Think Years Not Months
When you buy something, you usually ask the question, “Will this work?” An even better question is “Will this accomplish what I want it to do?” This applies to buying transportation, cookware, dietary supplements, prescriptions, weed control products, insurance, and relationship advice. Of course, in order for you to answer the question, “Will this accomplish what I want it to do?”, you have to define what it is supposed to do. Is it 50% effective, 95% effective, or always effective?
In addition, you should ask the question, “How long will this last?” Part of the cost of a quality product is quality. If I buy a cheap product, and the warranty is for one year, then I am not necessarily getting value for my dollar. A recent example is a garden hose we bought with a lifetime guarantee. We purchased the hose in 2020 and it failed this summer. I took it back to the store and they refunded the cost of the product. I then purchased a new, but better-quality hose for more money, but it also has a lifetime guarantee. I could have purchased a hose for half the price, but I suspect it would fail before the warranty expires.
I think the same holds true for many, if not most investments. The investment “terms and conditions” never have a lifetime warranty, but there is something to be said for investments that last a long time and continue to provide growing dividend income.
3rd Quarter 2023 Results
Here are two ways to look at our 2023 YTD results. By way of reminder, it is normal for the months of March, June, September, and December to show the greatest dividend income. Most stocks and ETFs pay quarterly dividends. If you compare the months of March, June, and September, you will see March has the highest dividend income. This is due largely to special one-time dividends, not quarterly dividends. However, notice September’s dividend income exceeded the June dividend total.
Another way to examine the results is to look for the positions contributing the most to the total. In our situation, F, MAIN, ARCC, VYM, and CSWC are in the top five. GAIN, ABR, AVGO, MPW, and PFE round out the top ten. A word of caution is in order for MPW. This REIT may have some struggles and should be considered as a much higher risk investment. However, I am not selling our shares.
My Experience with Dividend Growth
It isn’t a blind leap of faith to use the dividend growth model for retirement. Even during bear markets, and during the Covid-19 market plummet, our dividends continued to arrive. The current year has been turbulent as well, and dividends have continued to flow into our accounts.
The best way to illustrate this is using a tool provided by Fidelity Investments. There is a PERFORMANCE (in the “More”) tab on Fidelity, and this can be used to see “BALANCE AND PERFORMANCE ACTIVITY” in different time frames and by monthly, quarterly, or annual views. This is a good way to measure performance. Of course, this only works if all of your investment accounts are with Fidelity Investments. Otherwise the work to do the analysis can be cumbersome, if not just mind-numbing.
Ten- and Twenty-Year History
As I said at the beginning of this post, wise investors “Think Years Not Months.” Anytime you get fearful about a turbulent market remember two things: 1) Investors don’t react to trader’s behaviors and 2) Investors think like owners. Owners make decisions differently than renters. Stock traders are like renters. They want a short-term lease on the stock so they can leave sooner rather than later.
What Should You Do? (Repeat from last Quarter!)
Let me strongly suggest that you have a strategy. It does not have to be dividend growth, but I would say it should be anti-bond and anti-annuity. There are exceptions to this “rule”, as there are some who might benefit from tax-free bonds and others who might need an annuity for specific reasons. However, the vast majority of investors would do well to avoid or minimize putting money into annuities and bonds.
Full Disclosure
I have no plans to sell any of our investments.
Final Word
I think bonds are a poor long-term choice for most investors. Furthermore, “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.” Proverbs 21:5
Know Your Flocks & Herds 