What Are You Buying?

The market appears a bit frothy right now. The Dow Jones Industrial Average is currently north of 13,000 points, while the S&P 500 treads just above 1,400 points. But, as I've stated many times before I believe in purchasing high quality equities at attractive long-term prices on a regular basis. I believe that there are stocks trading for more attractive valuations than the market as whole at almost any given time and I make it a priority to seek out quality on sale.

I try to look at the big picture and stay dedicated to my plan, which involves living well below my means and using excess capital to purchase stocks on a monthly basis. And as another month approaches I'm starting to fill out my shopping list. As the great Warren Buffett likes to say: my trigger finger is getting itchy. I don't have an elephant gun, but my little pistol will still get the job done!

It's been a while since I asked you readers about your watch lists and what you're interested in buying. I haven't been as active in the market as I usually am over the last couple months while I took a breather from blogging and investing in general. The break has given me two wonderful things: renewed focus and a little extra cash. Sweet!

Here's a short list of some equities I'm considering purchasing in early September:

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.

Weekend Reading - August 25, 2012

Another week behind us. I can't believe we're entering the last quarter of 2012 already. All cliches aside, I truly wonder where all the time has gone. Most people see year by year escape from their clutches and look back on the time and wonder where all the money went? The great thing about marching towards financial freedom and being so aware of one's spending habits is watching the wealth grow and grow. I can look back every 12 months and see EXACTLY where all the money went. A great majority of it went into my brokerage account, to purchase shares of high quality companies that continue to reward me as a loyal shareholder with rising distributions in the form of dividends.

The market continues up and down and I pay no attention. Pundits on major news programs point to company moves and major government decrees with microscopes and proclamations. That's because they have 8 hours of empty news space to fill. I pay no mind. And neither should you.

Here are some excellent articles from fellow dividend growth investors, frugalists and personal finance bloggers from the past week.

Dividends Are My Fruit

As someone who is trying to become financially independent by 40 years old, it's extremely imperative that I build a passive income stream that will exceed my expenses and also outpace inflation. This requirement is what led me to invest in dividend growth stocks. Dividend growth stocks typically have a long track record of paying increasing dividends. I realized that dividends can be a fantastic passive income source. One thing not mentioned often is how easy they are to receive. They're deposited automatically in my brokerage account. I don't have to go to some office and turn in a voucher or call up some 1-800 number. And by investing in companies that have long track records of raising dividends, I can be assured that my income will only go up over time.

There are many ways to extract income from a stock portfolio. One of the most common ways is to perform a controlled sell-off of assets in order to meet expenses and maintain a certain lifestyle. This would usually involve building up a large portfolio over your working years and then drawing down income from the portfolio by selling off stock once you're retired. You would determine a safe withdrawal rate, based on your expenses and asset base, and then start to slowly bleed your portfolio dry. Usually this selling would only increase in percentage terms over time as your expenses rise and as the asset base dwindles. So effectively, as you age and your expenses keep increasing, you are slowly running out of assets with which to meet these obligations. This makes no sense to me, and I'll discuss why.

The Best Thing About Financial Independence: Choice

I Work Much Harder Than I'd Like

I don't know about you, but I work a lot. I get up at 6:15 a.m. every weekday morning and I typically arrive at the office just before 7:30. That's early! I then proceed to create value for my employer by busting my butt throughout the workday and "getting things done". I work in the automotive industry, specifically in an automotive dealership. My job primarily consists of checking in cars for repairs, documenting the VIN and mileage of every vehicle along with the repair concern, compiling estimates and acting as a liaison between the client and the technician fixing the vehicle. You could say I "sell repairs", but really repairs sell themselves. I simply present the repair to the client and hopefully they accept. If you want to drive your car all around town, you're going to need brakes, tires and oil changes. I do this until 6:00 every evening and I also work at least one Saturday a month, sometimes two.  Would I do this if I had the choice? Would I work 50 hours per week, often getting screamed at by unhappy victims of aging vehicles if I didn't have to? Absolutely not. And that's where the real beauty of financial independence comes into view...the ultimate luxury in life: choice!

My Biggest Financial Mistake

As someone who lives frugally and saves more than half his net income, invests monthly into high-quality dividend growth stocks, writes a blog about trying to reach financial independence before 40 years old and has a long-term financial focus it may be natural for you to think that I've always been this way. It's easy to think I've always been conscientious about purchases and money matters; that I've always been frugal and knowledgeable about the stock market. But this is extremely far from the truth.

Recent Dividend Increases

As a dividend growth investor, one of the primary objectives I seek is passive dividend income from my investments that increases over the rate of inflation, annually. It's always wonderful news when companies decide to reward loyal long-term shareholders with a dividend raise. Some recent dividend increases include:

Recent Buy

It's been a little while since I published a stock purchase. Even though I haven't been as active in the markets lately, it's great to know that my investments have my back. The stocks I own continue to disperse dividends into my brokerage account as usual and the cash balance just grows and grows. This small break from investing gives me a glimpse into the future. By sparsely checking my investments over the last couple of months and leaving them be, but continuing to collect dividends, I basically gave myself a brief view of what financial independence looks like. I can live my day-to-day life and do whatever I feel like doing, knowing that the companies I own a stake in will continue to generate rising revenue streams, increase profits and pay me rising dividends as a capital supporter of said businesses. It's a wonderful world for a dividend growth investor!

As part of my Recent Buy series, I try to let my readers know of any equities I purchase soon after the transaction is completed. This is just one way I try to document my progress toward early retirement and financial independence.

Finding Value In This Market

It's good to be back! Echoing some of the sentiment I noticed in the comments on this blog recently, it seems that us dividend growth investors have been hesitant to deploy capital over the last few months. I share those circumstances, albeit not totally because of expensive stocks. It seems that if any time was a good time to take a break from frugality and investing, the last few months were that time.

The DJIA is up over 1,000 points over just the last two months. At the beginning of June, the Dow Jones was sitting just above 12,000. As of this past Friday, the DJIA closed at 13,208. That's quite a climb, and if you missed the occasional dip due to eurozone concerns or stories of slowing growth you now find yourself in the precarious position of sitting on some cash with limited opportunities to invest it. I certainly don't have a giant warchest due to some decisions over the last couple months that I regret, but I do find myself with a little capital.

Valuation is extremely critical when considering whether or not to purchase a specific stock. It determines your overall performance on your investment including your total return and yield on cost. To be a successful dividend growth investor, one must not only consider company fundamentals, dividend security, yield, dividend growth metrics, sector allocation and the like before purchasing a stock but must also strongly consider the price you're going to pay for that stock. Even the best companies in the world can be too expensive, and if you pay too high a price, even for high quality, you will suffer for it in the way of reduced yield and a low overall return.

I'll Be Back

I'll be back...very soon!

Thanks everyone for the wonderful comments that you readers left when I decided to take a break from this blog, but very soon....I'll be back!

After taking a break from blogging here on Dividend Mantra, I have found that I miss the mutual inspiration, the wonderful comments that readers leave and the general camaraderie in the dividend growth investing community. I miss being a part of all of that and so within the next 4-6 weeks you can expect content to be up and running here on this blog and I'll be posting just like I was before.