12-19-2014, 03:24 PM
First off, welcome to DGF. You'll find a lot of bright people here. If you haven't yet, it would be nice to introduce yourself in the 'Introductions' section. Sometimes it helps in replying when we know your age bracket, goals, etc.
My responses are below:
I'm not sure you can say there was an upswing because of the Great Recession since there are no statistics. Anecdotally, I've read/heard of or from many that were dividend growth investors for decades; usually they never referred to themselves that way so I think the term is relatively recent.
What I can say is it became more visible thanks, IMO, to Seeking Alpha and a few other sites. The explosion in online traffic from the dot.com bubble onward plus methods of access (phones & tablets primarily) has also contributed to the plethora of exposure for anyone looking to invest. SA's syndication with Yahoo! is how I found out about it.
I think you need to sort out your own thoughts on the topic. Any strategy can be successful if you can find the key points and stick to them.
As for dividend growth, DGIs don't necessarily buy just undervalued stocks. Fairly or even slightly overvalued stocks are acceptable to many. Much depends on your age, the time frame you will be investing and what are your goals are. There are some that will only buy when the market has corrected significantly and then hold forever. So yes, some only buy undervalued companies.
For me, with only a decade or so to go before I need to use some of it, putting my cash to work in companies that 1.) pay enough yield and 2.) are not grossly overvalued and let time and compounding do their work seems to be the most valuable strategy. If I was waiting for companies to become undervalued, I may have sat out this incredible bull run for several years. I agree, there's not much that's cheap except for the oil patch right now (hint) but there are still fairly valued companies out there if you are willing to research.
Time in the market and the compounding of reinvested dividends, either in the original company or collecting them and purchasing other companies, are two important tenets that will allow you to reach your goals. Hence it is a long-term endeavor and not the investment "flavor of the week" if you want to be successful with dividend growth investing.
I inferred from your comment that you will be taking some of your mutual fund investments to purchase dividend growth stocks. If so, it could be a zero sum game. By the time you make a decision to purchase something and the market has corrected, your mutual funds have also corrected.
From your tone, I suggest you think through what strategy or combination of strategies make sense to you. Your situation is no different than what many have experienced.
Remember, this is a marathon and not a sprint.
My responses are below:
(12-19-2014, 01:17 PM)simple_is_rich Wrote: There was a upswing in DGI investing subsequent to the Great Recession. This was due to the ease of which in finding quality companies at valued prices. It appears to me that the ease of finding low-value stocks is getting more and more challenging as the market is close to full-value or overpriced.
I'm not sure you can say there was an upswing because of the Great Recession since there are no statistics. Anecdotally, I've read/heard of or from many that were dividend growth investors for decades; usually they never referred to themselves that way so I think the term is relatively recent.
What I can say is it became more visible thanks, IMO, to Seeking Alpha and a few other sites. The explosion in online traffic from the dot.com bubble onward plus methods of access (phones & tablets primarily) has also contributed to the plethora of exposure for anyone looking to invest. SA's syndication with Yahoo! is how I found out about it.
(12-19-2014, 01:17 PM)simple_is_rich Wrote: I'm asking because I don't want to begin this strategy now if it's not sound. I still have a lot of reading/research/thinking to do before I make any moves, so I'm not in a hurry exactly. Perhaps by the time I'm ready to make a purchase, the market will have corrected down to a more discounted level.
I think you need to sort out your own thoughts on the topic. Any strategy can be successful if you can find the key points and stick to them.
As for dividend growth, DGIs don't necessarily buy just undervalued stocks. Fairly or even slightly overvalued stocks are acceptable to many. Much depends on your age, the time frame you will be investing and what are your goals are. There are some that will only buy when the market has corrected significantly and then hold forever. So yes, some only buy undervalued companies.
For me, with only a decade or so to go before I need to use some of it, putting my cash to work in companies that 1.) pay enough yield and 2.) are not grossly overvalued and let time and compounding do their work seems to be the most valuable strategy. If I was waiting for companies to become undervalued, I may have sat out this incredible bull run for several years. I agree, there's not much that's cheap except for the oil patch right now (hint) but there are still fairly valued companies out there if you are willing to research.
Time in the market and the compounding of reinvested dividends, either in the original company or collecting them and purchasing other companies, are two important tenets that will allow you to reach your goals. Hence it is a long-term endeavor and not the investment "flavor of the week" if you want to be successful with dividend growth investing.
I inferred from your comment that you will be taking some of your mutual fund investments to purchase dividend growth stocks. If so, it could be a zero sum game. By the time you make a decision to purchase something and the market has corrected, your mutual funds have also corrected.
(12-19-2014, 01:17 PM)simple_is_rich Wrote: I'm sure these questions have been asked before. Any other advice for somebody starting today that you might have would be greatly appreciated. I know a lot of you have been on the train for a few years, so my situation is different.
But I feel like it's worthwhile to investigate the efficacy of a DGI strategy when the market is at or close to full value.
From your tone, I suggest you think through what strategy or combination of strategies make sense to you. Your situation is no different than what many have experienced.
Remember, this is a marathon and not a sprint.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan