Over many years of investing both personally and professionally, I have found dividend growth investing to be one of the most rewarding areas for long-term investors looking to compound their hard earned savings over time.
At the core of dividend growth investing is the powerful and efficient engine of compound growth. Like any powerful engine, it must be built properly, with quality parts, solid engineering and excellent craftsmanship. In the case of building a portfolio of dividend growth stocks, this means doing quality research upfront, watching how companies and management teams perform in different market conditions and, most importantly, designing portfolios with a clear view of how the dividend stream may grow over time.
Once built, this engine must be fine-tuned, carefully tended to and well-maintained. This means continuous monitoring of the holdings, making adjustments when necessary and constantly looking for things that may challenge the thesis for holding each position. For dividend growth investing specifically, all of this must be done with an eye towards the implications for continued growth of the dividend stream over time. When all these things come together, the results can be highly rewarding, particularly when this powerful investment engine fires on all cylinders.
Unlike so much of today’s fast paced investment world, dividend growth investing plays out over years and decades, not months, days or minutes. It is an area for the thoughtful, the patient and those who are more interested in building real long-term wealth than trying to capture short-term trading gains. It is not flashy, exciting or something that will necessarily catch people’s attention at a cocktail party. Above all, having this focus eliminates many of the daily distractions that can lead to sub-optimal long-term investment outcomes.
In some ways, dividend growth investing is straightforward and simple. It can also be subtle and complex. On the simple side, our search is all about building portfolios of companies that grow their dividends over time. A rising income stream can provide a sense of security in the face of economic uncertainty, inflation, stock market gyrations and whatever else may confront us in our investing future. On the subtle side, building and maintaining such a portfolio to deliver solid results over the long-haul requires work, thought and persistence. With this blog, I hope to cover all these issues – from some of the simplest concepts to the highly nuanced as well.
Those who have come to know me and my investment work over the years understand the incredible passion I have for dividend growth investing. I left a wonderful job managing portfolios in mutual funds for The Capital Group Companies in order to follow this passion for dividend growth. I did this knowing I would never have the access to all of the resources as I did at Capital, but that I could focus my entire attention on the area I know best – dividend growth. As founder and Portfolio Manager of Dividend Growth Partners, I manage dividend portfolios for our firm’s clients on a daily basis. With this blog I hope to share many of my thoughts in this area with a broader audience.