There are many detractors that believe that dividend growth stock investing is stodgy, old and boring. With this video, I plan to dispel some of those myths and prejudices. Not only can dividend growth stock investing be modern and exciting, it can also be quite profitable. Part of this lies in the reality that just like it is a market of stocks and not a stock market, dividend growth stocks come in all sizes, flavors, and colors. Some grow slowly, some grow fast, some offer very high yields, some offer lower yields to grow very fast and every combination in between.
Personally, I have found that applying a valuation-based dividend growth stock investing philosophy works very well over the long run. However, I have also broken dividend growth investing into two categories. With one category I construct portfolios whose objective is to primarily produce a high level of current income within reason, coupled with the opportunity to see both that income and the capital grow consistently over time. This type of portfolio best serves the investor who has accumulated enough assets to retire and live comfortably off the income those assets can produce.
The other category of dividend growth stock investing favors capital appreciation over current income. With this strategy the objective is to focus on growth over current yield. The idea is to build a portfolio that can grow at a high enough rate to eventually produce enough income to live off at some future time. The financial services industry often refers to this as investing for retirement or for the accumulation phase prior to retirement.
Ironically, there can be a significant amount of overlap regarding the stocks that comprise either of the two affirmation portfolios. This is often the result of valuation coming into play. Low valuation produces what I call natural leverage that can lead to strongly above-average future capital appreciation through moderate growth and multiple expansion. In other words, the inevitable reversion to the mean can serve as a turbocharger to the portfolio in the circumstances.
Finally, this particular video focuses on attractively valued stocks with very consistent historical growth rate achievements. There are many additional consistent growers that are unfortunately overvalued in today’s market, therefore, they have been excluded. Names like Apple, Microsoft, Visa, Nike and others to name a few are great consistent growers that are unfortunately overvalued. The key is to invest in great consistent producers when their valuation is attractive and their prospects for future growth intact. With this video I offer 10 that I believe fit that bill.
In the video I will be reviewing AmerisourceBergen (ABC), Amgen (AMGN), Anthem (ANTM), Canadian Tire (CTC.A), Lockheed Martin (LMT), Altria Group (MO), Metro (MRU), Oracle (ORCL), Open Text (OTEX), T. Rowe Price (TROW) and S&P 500 (^SPX) through the lens of FAST Graphs!
Disclosure: Long ABC, AMGN, ANTM, LMT, ORCL, MO, TROW at the time of writing.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.