Dividend Growth Investing is boring!

[hendi_alex]

Active investing and trading is much more entertaining and interesting. YTD my very interesting, actively managed account is up approximately 6%. My very boring long term dividend account is +29%. So much for excitement!

To be fair, I am using about 25% margin in the long term dividend account, so gains have been magnified to that extent. These results have convinced me of the folly of indiscriminately selling large numbers of calls in a rising market. In the managed account, all gains were capped at around 10%-12% because of call writing. When various losing plays were factored in, the YTG of 6% results. On the other hand, positions in the long term dividend account have been allowed to run, with many positions running up 30% or more, plus the steady stream from the average 5%-6% dividend yield.

I'm not sure that dividend investing will generate a better total return than a mixed growth and income portfolio, but am pretty confident that selling calls for income is mostly a counter productive strategy. Also, I doubt that all markets would provide such disparate results as above. But for a rising market, making one's best selection and then giving the positions time to run, IMO is a better trading strategy than selling calls for income or than prematurely trying to capture profits. To build a long term portfolio, I continue to lean toward dividend value investing, where positions are held long term, but where entry points are selected based upon relative value at the time of purchase.

[Kerim]

Great topic, Alex. I agree completely that dividend growth investing is a little like watching paint dry. My faith in it as a long-term approach is very strong, but it doesn't provide much excitement. I do still find the dividend payouts and annual increases to be a fun source of pleasure (see the "101 Happy Moments" thread). But even with a portfolio of 20 to 30 stocks, it can be weeks between anything exciting happening.

I suppose the exception to this might be if you have a lot of cash on the sidelines to deploy. Then you might be making frequent purchases to keep you engaged. For me, that "hyper-inflationary" period of building my portfolio is past, and now I am just adding a bit of new money every month and making new purchases every once in a while.

To satisfy my need for a little action, I speculate with options. I only play with a tiny amount of money (usually only a few hundred dollars at a time, occasionally a little more), and I understand that it is nothing more than gambling. But it is fun to play my hunches and it gives me something to watch throughout the day.

Then I just leave my boring old dividend growth portfolio alone to do its thing.

[hendi_alex]

Yep a bit boring, but that steady and ever growing 'cha-ching, cha-ching, cha-ching' of cash hitting the pot certainly is reassuring.

I really enjoy the excitement of making shorter term trades, but am relegating that and any options play to no more than half of the value of my IRA. The small and growing dividend portfolio is ear marked for long term investing, with an emphasis split between current yield and growth.

[cannew]

(10-21-2013, 10:59 AM)hendi_alex Wrote: Yep a bit boring, but that steady and ever growing 'cha-ching, cha-ching, cha-ching' of cash hitting the pot certainly is reassuring.

I was wondering if we would ever agree on something, but I have to admit that I do !!

Of course I'm at the late stage and therefore have no interest in trading and have settled on a list of stocks that have done as you say "ever growing".

I was disappointed that the market did not drop because of the US problems, but there will be another crisis and I'm patiently waiting to buy.

[hendi_alex]

"I was wondering if we would ever agree on something,"

I'm not sure what agreement means. If not agreeing means that my overall approach is generally not your cup of tea, then you are probably right. We should however come fairly close to agreement on the long term accumulation of dividend stocks approach that I'm employing in the cash account. We probably could agree that there are many ways to skin a cat, and most everyone has very individual needs that will cause his/her approach to be quite different from some other individual's approach.

Details removed as didn't intend to leave such personal data up for long. Original paragraph gave portfolio results from rebound to present.

In terms of growth since hitting the previous high in October 2007, the return has been pretty meager. But in terms of the rebound from 2009, I am ecstatic and never would have believed that the portfolio NAV could have recovered and grown in such a dramatic way. My active trading during the period was no where near the best way, but for me the results have been quite acceptable.

[TomK]

Boring is bad? Life is exciting enough -- I am delighted to choose an investing strategy that is boring!