6 January 2012
An income producing strategy for 2012
The Guide to Dividend Investing updated
As we enter 2012, we will no doubt continue to be buffeted by headlines streaming out of Europe, China and Washington. And it's safe to say you can expect volatility to be similar to what we saw in 2011.
Instead of trying to predict and trade the enormously complicated macroeconomic environment, we intend to use the volatility to our advantage.
We focus on finding high quality dividend paying companies that are unfairly beaten down by unrelated macroeconomic factors.
Then, use weakness in the overall market to buy shares in these companies at fire-sale prices, i.e. when they are historically undervalued.
Whenever uncertainties in the markets are (about to be) cleared up and sentiment has(is) changed(ing) investors will once again start thinking about the fundamentals of companies that ultimately will lead to a rally in shares.
But, you see I believe that investments, in particular shares, should work for us all the time. Not just when they happen to be going up in value, but rather by paying us to own them, year in, year out.
Not only that but I expect them to pay out more and more the longer they are held.
And ironically, once you have found investments that meet that requirement capital appreciation comes naturally afterwards.
This philosophy has allowed me to secure positive market beating returns in the past year from the Dividend Income Portfolio that I ran at Dividend Income Investor.com.
It is also why another year of low interest rates don’t bother me too much, raking in increasing dividends from high quality dividend companies.
The time has never been better to get into high quality dividend paying shares. I believe, high quality companies paying increasing dividends offer the kind of security and income stream that no other investment can.
Simple investment strategy anybody can use
Having determined which high quality dividend paying companies I want to own, and, at what price, I just spent some minutes at my online ISA account setting limit buy-orders.
And that's it.
Then, I just wait patiently for the stockmarket to sell me those shares, but only when they have reached those pre-determined historically undervalued levels.
And that’s how you maximise total real returns and that's how I like it these days.
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Guide to Dividend Investing - 2012 edition
I have been working on the 2012 edition since late November, when I first began to update, add new material, and reorganise some of the text.
While some readers have asked to include more examples of historically undervalued companies the focus of the Guide squarely remains on its core premise as an introduction to dividend income investing with an emphasis on investing in high quality dividend paying shares when they are historically undervalued.
Several improvements and upgrades to the text have been made. All of the chapters have been checked and updated where necessary. Several of the chapters have been enhanced and expanded. In particular: the very important chapter on the conceptual and theoretical foundations of the maths behind our specific dividend income investing methodology.
Other new features include the introduction of Dividend Value Profiles at Dividend Income Investor.com showing the dividend yields of various companies at which their share prices are at historic undervalue levels as well as at historic overvalue levels.
The resource on further reading materials has been expanded. Initially, I had considered including an overview to the many articles that I have written on dividend growth investing, with direct links to the articles, but this is something for a later edition.
Till next time
Dividend Income Investor.com
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