Wednesday, May 11, 2011

Portfolio Management: 4 - Investing Account

In the next video of my portfolio management series I discuss the second of my three accounts, the investing account.

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

Dividend investing. I rarely see a more misunderstood strategy when it comes to investing. Take Johnson and Johnson (JNJ) as an example. At first look it appears to not give much profit. 2% - 3% a year yield won't keep up with inflation so why bother. Looking back at 2000 the share price has only risen about 25% over 11 years. We are practically at the same price level so its made their shareholders no profit right?

Look at the actual dollar amount of the dividend paid each year...

2000:  $0.60
2001:  $0.71 (+18%)
2002:  $0.795 (+12%)
2003:  $0.925 (+16%)
2004:  $1.095 (+18%)
2005:  $1.275 (+16%)
2006:  $1.455 (+14%)
2007:  $1.62 (+11%)
2008:  $1.795 (+10%)
2009:  $1.93 (+7%)
2010:  $2.11 (+9%)
2011:  $2.25 (+7% estimated)

Since 2000 JNJ has nearly quadrupled how much they are paying out in dividends.
Thats through the Dotcom bubble, 9/11, and the housing and banking crisis / Great Recession. Even this year with all the mass recalls where some are predicting the end of JNJ and some say their business is in shambles, they are growing the company and continuing to pass on that growth to the shareholders.
When the country lost millions of jobs and the stock market fell by nearly 50% of its value JNJ still gave their shareholders a 7% raise in their pay.

That's the sort of dependability we want with our portfolio. That clearly out paces inflation so we do not have to worry about that much either. JNJ isnt alone. There are 100 companies that have raised their dividend for 25 years or more in a row. 144 companies that have raised it by more then 10 - 24 years in a row.

When was the last time your day job gave you a 10% raise every year?

No comments:

Post a Comment