Any dividend growth investors out there?

[jimnjana]

I have positions in LINE & NLY... Good yield, consistent growth... LINE has been fluctuating with the energy sector, but growth should continue...

Here are my top dividend producing positions...

NLY - 16.32% Div
BX - 8.58% Div
LINE - 9.56% Div
AGNC - 22.12% Div

RSO - 14.5 %
NZT - 10.7 %
EVEP - 9.8 %

Top three right now, RSO Current Yield was approaching 20% a few weeks ago but a good quarter has the share price up several dollars per share. I didn't list AMY which currently has a value of "0" per share but is still paying a monthly dividend at a 50 cent per share annual rate.

 

[Ronnieboy]

Are most of these positions buy and hold forever? With the exception of a dividend getting suspended or cut, how much work does it entail to keep a watch on these?
Also, what is a good number of companies to keep in the 'dividend portfolio'?

 

[clifp]

Are most of these positions buy and hold forever? With the exception of a dividend getting suspended or cut, how much work does it entail to keep a watch on these?
Also, what is a good number of companies to keep in the 'dividend portfolio'?

Forever is a very long time, but I certainly think the that planned holding period should be longer than a Presidential terms. I cheat and subscribe to a dividend newsletter which reduces the amount of work. I don't blindly follow his advice (probably 1/2 the time for buying and 2/3s of the time for selling) but I do take his recommendation seriously. I generally hold between 30 and 40 individual issues and dividend stocks comprise about 35-45% of my portfolio. If you follow Bob Brinker's rule and make sure that no individual issue is more than 4% of your portfolio (Berkshire is an exception for me), than 10-20 dividend stocks can provide a meaningful amount of income without a huge individual issue risk.

 

[Zathras]

All depends on your investing style.
Keeping an eye on a companies cash flow, the boards attitude towards dividends, etc is always a good idea.
However, there are also very large, mature companies with very long histories of paying and increasing their dividends which you could consider buy and hold forever. However, there is ALWAYS some risk. So keeping an eye on the individual companies is a good idea.
The number of companies is up to you. Some will feel that you need at least 20 do get good diversification, other are more comfortable around a dozen. Some may prefer putting all their eggs in one basket, but in general that lack of diversification makes me shudder

 

[jimnjana]

RSO - 14.5 %
NZT - 10.7 %
EVEP - 9.8 %

Top three right now, RSO Current Yield was approaching 20% a few weeks ago but a good quarter has the share price up several dollars per share. I didn't list AMY which currently has a value of "0" per share but is still paying a monthly dividend at a 50 cent per share annual rate.

Update

Sold NZT (too volatile) and EVEP (fully valued, bought MHR,PEI, and OLP w/proceeds).

Currently own

RSO,PEI,OLP,NYB,PMT,PM,MO,DUK, BBEP and AMREIT

 

[MWaterman]

I adore dividend growth stocks. I run six trusts funds for my neices and a nephew and all contain stocks with good dividend history. I buy them those because I don't want to have to trade anything. I just like to buy small amounts over time and let compounding do it's thing. I've found that the rules I use to screen pretty much any stock apply to those paying healthy yields. People get nervous around very high yields, but if the profit margins aren't thinning over time, debt levels remain consistent or are improving, you have a pretty safe return coming.

Do be cautious with MLPs that you look at the net income growth of at least 5 years. What may appear to be a great yield with a low P/E could really only be a temporary boost to earnings, for example, just after gas prices had spent some time being high we saw the earnings of LINE go way up. The numbers before those years were a lot lower, and so it basically would have been a value trap if it hadn't been priced so low. I bought in with a yield close to 16%, and sold after the stock went up 80% in price.

 

[Danmar]

OMG my dividend yield keeps going down Dividends intact. Still like my strategy.

 

[Nords]

OMG my dividend yield keeps going down Dividends intact. Still like my strategy.

Diversified dividend strategy...

 

[Danmar]

Diversified dividend strategy...

Agree. In my case I'm not as diversified as I would like. I have a excessive position in my previous employer whose CEO and other execs I know and respect. Problem is my tax cost is very low and selling any of this stock would cost me big tax dollars. I know I should do it at some point and will-probably over time. In the meantime they are doing exceptionally well and I expect them to resume dividend increases within a year. The pension plan is very well funded too.

 

[DeborahB]

OMG my dividend yield keeps going down Dividends intact. Still like my strategy.

You have to consider what you paid for the stock. Often, yield is based on current price. So if you bought it at $10 with a $1 dividend, and now it's at $20 the dividend yield will usually be based on the current price - you bought it with a 10% yield - now it's a 5% yield. Plus you've got a LTCG of 100%...

 

[Danmar]

You have to consider what you paid for the stock. Often, yield is based on current price. So if you bought it at $10 with a $1 dividend, and now it's at $20 the dividend yield will usually be based on the current price - you bought it with a 10% yield - now it's a 5% yield. Plus you've got a LTCG of 100%...

Thanks Thinker. I was trying to be funny.

 

[Nords]

Agree. In my case I'm not as diversified as I would like. I have a excessive position in my previous employer whose CEO and other execs I know and respect. Problem is my tax cost is very low and selling any of this stock would cost me big tax dollars. I know I should do it at some point and will-probably over time. In the meantime they are doing exceptionally well and I expect them to resume dividend increases within a year. The pension plan is very well funded too.

Wanna hear some devil's advocating?

