Becoming a Detective

The Secrets of Growing Income Part 5 Dividend Growth Detective

As a young boy, I became more interested in reading when I discovered the Hardy Boys books by Franklin W. Dixon. I don’t recall how many of the books I had, but I think I had almost all of them. Being a detective seemed like fun, never mind the risks to life and limb. Never mind the long hours without getting any clues or not seeing progress. Being a dividend detective should not consume hours of your time. Just like crime detectives, having a couple of magnifying glasses and finger-printing tools might be helpful.

The Hardy Boys Detective books by Franklin W. Dixon

The Finger Printing Magnification Tools for Dividend Growth

My Seeking Alpha subscription becomes more-and-more valuable to me over time. One of the great features is the Portfolio tool. This morning I used that tool to create a top-ten list of the top ten investments in two different dividend-focused ETFs: SCHD and VYM. That took about five minutes. I also explored Dividend.com to see what the longest-dividend-increase stocks were. I suspect you might not recognize some of the companies in the top five. They are AWR, DOV, PG, GPC, and NWN. You probably recognize PG and GPC. Here is an image that shows what you can learn from Dividend.com.

SOURCE: DIVIDEND.COM Dividend Champions in Years of Increasing Dividends

ETF – COMPARE PEERS TO VYM

The easiest and most diversified way to get decent dividend growth over the course of your investing journey is to find a couple of good ETFs or mutual funds that do it for you. This is not expensive, and you really don’t need an investment advisor to make this type of decision for you. I prefer ETFs over mutual funds, but I won’t list the reasons here.

I use Seeking Alpha to do peer comparisons. In this case, because VYM is number one in our top ten investments, I started there. I clicked the “Peers” link and SA automatically gave me the following ETFs for the comparison: VYM, SCHD, DVY, HDV, DGRO, and SDY.

Compaing VYM to Peers on Seeking Alpha

You should notice the following: 1) Although I am looking for dividend growth because I want automatic increasing income, I am also concerned about the performance of the investment. 2) The 5-Year CAGR percentage is a helpful way to see how fast the dividend has grown historically. In general, I want to see a dividend growth rate exceeding five percent. Remember inflation?

Comparing Dividend Growth and 10 Year Price Performance SOURCE: Seeking Alpha

VYM TOP TEN

The top ten investments in VYM are not the same as the top ten in SCHD. However, there is some overlap. The reason I hold more shares of VYM than SCHD is quite simple. VYM has 445 holdings and SCHD has 103. In other words, VYM has a broad base of dividend-paying stocks and SCHD is more focused. However, SCHD has a better price performance over the last ten years. Therefore, if an investor is more focused on the growth of the price of their shares, SCHD is probably a better choice than VYM.

VYM Top Ten Dividend Growth
VYM Compare Top Ten Investmenst for Years of Dividend Growth

SCHD TOP TEN

VYM is a good ETF for investors focused on diversification and dividend growth. SCHD is probably a better choice for those who are willing to be more focused on performance. In fact, an argument could be made that I should make SCHD number one in my top five investments. Maybe some day it will be.

Summary

You may want to look at Dividend.com to find individual stocks with outstanding dividend growth histories. However, for the investor with less time and a desire for more diversification, sticking with ETFs that automatically provide income growth is probably your best course of action.

What Might You Do?

You may want to use Seeking Alpha to compare your existing portfolio holdings. If you are interested in my help, I may be able to do the work for you. However, depending on the number of holdings you have, I might not do that for free. It also depends on how many want that extra help. My time is limited, and the number of readers is increasing, so I cannot make too many promises I might not be able to keep.

Full Disclosure

Cindie and I own a combined total of 2,530 shares of VYM.  We hold 750 shares of SCHD. We have 501 shares of DGRO. There are other ETFs and many dividend growth stocks in our portfolio. Some of them are ABBV, PFE, and HD.


A Reminder from Matthew 6:19-20

“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal.” Matthew 6:19-20 ESV