Safe Dividend Investing
In 2000, I lost $300,000 in mutual funds that an investment advisor had put my lifesavings into.... I lost it because I had entrusted it to an industry that does not educate investors nor encourage them to look closely at what that industry is doing with their money..... I set out to find a better, safer way to invest..... My podcasts relate to what I learned in creating a generous, reliable income and in growing my wealth.... A few of the more important lessons I learned and explore are:.... (1) It is critical that you become a self-directed investor.....(2) If you can not easily measure the risk and potential in an investment, then do not invest in it. This excludes from your portfolio bundled investment devices, like mutual funds, ETFs and Index funds,..... (3) Financially strong companies who have paid “good dividends” for decades will continue to stay strong and continue to pay good dividends because it is both part of their "character" and in their executives selfish interest.....(4) Diversification is critical. Investing equally in the best 20 strong dividend stocks is the ideal.....A portfolio of 20 limits your risk in any one stock to 5% of your wealth..... No matter how strong you think a stock is, do not fall in love with it..... I have lived very well off my steady dividend income for 18 years, through two market crashes and one pandemic. I have watched my portfolio’s capital more than triple from where I started, despite taking out a generous dividend income every year to live on... In charts, for my second investment book,(Safer Better Dividend Investing), I spent months scoring all 628 dividend stocks paying dividends of 6% or greater traded on the TSX, NYSE and the NASDAQ. I discovered dozens of stocks that can provide not only a generous dividend income but outstanding capital growth.....Financial independence is realizable for careful, patient, dividend investors.
Safe Dividend Investing
Podcast 166 - A Simple, Safe, Easy Way to Invest Profitably.
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Welcome to Safe Dividend Investing’s Podcast # 166 on May 2nd of 2024.
Today, I will be answering 1 interesting investment question.
QUESTION (1)
IS THERE A SIMPLE, SAFE,EASY WAY TO INVEST PROFITABLY?
SIX INVESTMENT BOOKS, BY IAN DUNCAN MACDONALD, ARE AVAILABLE FROM AMAZON.COM KINDLE BOOKS, THE FOLLOWING ARE THE 2 LATEST:
(1) CANADIAN HIGH DIVIDEND INVESTING -
In this 325-page book, learn how to select, purchase and build a portfolio of 20 Canadian strong dividend stocks. Summary records of 215 stocks are sorted in multiple ways, and each stock's unique page provides detailed scoring data and 24 years of price and dividend trend data. Released September 23.
(2) NEW YORK STOCK EXCHANGE'S 106 BEST HIGH DIVIDEND STOCKS -
In this 334-page book, there is a 2-page report for each company scoring 11 data elements. It also lists 23 years of historical share price and dividend payouts so that investors can judge the stock's reliability. Released December 2022.
A TRANSCRIPT OF THIS PODCAST IS AVAILABLE.
If interested, you can can view a long interview I had on Troy Marsh's Dividend Obsession YouTube Channel at Youtube.com/watch?v=5BnrDp8CDw9. His email address is dividendobsession@gmail.com.
FOR MORE INFORMATION ON Ian's 6 INVESTMENT BOOKS, 3 NOVELS, PAINTINGS, PHOTOGRAPHS AND DIGITAL ART VISIT www.informus.ca
Ian Duncan MacDonald
Author and Commercial Risk Consultant,
President of Informus Inc
2 Vista Humber Drive
Toronto, Ontario
Canada, M9P 3R7
Toronto Telephone - 416-245-4994
imacd@informus.ca
PODCAST 166
SAFE DIVIDEND INVESTING
2 May 2024
Greetings to listeners all around the world. Welcome to Safe Dividend Investing’s Podcast # 166, on May 2nd of 2024.
My name is Ian Duncan MacDonald. In today’s podcast, I will be answering one interesting investment question. Some of you may be interested in a long interview of myself by Troy Marsh on his YouTube Podcast Dividend Obsession
The exact YouTube address is, Youtube.com/watch?v=5BnrDp8CDwQ
Troy’s email address is dividendobsession@gmail.com
The objective of my books, my website and my podcasts are to show all those seeking financial independence how to become informed, confident, successful, self-directed investors.