A couple years ago I had another poster on this board call me out for my lack of diversification in a similar situation. In this case the CEO is Warren Buffett and the other execs are Berkshire Hathaway employees. We'd held those shares since 2001 and they'd more than doubled in price. And yeah, we took a humongous cap gain when I finally got off my dead assets.

I'm really glad this friend hit me upside the head with a 2x4, because we reluctantly rebalanced in Feb 2008 and the share price still hasn't recovered to that lofty [-]plateau[/-] peak. We were talking most of the kid's college fund and nearly a fifth of our ER portfolio. The former is now all in CDs (she starts college in 109 days) and the latter is now slightly more diversified.

I didn't appreciate it at the time, but just eight months later we were able to wipe out all of that nasty cap gain-- through humongous cap losses on tax-loss swap sales of the rest of our portfolio. We even have cap losses to carry forward for 5-10 years. Hopefully you don't have the same "opportunity".

So I don't know if your CEO is in the same respect class as Warren Buffett, and you probably know your CEO/execs better than I know Buffett & team, but I doubt that will offer you much comfort if their share price drops by over 50% from its peak. It tested my comfort level.

If we're as good at investing as we say we are, then we shouldn't base selling decisions upon taxes. In fact, paying cap-gains taxes should be the fervent desire of every stock transaction. Hopefully long-term cap gains taxes, but short-term cap gains are better than some of the alternatives.

Dividends & pension plans... yeah, I bet that dividend rate looks twice as good when the share price is whacked in half. We have another poster who followed Bank of America's downward spiral (and ever-rising dividend rate) right down until the dividend was cut to a penny. And 401(k)s are a lot easier to fund after the layoffs.

Black swans. I'm just sayin'.

 

[heyduke]

... and what Nords is saying is spot on...

 

[Danmar]

Nords-appreciate the advice. I would give the same advice. My actual risk is even higher as I am sitting on a further multi million dollar, in the money position for my remaining vested employee stock options. These expire over the next 20 months (the vast majority in 20 months). Only simple way to get this position down is to cash them out. If I do this I am foregoing significant option time value. These options have been my main source of wealth over the years. My attitude has always been "dance with the lady you brought". I had a role in developing stategy for this company and was part of the senior team so it is emotionally diificult for me to reduce my exposure to what could arguably be Canada's best run and most successful large company. This in no way negates your advice-I know you are right. Also, once the options are cashed out the only significant risk to us is the dividend (current yield about 3.25%). This represents about 35% of current earnings and hasn't been cut since the 1930's. Thanks again.

 

[DeborahB]

Thanks Thinker. I was trying to be funny.

Oops - the famous issue of conveying humor in email rears its ugly head!

 

[Nords]

Nords-appreciate the advice. I would give the same advice. My actual risk is even higher as I am sitting on a further multi million dollar, in the money position for my remaining vested employee stock options. These expire over the next 20 months (the vast majority in 20 months). Only simple way to get this position down is to cash them out. If I do this I am foregoing significant option time value. These options have been my main source of wealth over the years.

Ah, I have no experience with being paid in options.

However CuteFuzzyBunny and ClifP can no doubt share their hair-curling options stories to give you a completely different perspective on the alleged "time value" of your options.

Hey, at least you're not exercising and holding the stock to shift the taxes to long-term cap gains. But for the amount of money at risk there has to be a way to slap a collar on that puppy.

 

[Danmar]

Options gains are taxed like cap gains in Canada. Also no distinction between short and long term cap gains. All taxed at 19.5% in Alberta. Thanks again.

 

[MichaelB]

Nords-appreciate the advice. I would give the same advice. My actual risk is even higher as I am sitting on a further multi million dollar, in the money position for my remaining vested employee stock options. These expire over the next 20 months (the vast majority in 20 months). Only simple way to get this position down is to cash them out. If I do this I am foregoing significant option time value. T

You can hedge through the vesting period - buy puts that expire close to the time you plan to exercise.

 

[Danmar]

You can hedge through the vesting period - buy puts that expire close to the time you plan to exercise.

Yes I understand -thanks. Options are all vested and I could cash any time. Bottom line is I will gradually cash out over next 20 months taking advantage of any run ups. I am fairly comfortable with this exposure although by their nature options tend to be risky instruments. At least they are deep in the money.

 

[audreyh1]

I went through this! I was very lucky (but patient too - I did go through some long waiting periods).

Audrey

 

[Danmar]

Nords-I went back and read your post again. In fact the stock backing up my options dropped by about 60% from its peak. This was from Oct/07 to Feb/09. It is creating new all time highs now. You can imagine how difficult this was for our net worth. In fact excluding real estate (as I usually recommend) our net worth dropped by 75%!! Luckily we didn't panic as I had confidence that things would improve quickly as they did. After going through that I have decided to be patient and play it out. Maybe easy to say now but the recession was mild in Canada and things really look OK at this point.

 

[REWahoo]

After going through that I have decided to be patient and play it out. Maybe easy to say now but the recession was mild in Canada and things really look OK at this point.

I sincerely hope this works out for you. Not often, but on occasion, posts like this come back to haunt folks who look back and say, "If only I'd taken my gains then - at least some of them - instead of waiting!".

 

[Danmar]

I sincerely hope this works out for you. Not often, but on occasion, posts like this come back to haunt folks who look back and say, "If only I'd taken my gains then - at least some of them - instead of waiting!".

Thank you. I have taken quite a few gains over the years. Let's hope there are more.

 

[Nords]

Nords-I went back and read your post again.

I'm done here. Good luck with that.