Dividend Investing On Steroids

I've been investing in individual equities for nearly 50 years (40 professionally), and I've never owned one that didn't pay a dividend. I don't remember hearing about dividend "achievers", "champions", or "aristocrats" back in the '70s; I just felt that dividend payers were a safer investment than the others.

Over the years, up markets and down, I came up with additional "quality checks" to assure myself (and my clients) that the companies we owned were "fundamentally" better than most. Adding a NYSE only restriction and, a B+ or better S & P ranking requirement upgraded the field. Then, a "less than 5% in any one entity" diversification discipline, managed the risk "inside" each portfolio.

  • High quality dividend paying companies seem to fall less precipitously during corrections and tend to rise faster during rallies.  Rarely do "achievers" cut their dividends or go out of business. You can ride out the storms called corrections much more securely in a boat of this quality.
  • In the three major meltdowns since the 70's, only government intervention during the "financial crisis" caused any high quality dividend payers to go under.

For me, these "risk minimized" equities, were dubbed "Investment Grade Value Stocks"(IGVS), and they were the only ones ever finding their way into managed portfolios... but problems developed in spite of the quality, diversification, and income.

Gradually rising price levels have actually became a problem!

Rallies kept getting longer and corrections lasted months instead of years. As profits were realized, fewer and fewer IGVSs were at suitable prices for new purchases... splits seemed less frequent. Elevated valuations increased market risk while reducing current dividend yields. Equity buckets contained too much cash, particularly in times of low interest rates.

  • Over the years, private REITs, MLPs, and some equity CEFs were used as equity bucket "fillers"... many of the former were those that reside on the "dividend achievers" list. More recently these non-individual equities have pretty much become the primary occupant.
  • Managed equity CEFs were particularly interesting as they contain many "dividend achievers" but in vehicles that lend themselves more easily to trading and profit compounding... this in addition to the huge dividends they produce.
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My articles always describe aspects of an investment process I have been using since the 1970's, as described in my book, "The Brainwashing ...

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