Dividend Growth Investing

Discussion of the Stock portion of the Permanent Portfolio

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tarentola
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Re: Dividend Growth Investing

Post by tarentola » Wed Feb 21, 2018 7:12 am

Jeffreyalan wrote:What would be everyone’s opinion here on dividend growth investing? For example, buying 20-25 stocks like MMM and Johnson & Johnson and just holding them forever. Live off of the rising dividend stream and leave the shares for my children. I know it will have more ups and downs than a Balanced portfolio. But if I can ride out the volitility, what are the opinions on this strategy?
DG investing is popular because:
- it provides a discipline: essentially buy and hold, so no trading, no agonising
- it is simple to understand: from a diversity of sectors, buy blue chips with a history of rising dividends, do not sell
- it favours shares in established companies, often household names, whose products are in daily demand (food, drink, tobacco, oil, health, software)
- it provides an income without shareholder intervention: no rebalancing, no decisions, the divs just land in your bank account
- it ignores price volatility: dividends tend to hold up even when share prices crash. For example in 2007-8 the S&P dropped over 50%, but the drop in dividend payments much less marked, and some companies continued to raise dividends during the crash and indeed thoughout the "lost decade". See https://seekingalpha.com/article/294269 ... -recession.

Seekingalpha.com has a lot of information about dividend growth investing, where contributors describe portfolios of individual shares which have been running for years. The results are in general pretty good. However, it seems that DG portfolios provide less total return than multiasset portfolios which are regularly rebalanced (several posts by Larry Swedroe on Bogleheads). Eric@Servo on Seekingalpha started a lively debate with the DG crowd and acquitted himself very well; that discussion is worth looking at for pros and cons. See also David van Knapp's articles, especially https://seekingalpha.com/article/187516 ... -dividends.

Conclusion: DG is probably not the best option for long-term total return, but provides a fairly sure return and requires little intervention (sound familiar?).
tarentola
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Re: Dividend Growth Investing

Post by tarentola » Sun Mar 11, 2018 3:46 am

A recent article on Seeking Alpha which provides a good classification of dividend growth shares to consider:
https://seekingalpha.com/article/415331 ... wth-stocks
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