Sunday, September 23, 2012
Weekend Reading - September 23, 2012
Boy, do I love dividend growth investing. You invest your capital with high quality companies which pay out dividends to loyal shareholders, and are able to sustain rising payouts over the long-term. You are then able to reinvest these distributions, which due to their rising nature over time, become larger and larger reinvestments. These larger reinvestments then purchase larger and larger amounts of shares, which pay out larger distributions due to your increased ownership in said companies.
This effect of reinvestment that compounds itself not only through dividend reinvestment, but a dividend that also increases over time, is simply wonderful. I've heard of this type of compounding referred to "hypercompounding" due to the fact that you're not just compounding your wealth due to organic reinvestment of wealth, but your wealth is actually being reinvested at increasingly amplified amounts. Simply amazing.
High quality companies continue to allow shareholders to "hypercompound" their wealth through dividend payouts that rise year after year. For example, McDonald's Corporation (MCD), the worldwide restaurant, recently raised their dividend 10%, going from a $0.70 dividend per share, paid quarterly, to a new $0.77 quarterly dividend per share. Philip Morris International (PM), the global cigarette manufacturer, also recently raised its dividend. The new payout for PM is up 10.4%, after rising from $0.77 quarterly per share to the new $0.85 quarterly per share.
When was the last time you got a 10% raise at work? I've never gotten a 10% raise at work. And, even if I did I know it wouldn't be sustainable year after year after year. After these double digit dividend raises, your reinvested dividends just started compounding themselves at an increased rate. Hmm, we might be on to something here.
As I look forward to a day of football after a long 6-day workweek, I'll know that I'm one day closer to financial independence because wonderful companies continue to reward me as a loyal shareholder.
Here are some excellent articles from fellow dividend growth investors, frugalists and personal finance bloggers from the past week.
Johnson and Johnson: Cautiously Optimistic at $68/Share
Dividend Monk thinks JNJ could rebound nicely from some recent recall and managerial issues. He likes the new direction the company is in and thinks the current valuation warrants attention with caution.
Is it Convenient? Would I Enjoy it? Wrong Question.
Mr. Money Mustache wrote this fantastic post that should force you to re-think your priorities in life. I wrote a lengthy comment in response to this article the highlights my recent journey back into normal society and my epiphany that I have found freedom from desire of things that mean nothing to my long-term happiness and satisfaction. Good stuff MMM!
Stock Bought: NSC
Dividend Growth Machine recently bought NSC on a day when it was down almost 10%. Along with yours truly, a number of bloggers picked up NSC shares during the bloodbath. You can see that here, here and here.
The Weekly Lineup: From Pigs to Podcasts, and FinCon12
The Dividend Ninja just announced he purchased The Dividend Pig. Way to go Ninja. Best of luck with the project!
Money Management for Dividend Investors
DGI discusses how a dividend growth investor must continuously monitor his/her portfolio and add to attractively valued positions while still maintaining a proper allocation and diversification level.
Passive Income Pursuit is going to hit well over $100 in dividends this month. Great job!
August 2012 Pocket Change Portfolio Performance
D4L reported on his dividend income from his Pocket Change Portfolio. Fantastic month, and he received dividends from some high quality investments. If my pocket change looked like that I'd probably already be working part-time!
Thanks for reading.
Photo Credit: Benoit Mahe