As a dividend investor, my main goal is obviously to build a sizeable portfolio generating passive income. There is nothing more powerful than receiving an ever increasing payment each month. Over many years, a dividend growth investor is able to build a solid asset that will ensure a safe and comfortable retirement.
My quest for passive income has lead me down various paths. One of them is dividend investing, but another side of my journey to financial freedom is my online company. One of my biggest assets is this blog along with my membership website Dividend Stocks Rock. Since January 2015, I’ve been putting numerous hours into my online projects. I currently work 20 hours a week on my investing websites while working full time at my day job. Why am I working like a maniac? Because great dreams can only be achieved through great effort! In 13 months, I’ll retire from the paycheck world and start a new life of travel with my family. I can’t achieve that if my online income is not sufficient to support my new lifestyle. This is why I decided to press fast forward and not only grow through hard work, but to grow by acquisition as well.
We recently bought another dividend blog to increase our presence in this field and to reach a new audience. The process of buying a blog is about the same thing as buying shares of a company; it’s all about the investment return. While I can’t reveal exact numbers due to our purchase agreement, I want to share with you how I bought the Dividend Monk (DM).
How I Bought Dividend Monk
This blog has been silent for the past 12 months. The latest post was dated January 2014. I knew the Dividend Monk very well since we participated in many group projects a while ago and have helped each other driving traffic to our respective blogs. Matt (former owner) is one of the most solid dividend growth bloggers I know. Being an engineer by day, his investment process is flawless and well detailed. This is why I was so interested when Matt reached out to me to see if I was interested in buying.
In the personal finance blog “industry”, I’m known to be an active site buyer. Since 2006, my partner and I successfully bought a dozen websites and they are all generating solid passive income today. I’d say that my website portfolio is bigger and pays greater dividends than my investing portfolio… enough said.
Still, why buy a blog in the same field as The Dividend Guy, isn’t this cannibalism? One may see it that way, but there is an interesting twist to the story. There is a big difference between the Monk and the Div Guy in writing styles. When you read my blog, you expect straight to the point analysis or something a little bit more entertaining in the investing world. I’m known to be a little bit more creative and like writing jokes and adding funny comments. While investing is serious, I like to add color to this gray-ish industry.
The Dividend Monk is exactly the opposite. This blog is known for its detailed and researched analysis. Matt used to include a dividend discount model calculation to determine the value and explore 7 yr stats to analyze a company’s fundamentals. Since both blogs don’t cover dividend stocks from the same angle, it was perfect for us; we can now reach both type of investors through two blogs!
But the most interesting twist with Dividend Monk was its dividend distribution ability. The site, with little to no work, generates cash flow on a monthly basis. It’s literally like buying a dividend stock and I can assure you my yield is way over anything we would imagine in the stock market! The Dividend Toolkit is a product that sells by itself! And the purchase of DM came with full copyright on this amazing tool.
What’s the Dividend Toolkit
The Dividend Toolkit includes two components:
1) The 200 page PDF Stock Analysis Guide for individual investors, which describes the extremely efficient method to analyze a dividend stock, how to build and manage a dividend portfolio, and what you need to know about MLPs, REITs, and asset allocation. It offers plenty of content, and is divided into modular sections so that it’s easy to read through. The first chunk of the book is introductory content for new investors, and the later part of the book gets into the useful specifics. Even if you rely on newsletters or blogs for your stock ideas, this guide will give you a deeper understanding of your investments and will give you specific tools to check the accuracy of any stock ideas that you’re given.
2) The Valuation Spreadsheet File, which contains a streamlined and easy-to-use tool to instantly calculate the intrinsic value of a stock. Unlike many financial books that give equations without an efficient way to use them, this book comes with the tool to apply the specific concepts in the book. It has a few different options, including the Dividend Discount Model, so that you can calculate the fair value to pay for any stock.
The sales page is well built and focused on solving the most important question every investor has; how to determining the value of a stock. Then, it is just a matter of writing content on the blog and make sure it has some exposure to guarantee the dividend payment by the website on a monthly basis.
Risk Vs Reward
Since the online world moves quickly, the valuation for blogs is lower than regular business. While public stock on the market easily trade for 17-18 times its profit, sites trade as low as 1.5 to 2 times. For bigger websites, you can obviously reach a higher multiplier but in a case of a slowly-dying site, the multiplier is very low.
It is low because it comes with high risk. Tomorrow morning, the site could drive little to no traffic and I would not sell any more Toolkits. This is the risk we are taking. On the other hand, it is also a possibility that we reach a perfect integration between this blog and DM and grow sales to a whole new level. This would be our reward.
Considering revenue is one thing, but you must also consider the work required to run the site and the ongoing cost of running it. In this case, work required was minimal at the time of purchase but we factored a few costs involved in operating the site (domain, server, sales platform, newsletter, etc). Many bloggers wish to sell their site one day but forget they hide the biggest cost; time they spend on the site. Dividend Monk’s case was interesting because the previous owner didn’t write anymore and it was still driving a few sales. But most blogs requires hours and hours of work. We all do it for free, but if you sell your asset, you have to consider the buyer will have to either work or pay someone else to drive the show. This is another reason why multipliers are not super high. If I was going to sell one of my blogs, I would first hire a writer and slowly leave the site in his hands to show how profitable the blog could be without the involvement of its owner.
Since we already have our own setup, we can integrate DM into our business and save on cost. For example, we already pay for servers, product selling platform and newsletter services. In a similar fashion as brick and mortar companies integrating smaller competitors, we can use our synergy to generate a higher profit. Isn’t it great to see that financial theory applies for smaller transactions as well?
As you can see, this is not much different than buying a dividend stock. The main difference is that volatility is greater but you have some kind of control as you are the one who runs the site.
How I Will Run Both Sites
Since the purpose of this transaction was to reach out to more readers, I will keep both writing styles separately. Therefore, the fun will still happen on The Dividend Guy Blog and the more serious and analytical stuff will be published on Dividend Monk. Therefore, if you are looking more for a valuation approach and additional stock analysis (both blogs won’t publish the same company analysis), I strongly suggest you subscribe to The Dividend Monk Newsletter.
And you won’t receive emails twice because you subscribed to both newsletters. Technology is a wonderful thing and the integration is already done ;-).
Special Launch Rebate!
If you are interested in buying the Dividend Toolkit, ***I’m giving a promotional code for the rest of the month of April only***
Click on the image below to buy the Toolkit and enter the promotional code “dividendguy” in the transaction screen. You’ll enjoy it for $10 only!