QUESTION #1
IS THERE A SIMPLE, SAFE, EASY WAY TO INVEST PROFITABLY?
Investing can be as complicated as you want to make it. However, complicated does not make investing easy or profitable.
You can spend years reading hundreds of books whose authors will try to impress you with complicated formulas and investment practices that once you master them will make you rich, rich, rich. Soon or later, you come to the realization that trying to learn how to invest from books just doesn’t seem to work.
You can abandon the books, videos and the classroom instructions and give all your money to a professional financial advisor. He too will assure you that he will make you rich, rich, rich.
He too will try to impress you with complicated investment jargon and incomprehensible strategies that only a professional like him could possibly understand. Eighty percent of the time he will try to convince you to put your life savings into a fund of one kind or another because it is the easiest thing to sell you. This plunge into blindly trusting some vague authority managing a fund gives you zero control over your investment portfolio.
At some point you might realize that you have only a vague idea of the slow erosion of the money in your fund. You might puzzle over how the advisor, the company he works for, and the fund managers are all being paid out of your investment. You know that no one works for free.
On a million dollars placed with your advisor you can expect to pay everyone attached to it between $20,000 and $30,000 a year in fees, charges, and commissions. Not just this year, but every year that your money is with that advisor. You may have the uneasy feeling that the advisor is benefiting far more from your money you than you are.
If you want total control of your investments and to understand exactly what you are invested in and how much it is costing you, there is only one solution. That is to become a self-directed investor. No one will then touch your money but you.
If you keep your self-directed investing simple you can become a successful investor. You are not stupid. You can easily understand the simple reality that for a company to make a profit its revenues must exceed its expenses.
You can also easily understand that if you buy a partnership in a long-established profitable company that as a part owner of that company, you could expect to share in that company’s profits. When you buy shares in a company on a stock exchange you are becoming a part owner of that public company. Some public companies share their profits with their owners. Those payments are called dividends.
Thus, if you as an investor simply want to receive a good steady income from an investment, you buy shares in companies that pay dividends. The fact the price you paid for those dividend paying shares today may be higher or lower tomorrow deserves is only of passing interest.
What you want to see is that the monthly or quarterly dividend payments have been constantly been paid for decades and have been increasing. This gives you confidence that the management of this company know something about making those profits from which your dividends will be paid. It also confirms that the executives controlling such a company have a habit of sharing the profits with their fellow shareholders, which is unlikely to change.
You might also notice that for most dividend paying stocks steadily rising dividend payments are usually accompanied by steadily rising share prices. This means that not only will you receive a steady income, but your wealth will also be steadily increasing by buying these shares. Thus, years in the future if you should ever choose to sell your shares they will most likely be worth far more than what you originally paid for them.
If you restrict your investing to the simple objective of only investing in companies that pay dividends you have immediately eliminated for consideration 47% of the 16,000 stocks supposedly available in North America.
If your objective is only to invest in the 20 best dividend stocks traded on North American exchanges, how do you sort the thousands of dividend paying companies from most to least desirable? You open a self-directed investment account with your bank. If you do your banking over the internet, most banks offer to open a self-directed stock trading account online for you. It will be linked to your other bank accounts. This allows the bank to easily transfer dividend income from your investment account to your bank account. You should not have to go into your bank branch to open an investment account. It can be opened online.
The major banks have many free investment tools and aids available free of charge to their self-directed investment customers. One of these tools would be a selector tool that allows you to sort through all the stocks available on stock exchanges. These selectors can allow you to eliminate all but those 20 stocks whose average dividend yield percents will give you a steady 6% to 9% return on what you have invested.
For example, you can look at each stock’s monthly history of dividend payments and stock price increases. Those companies who have not existed for 20 years can immediately be rejected. Those whose share prices and dividend payments have declined can also be eliminated.
