interest rates will also increase (when? – who knows, but they will sometime).
    I gave it a title – “Essence of Dividend Growth Investing”
    Thanks for this
    Neil

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