Years of doing research, reading academic studies and working on portfolios (including mine) brought me to this set of rules that enables me to simplify my investing process.
Principle 2 – Focus on Dividend Growth. Why? Because Dividend Growth Stocks beat the market most of the time and represent your best protection against marke drops!
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00:00 Mike Heroux: Hey, fellow investors, this is Mike Heroux, from Dividends Stocks
Rocks. Welcome to Part Two of my Dividend Growth Investing Principles. The
second one is probably the most important principles across my whole investment
methodology, it is focused on dividend growth. Why is it that important?
Because, first, dividend growth stocks beat the market most of the time. And I
didn’t make that up, I didn’t invent that up. If you Google researches about
dividend growers versus the rest of the market, you will find, notably, Ned
Davis Research has done plenty of work on that. Most of the time, dividend
growers or initiators, meaning companies that are growing their dividends year
after year or that have started to pay dividend to their shareholders will beat
the market over time. And when you think about it, it’s only common sense.
01:04 MH: Second of all, dividend growth stocks is probably your best
protection against any kind of market. When you think about it, you hold your
shares, the market goes up, the market goes down, there’s absolutely nothing
you can do. So if the market like in 2018 drop by 10%, but you’re receiving 4%
in dividend, this means that your overall return is -6, instead of -10. So it
will help you to smoother the bad years, and on top of that, dividend growers
will still do well during good times. So while you’re minimizing your losses
during bear market or corrections, you’re also make sure that you’re doing some
good returns over the bull run.
01:52 MH: And what kind of message a company gives you, one that says,
“You know what, Mike? We’re going to increase our dividend payment this
year.” And when you look at the market and the market is down, the economy
is slowing, and unemployment rate rises, but the company keeps telling you,
“Mike, this year again, we’re going to pay you more for being part of our company.”
This tell you a strong message, and that message is, “Mike, we are making
money.” And as an investor, the first thing I wanna do is put my money
into money-making machine, right? So I wanna make sure that I select companies
that are actually making money and more money year after year. And one of the
best criteria to look at is dividend growth for that very same reason, because
if the dividend is growing year after year, this means that the rest of the
company is doing well and improving.
02:51 MH: So now, following that principle, I invested over $100,000 back in
2017, at the peak of the stock market back then. I decided to quit my job and I
received the committed value of my pension plan, which was about $108,000. I
decided to use that money following my seven dividend growth investing
principles, and I put everything in the market within the next three months. So
between September and December of 2017, I put all my money to work. Why?
Because I focused on dividend growth. So as long as my companies are growing
their dividend, I don’t really mind what’s happening on the stock market.
03:39 MH: It turns out one year later that I was right. In 2018, even though
the market was down, my portfolio was up. I finished the year with 5.4% total
return. And you can guess that about half of it, probably more than half of it
actually, was due to the dividend payment I received throughout the year. So,
this proves you that when you hit a bear market or a correction, dividend
growth investing will work out for you. Now, if you wanna know more about this
investment process and how I invested my money back in 2017, you can go click
on the link below, in the note. I’ve done a complete webinar over an hour
telling you all about my methodology and how I did invest my money back then
and the result so far.
04:32 MH: So, until next week will be principle number three. So in the
meantime, invest your money, cash some dividend, and don’t forget to smile.
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