Over a hundred stocks have been screened.
The cream of the crop has been bought.
The portfolio is up and running.
The dividends are flowing in.
Now what?
More specifically, how do you maintain your dividend growth portfolio?
There is no point in doing all of this work if your portfolio would not be the success it is now 10-, 20-, and 30-years down the road.
No maintenance, no portfolio; no portfolio, no money.
However, because you’re following the Simply Dividends Guide it’s important to keep in mind that your maintenance role is minimal.
You’re looking for financial freedom.
Not another nine-to-five job as a day trader.
You’re not going to buy this stock today and fuss over whether to sell when it hits its 52-week high then beat yourself up for getting out too early because the stock shot up even more.
You don’t sweat on portfolio maintenance because you’ve set things up where the portfolio consists of sound businesses paying safe, growing dividends, there’s not much to do when it comes down to maintenance other than watching the safe, growing dividends flow into your account.
In fact, staying calm and doing nothing is a critical part of this whole dividend investing thing.
Research showed, and I’m being serious here, that between the years 1963-1993, there was a 90-day period (which accounted for 1% of the entirety between those two years) where investors experienced the best stock market gains.
And if you were outside of that 3-month period, you would have missed out on the best stock market gains within a 30-years of investing.
But it gets worse.
Way worse.
Because there’s an additional study that found that if you were outside the market for just 7% of the time (or a mere 4.5 years) between 1926 all the way through 1990, you would have earned absolutely nothing from 64 years of investing.
Can you imagine getting nothing after a person’s entire lifetime of work?
All because you were that guy.
That guy who was too afraid to dip his toes in the market until all stocks plummeted in a once-in-two-lifetimes recession.
And then he was still too afraid to get in the market because he doubted whether the prices were really at rock bottom.
At which point the trains have left the station with prices floating back up again.
Now be honest with yourselves.
Have you been that guy.
I know I’ve been.
It’s OK because we’re all human.
We’re afraid sometimes.
But from the evidence, we know for certain that holding stocks, staying in the market, and inactivity are the best things to do in investing.
Not rebalancing, not selling off, not waiting to buy the dip.
And the dividend growth strategy helps us control that fear.
Because we are proud owners of fundamentally-sound companies that have weathered through market downturns and emerged out stronger.
Because the safety and growth of recurring dividend income streams empower us to remain grounded over short-term stock price fluctuation by focusing on value.
Because we trust the well-experimented process of dividend growth investing that has lifted up many who come before us into financial freedom with consciousness, frugality and discipline.
So all we have to do for portfolio maintenance is to sleep on it.
Just kidding.
The fundamentals of the companies we invest in may change every now and then so we still have keep our vigilience.
Here’s what we need to do every month for 1 hour.
Refraining ourselves from doing too much is still Rule #1.
The Companies That We Already Own.
- Is the dividend safe?
- Will the dividend grow?
- How much should I pay for those dividends?
You’ll have these memorized by the second quarter of starting your portfolio.
You’ll ask the exact three questions as when you inaugurated the stock into your portfolio.
With an eye on whether anything has changed.
Update the No BS Reports with the latest quarterly or annual financial statements.
You can find them on the Securities and Exchange Commission’s search engine called EDGAR.
Confirm the growing trend of revenue, EBITA, free cash flow; and the declining trend of shares outstanding.
Review the economic moats of the company — are they just as wide as a quarter ago?
These will assure you that the dividend are still safe.
Next, has the company risen its dividends?
They’ll usually do so annually.
Lastly, review your fair value calculation with the DCF Model and the DR Model by refreshing the analyst projections.
If your stock holdings happen to be below fair value, grab more of it with the coming salary.
Of course its not always rainbows and butterflies.
There will be times when your company is heading downhill on dividend safety or growth.
Here are two things that you can do:
- Sit on it and watch for another quarter.
- Sell off your holdings.
I can’t teach you which action is best and I’m not going to try.
This judgement is the art of investing and it’ll take experience and wisdom.
What I’ll tell you is to research extensively, reference the thoughts of seasoned investors, and refrain from doing too much (remember rule #1).
Then make your own decision.
The Companies That We Don’t Own.
I have a habit of analyzing a new company every month.
Putting one company through the Dividend Lab Manual system at a time.
And I suggest that you do the same.
The rationale is simple.
The more companies you analyze, the more gems you will find.
Also the better the gems you will find.
Because over this process, you will slowly calibrate your internal ruler for measuring the quality of a company’s stock.
This is how you cultivate your experience and wisdom in investing.
Previous stocks which you had thought were gems will pale in comparison to the new ones you find.
The market then becomes a much larger place.
And obviously you’d be tempted to replace your old gems with the new ones you fancy.
Trust your judgement.
And remember Rule #1.
So there you have it.
One hour per month well spent.
Now that you’ve launched your portfolio and started maintaining it, it’s time to figure out the ideal number of stocks you should own.
Continue