[Sure Dividend]
High quality dividend stocks, long-term plan
The 8 Rules of Dividend Investing
I believe your financial future is best handled by the person with the most at stake; you. Sure Dividend is here to help independent investors simplify the process of building and maintaining a high quality dividend growth portfolio.
Sure Dividend uses the 8 Rules of Dividend Investing to clarify the process of selecting high quality dividend growth stocks so you know exactly what and when to buy and sell. The 8 Rules show why dividend growth investing continues to be so effective, both through historical evidence and through the financial wisdom of some of the greatest investors of the last 100 years.
Each rule is based on common sense principals from extraordinarily successful investors Each rule is quantifiable and actionable Each rule is academically tested and has historically improved long-term results.
Rules 1 to 5: What to Buy
Rule # 1 – The Quality Rule
“The single greatest edge an investor can have is a long term orientation”
– Seth Klarman
Common Sense Idea: Invest in great businesses that have a proven long-term record of stability, growth, and profitability. There is no reason to own a so-so business when you can own a great business for a very long time.
Financial Rule: Invest only in stocks with 25 or more years of dividend payments without a reduction.
Evidence: The Dividend Aristocrats (stocks with 25+ years of rising dividends) have outperformed the S&P500 over the last 10 years by over 2% each year
Source: S&P 500 Dividend Aristocrats Factsheet
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Rule # 2 – The Bargain Rule
“Price is what you pay, value is what you get”
– Warren Buffett
Common Sense Idea: Invest in businesses that pay you the most dividends so you can increase your cash flow from your investments.
Financial Rule: Rank stocks by their dividend yield.
Evidence: The highest yielding quintile of stocks outperformed the lowest yielding quintile of stocks by 1.76% per year from 1928 through 2013.
Source: Dividends: A Review of Historical Returns by Heartland Funds
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Rule # 3 – The Safety Rule
“The secret of sound investment in 3 words; margin of safety”
– Benjamin Graham
Common Sense Idea: If a business is paying out all their profits as dividends, they will have nothing left to grow the business. When a downturn in the business occurs, they will have to cut the dividend. Invest in businesses that have much higher profits than they do dividend payments so your dividend payments are secure.
Financial Rule: Rank stocks by their payout ratios.
Evidence: High yield low payout ratio stocks outperformed high yield high payout ratio stocks by 8.2% per year from 1990 to 2006.
Source: High Yield, Low Payout by Barefoot, Patel, & Yao
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Rule # 4 – The Growth Rule
“All you need for a lifetime of successful investing is a few big winners”
– Peter Lynch
Common Sense Idea: Invest in businesses that have a history of solid growth. If a business has maintained a high growth rate for several years, they are likely to continue to do so. The more a business grows, the more profitable your investment will become.
Financial Rule: Rank stocks by their long-term revenue growth.
Evidence: Growing dividend stocks have outperformed stocks with unchanging dividends by 2.4% per year from 1972 to 2013.
Source: Rising Dividends Fund, Oppenheimer
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Rule # 5 – The Peace of Mind Rule
“Psychology is probably the most important factor in the market – and one that is least understood”
- David Dreman
Common Sense Idea: Look for businesses that people invest in during recessions and times of panic. These businesses will have a relatively stable stock price that will make them easier to hold for the long run.
Financial Rule: Rank stocks by their long-term volatility.
Evidence: The S&P Low Volatility index outperformed the S&P500 by 2.00% per year for the 20 year period ending September 30th, 2011.
Source: S&P 500 Low Volatility Index: Low & Slow Could Win the Race
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Rules 6 & 7: When to Sell
Rule # 6 – The Overpriced Rule
“Pigs get fat, hogs get slaughtered”
– Unknown
Common Sense Idea: If you are offered $500,000 for a $250,000 house, you take the money. It is the same with a stock. If you can sell a stock for much more than it is worth , you should. Take the money and reinvest it into businesses that pay higher dividends.
Financial Rule: Sell when the normalized P/E ratio is over 40.
Evidence: The lowest decile of P/E stocks outperformed the highest decile by 9.02% per year from 1975 to 2010.
