Long-Term Thinking and Income

What are the major applicances in your Easy Income Strategy?

The best thing about a long-term investment perspective is that it requires very little time, effort, or maintenance. I don’t have to day-trade, sell covered call options, or even think about the ups-and-downs of a volatile stock market. It is like the appliances in our kitchen. We have some large appliances, like the refrigerator, the stove, the microwave oven, and the dishwasher. They are always available to do the work required to store, cook, and do the cleanup. I don’t even think about it. We just use them (with the exception of the dishwasher, because I like to wash dishes by hand.)

We don’t swap appliances in and out each month. They are installed and they do the work. Perhaps more investors would benefit from installing some stock and ETF “appliances” in their portfolio of investments that produce delicious dividends each month, quarter, and year. Even better, if the amount of delicious dividends increases, then there is more to share with others.

The Structure of Our Investments

As I mentioned yesterday, bonds and bond ETFs don’t play a role in our kitchen of investments. By way of reminder, Fidelity Investments says that I am an investor with a “Most Aggressive asset mix.” That is investor-speak for “Wayne doesn’t have enough bonds and has a lot of stocks.” But that doesn’t mean stupidity is the plan for our investments. Perhaps the best way to understand the approach is to look at our top ten investments using Seeking Alpha. I will also talk about the investments in my traditional IRA, as it is the largest account I manage.

A most aggressive asset mix does not = Stupid.

EIS Investment Number Eleven

This is the 11th post in the series. My goal is to present arguments in favor of a simplified and uncomplicated way to have income before and in retirement that grows even if we do nothing.

The Top Ten Investments Dividend Metrics

First of all, we want to look at the “top ten” across all of our investments. Because we own shares of PFE, MAIN, O, ARCC, and VYM in multiple accounts, they tell a story. As a dividend growth investor, I want to be mindful of the dividend payout ratio. This is the ratio that can tell a story about the relative safety of the dividend payout going forward, assuming the stock is in a company that is prospering over the long-term. The following image shows the top ten investments sorted by the ticker symbol.

Top Ten Investments include rational dividend metrics

The Top Ten Investments Years of Growth

If you are a dividend growth investor, then you want the dividends to grow. Seeking Alpha makes it easy to see the “Years of Growth” and the “Dividend Yield TTM.” “TTM” means “trailing twelve months.” I do not want to see any red for any of the ratings for our top ten investments. Green is best.

The Top Ten do not contain red warning Ratings. Yellow is hold and green is buy.

Wayne’s Traditional IRA Consecutive Years

Excluding options positions, which appear as separate investments, there are 74 positions in my traditional IRA account. The top ten investments in my IRA, from largest to smallest are: AVGO, VYM, STX, HPQ, F, AMD, PFE, MAIN, CM, AMZN. The ticker symbols in BOLD are investments that pay a dividend. In other words, only AMD and AMZN do not pay a dividend. However, I can trade options on those positions to make some additional income.

Consecutive Years of Dividends tells you something about a company’s management.

But there is more than one way to look at the “top ten.” One way is the top ten in consecutive years of dividend payments (2). Perhaps even more important is “Years of Growth” (1) in the dividend. As you can see, NNN and O have a surprisingly long history of increasing dividends. Both of those investments are REITs.

Wayne’s IRA Investment Value Change Perspectives

Recently technology and banking investments have been hammered by bad news. Therefore, another key element of investing is to understand total potential profit. If I were to sell my shares of STX, HPQ, F, AMD, CM, and AMZN during these volatile times, I would be selling at a loss. The beauty of being a dividend investor is that the current price of the shares is not a main concern. I still receive dividends on most of these investments. Therefore, while it looks like I have a loss on my shares of STX, I have been receiving dividends and the proceeds from covered call options during the time I have owned the shares.  The true loss is far less than $34K. Patient investors recognize this as a part of the investing puzzle. Because I own 1,600 shares of STX, I receive $4,480 in annual dividends. Patience is a virtue in the life of an investor.

Sometimes Bear Markets can make your investments less “valuable” in the short-term.

Dividend Consistency

The best kind of dividends are consistent dividends. Seeking Alpha also helps visualize this characteristic. What you might find interesting is that the top ten in this category is not the top ten investments in my IRA. Some appear that were not in the previous images. For example, IBM, ADC, HIW, VLO, and EOG show up in this list.

IBM, HPQ, PFE, CM, and NNN all have a history of consistent dividend payouts

Years of Dividend Growth

Another good way to sort the investments is by “Years of Growth.” I this case, NNN and O are the winners. So are O and STAG. They are all REITs. Many investors miss out on opportunities by ignoring REIT investments. HD is a consumer retail investment, and both IBM and HPQ are technology stocks. The thing to notice is that there is diversification by sector. I don’t focus on a single sector, but I do prefer the financials, real estate, health care and technology stocks for many of our investments.

Don’t miss the opportunties in REITs: NNN, O, STAG, and ADC.

What Should You Do?

We come to the end of this post, and you may be wondering, “What should I do with this information?” A better question might be, “What does my current strategy look like, and does it offer growing income if I am a patient investor?” I am always willing to look at your positions and provide some feedback. However, don’t buy my top ten investments until you examine your own goals and set a strategy. Then, and only then, can you start picking your own top ten.

Full Disclosure

Cindie and I own stocks and stock ETFs. We don’t own bonds.