Monday, August 27, 2012
The Dividend Toolkit: Review
Matt Alden, the blogger behind Dividend Monk, recently released a new e-book titled The Dividend Toolkit. I received my copy recently and had a chance to thoroughly read it over the last few days. I'm going to give my honest and forthright opinion on this book.
The book starts out with six core topics that delve into the basics of living below your means, why dividend growth investing is such a powerful long-term investment strategy and how to build and manage an investment portfolio. You may think these topics can be skipped over if you're an advanced investor, but I disagree. Reacquainting oneself with the basics is always important as we can all become a bit jaded, but more importantly Matt does a fantastic job is laying out the basic groundwork for a successful investment career.
The book then moves into six advanced topics which include asset allocation, index investing, how to properly value investments and then discusses alternative investment vehicles in MLP's/REIT's. This is where the "meat" of the book is, primarily. Matt is heralded for his attention to detail and I think this is where he really shines. If you've ever read any books on value investing, you'll feel right at home here. Matt insists on properly valuing stocks and shows you exactly how he does so in all of his stock analysis reports. He primarily discusses Discounted Cash Flow and Dividend Discount Model methods of valuing companies. He also talks about a margin of safety and why it's so important.
As an added bonus, the book came with easy-to-use spreadsheets that come with DCF and DDM valuation calculations built in. You simply input various figures like FCF, growth rates and the discount rate you're using (based on expected return) and you get a number of different values based on different possible inputs. This gives you, the user, a range of valuations and can give you exactly what type of margin of safety you should be seeking. The range of valuations is especially nice as some of the input numbers like growth rates cannot be known with absolute certainty.
I would say that this book is one of the best books I've ever read on dividend growth investing. The first six topics are not tied directly to DG investing, but rather to wealth building in general. These chapters are a great refresher on why exactly we're all investing in the first place. The later chapters are especially educational to DG investors, and the topic on MLP's and REIT's are very informational. Matt also discusses the basics of how a corporation works and why saving money and regularly contributing to your portfolio is so important. This book is an excellent read by itself, and would be a fantastic companion to other seminal value investing books like The Intelligent Investor by Benjamin Graham. The Dividend Toolkit is a bit more specific to dividend growth investing, however, and the main reason I loved it so much. It was focused, detailed and an extremely easy read. The 200 pages that it fills gives the reader a very well-rounded picture on why building wealth is important, how to build and manage a portfolio, why dividend growth investing works and how to properly value companies for strong long-term returns.
I highly recommend the book.
Thanks for reading.
Photo Credit: Dividend Monk