There are always good company stocks to be bought, but there are far better times to be a buyer, than others. And, this just isn’t one of those times. Wait! The market has been rising for weeks, and is in deep need of backing up for a bit. Anything you want to own will likely be able to be bought for considerably less within just the next 3 or 4 months. It will almost certainly be worth the wait.
My lovely wife, God bless her, she knows how to bring me back down to reality. Entering into my retirement, I wanted to trade gold stocks, sell put options, buy distressed corporate bonds, and generally just involve myself in the markets all kinds of different ways… and, she got my attention a few weeks back with such a simple question and complaint. If anything were to happen to me, what was she supposed to do? After all, she didn’t know what I was doing, or how she could possibly ever do any of it for herself. How very right she was! I took it to heart, and pretty much backed right out of all of that. I’ll still get into the precious metals mining stocks, whenever I see them take off again, as I had last Spring.
In total keeping with that old acronym, K.I.S.S., I realized that it would be very much in keeping with her best interests, and my own, to keep it simple. There’s absolutely no simpler way to invest, and create real wealth, than by accumulating shares of common stocks in a very special kind of company. I’ve labeled these the Safe-Dividend Growers. These companies, as you can tell, pay a cash dividend to share-holders, and it’s not any more than 40% of their earnings, which means it is safe; as the company is retaining easily enough to continue their R&D and marketing expenditures. And, beyond safe, I want dividend growers! With their R&D and marketing expenditures, they are continually growing their businesses, and hence their earnings, at a rate that makes it possible to raise their dividend to shareholders, annually, at a rate that very handily beats inflation.
With access to the right data, these companies are incredibly easy to find… if you know what to look for. I chart 10 years worth of forward-looking EPS estimate data, historical dividend payout, and share price data. These 3 things tell me all that I need to know.
The more smoothly and up-trending that EPS data, the more certain I am of the safety, and future growth of that dividend. The more consistent the very regular payout, and double-digit increase, of a stair-step pattern of past dividend payout, the more certain I am of that company’s understanding of their shareholders; that they are investors, looking for a steady and regular return of earnings back to them in the form of a steadily increasing cash dividend, that beats the heck out of inflation. I want to be one of their investors. I want their safe-dividend growth!
I’ve recently written of Ross Stores (ROST) and A.O. Smith (AOS). These represent two prime examples of the very type of company I’m talking about. Own some. I do. As I go back regularly to check on my stocks, and to look for some other, I continually see these two right near the very top of my search efforts.
I want to put another stock out now, shares of which I also own, but because I think it one of the very best examples of that company I just described; and that would be United Health Group (UNH). As with Ross Stores, and A.O. Smith, it’s just one of those businesses people are likely to always have to avail themselves of. In the case of United, it’s in the business of providing healthcare coverage… something we all always need. The costs of which are always going up; and the more likely changes, that might result in either capping costs, or actually lowering them, to us as the consumer, are more likely to come from dismantling the Obamacare legislation, and attempting to return healthcare back to a more free-market, and competitive type of a system. This can’t hurt UNH, or other providers, for the simple reason that such a change would only greatly reduce their costs, and allow them to possibly pass some of that savings on to the consumer, but will still result in plenty of profit and growth, as they simply alter their margins of profit.
United’s EPS is quite smooth, and trends upward in a goodly fashion. It’s dividend payout is of a fine-looking stair-step pattern, and should be able to safely grow well into the future. Do your own diligence. Check into any resource you might find. What are the risks of owning some shares of UNH? Far fewer than most, I’d say. If you agree, buy some, and sock it away ‘forever’, and just let management, and the markets, do what they’re going to do. Years down the road, you’ll enjoy a lovely dividend income stream to fund your retirement lifestyle, as my wife and I plan on doing.
While my ROST is now paying me a $.54 a share dividend, for a 1.28% yield; I can foresee the day, growing at the rate that it is, that I will be receiving 5 or 6%, and still growing annually, faster than inflation. Likewise, with A.O. Smith. The annual yield is .96% right now, from $.48 a share, but at its current, and projected, rate of dividend growth, 10 years from now, it is believed it may well be paying 10% on those shares bought at this time. I’m all for that! So, it is with UNH, now paying $2.50 a share, 1.55%, and growing. It’s projected rate of growth, and resulting yield, is believed to become well more than 10% in another decade. These things are by no means certain, of course, but where can you hope to do any better? To amass at least 20 such dividend growers, as these, and no more than 40, can make for an incredibly secure retirement, with a rapidly growing portfolio dividend income stream.
This is what I am doing for my wife and myself. I don’t need a broker, or an advisor. I got this! I only need a cheap on-line brokerage. At $3 per transaction, I’m with eOption. So, what do you think of all this? Is this the way to go, or what?
Here’s to your successful investing!
Harold F Crowell