Since dividends are paid out of profits, those companies whose “operating margins” are less than 20% can be eliminated. The same goes for the “book values” of a company’s stock calculated by accountants. I like to see a stock’s book value close to a stock’s share price or even higher. These selection factors are identified and explained in my investment books and the stock scoring software I supply with my books that makes the identification of good stocks easy.
You buy those stocks online and send money from your bank account to your investment account to pay for them. Your bank’s simple, easy, fast, well thought out service registers your stock ownership and so the monthly dividend payouts can be instantly transferred to your investment account. That 6% to 9% dividend yield percent sure beats the small interest paid on bank savings account.
Twenty stocks diversify your portfolio enough, so you do not have all your “eggs in one basket”. Life is strange and while a once-in-a-life-time incident may negatively impact one stock, it is not going to impact all 20 stocks. One stock’s deviant behavior among 20 would hardly be noticeable.
The 20 stocks is also small enough a portfolio that it requires little time to acquire your stocks or to keep an eye on them. I spend perhaps 20 minutes a week monitoring my portfolios.
What I find interesting is that many who are intimidated and uncomfortable with the idea of investing in the stock market have no similar hesitation in investing in real estate. They see real estate as understandable, something they can feel and touch. Those seeking a reliable investment income conveniently forget about all the problems associated with investing in real estate that are absent from stock investments.
For example, suppose you have inherited a million dollars and want to invest it in rental real estate to create a retirement income. You would first have to physically inspect all the properties you would consider buying. This takes a great deal of time and expense. When you finally decide on a property you need to hire a lawyer to make sure your ownership is properly registered.
Since this property was bought to provide income, you now need to find tenants. This requires the expense of advertising and time spent showing the property. Once the tenant is living on the property you must now maintain the property, upgrade it, insure it, pay taxes on it and collect the rent.
How much rent can you get for a million-dollar property in your area? Let us suppose you can get $5,000 a month or $60,000 a year. This is a 6% return on your million-dollar investment. Now deduct all the previously mentioned expenses and demands on your time for earning this monthly income. Keep deducting most of these expenses for all the years you rent this property. When you sell that property expect to pay tens of thousands of dollars in real estate sales commissions, lawyer’s fees, and taxes.
Compare the real estate investment to the $60,000 you would receive in dividend income by investing in dividend stocks. The only expense would be a one-time $180 fee that the bank might charge you for registering and processing all 20 of your shares. If you should ever sell the 20 shares you should expect to pay the same $180 fee. Some financial institutions would charge nothing.
Furthermore, while income from a rental property is taxed as normal earned income, the income from dividends, in most jurisdictions, is taxed at a low rate because the corporation paying the dividend has already paid taxes on its profits.
The fear and prejudice that many real estate investors have against stocks is costing them hundreds of thousands of dollars over many years. As I have tried to show, if they adopted a simple dividend stock investment strategy, they could be far better off financially.
The typical image they have of a stock investor is normally that of a gambler intent on buying a stock at 50 cents that rumors say will soon be worth $50. This gain is based on the stock’s supposed much hyped potential not its current profits. This is the same casino thinking that bets on making a fortune by picking the right number on the spinning of a roulette wheel.
Unfortunately, no one can accurately predict future share prices. There is always constant conflict in the stock market between optimistic speculators who think the price of a stock is going up and pessimistic speculators who think the price is going down. Almost all stock speculators lose money because of this unpredictability.
Unlike dividend investors, speculative investors do not expect or rely on a generous reliable income from their stock purchases to live on. They will often need to sell stocks to generate enough income to live on. Sometimes that selling price is below their purchase price. Their constant buying and selling of stocks reduce the chances of them ever achieving profits in the stock market.
If you have never considered investing in stocks reconsider your decision. If you keep it simple by investing in the shares of long-established, financially strong companies paying high dividends it can provide a safe, generous, ever-growing income and capital gain.
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