Source: The Case for Value by Brandes Investment Partners
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Rule # 7 – The Survival of the Fittest Rule
“When the facts change, I change my mind. What do you do, sir?”
– John Maynard Keynes
Common Sense Idea: If a stock you own reduces its dividend, it is paying you less over time instead of more. This is the opposite of what should happen. You must admit the business has lost its safety and reinvest the proceeds of the sale into a more stable business.
Financial Rule: Sell when the dividend payment is reduced or eliminated.
Evidence: Stocks that reduced or eliminated their dividends had a 0% return from 1972 through 2013.
Source: Rising Dividends Fund, Oppenheimer
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Rule 8: Portfolio Management
Rule # 8 – The Hedge Your Bets Rule
“The only investors who shouldn’t diversify are those who are right 100% of the time”
– John Templeton
Common Sense Idea: There are 10 stocks on your list each month. They are ranked in order. When you go to invest, buy the highest ranked stock of which you own the least of on the list. You will be spreading your bets over different businesses as time goes by. Better yet, you will still be investing in great businesses at fair or better prices.
Financial Rule: Buy the highest ranked stock of which you own the least.
Evidence: 90% of the benefits of diversification come from owning just 12 to 18 stocks.
Source: Frank Reilly and Keith Brown, Investment Analysis and Portfolio Management, page 213
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Have questions on the 8 Rules of Dividend Investing? Please reach out to me at [ben@suredividend.com]. I want to spread the effectiveness of dividend growth investing. Any questions I can answer are a step in the right direction, so please feel free to reach out to me if you have any questions at all.
High Quality Dividend Growth Stocks
The 8 Rules of Dividend Investing find high quality dividend growth stocks suitable for long-term investors. Five of the top 10 September high quality dividend growth stocks are listed below so you have an idea of what type of businesses the 8 Rules of Dividend Investing selects.
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Accumulation & Retirement
There are two phases in the course of an investors life; accumulation and retirement. In the accumulation phase, you actively save money every month or quarter to build your portfolio.
In the retirement phase, you are no longer saving money, and may be withdrawing money from your portfolio if your investment income is not covering your expenses.
Each phase requires a different investing strategy. Sure Dividend’s Portfolio Building Guide (included in newsletter) explains exactly how to build your dividend growth portfolio using the 8 Rules of Dividend Investing when you are in the accumulation phase. The Sure Dividend newsletter includes the Portfolio Building Guide along with the current rankings of the top 10 high quality dividend stocks based on the 8 Rules of Dividend Investing so you have everything you need to implement the strategy.
The 20 Stock Model Portfolio is suitable for investors in the retirement phase. The 20 Stock Model Portfolio shows exactly how to build a high quality dividend growth stock portfolio that seeks to maximize gains from diversification by minimizing the average correlation of the Top 20 dividend growth stocks based on The 8 Rules of Dividend Investing. This portfolio aims to reduce stock price volatility while providing dividend growth and current income.
Long Term Thinking Required
I am not looking for customers who are interested in constantly switching their stock positions. Sure Dividend subscribers think of stocks as businesses to own, not lottery tickets with which to gamble. If you are an independent investor focused on long-term results, then I believe you will benefit from the Sure Dividend plan that matches the phase of investing you are in currently.
60 Day No Obligation Full Refund Trial
Sure Dividend’s newsletter and 20 stock model portfolio simplify the process of high quality dividend investing. Our rates are made to be affordable for any investor. Sure Dividend makes the following guarantees:
60 Day Full Refund Trial Period No contracts, cancel any time Your price will never increase after subscribing
Immediately after you subscribe, you will be sent to a page to download your first newsletter and model portfolio in PDF format. Sure Dividend will email you a new newsletter and model portfolio on the first Sunday of each month in PDF format.
You can benefit from the Sure Dividend newsletter and 20 stock model portfolio by knowing exactly what dividend stocks to buy and sell, greatly simplifying the investing process.
The Sure Dividend newsletter is built with those in the accumulation phase of investing in mind. The 20 stock model portfolio is constructed for those who are in the retirement phase of investing
Only 9 USD per month, starting when you subscribe
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If you have any questions, please reach out to me at [ben@suredividend.com].
Thanks,
Ben Reynolds
Sure Dividend
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