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Sometimes it’s difficult to remember, especially when markets are tough as they are today and have been over the last few months, the things that got you here in the first place. By this I simply mean that if you’ve been an investor for a while, sometimes falling stock prices or a nasty market as we’ve had this summer can rattle you. It’s easy to doubt your ability as an investor, or forget how well you likely invested before the summer market turmoil. Don’t panic, this is only natural. When things go bad, we doubt ourselves. But don’t beat yourself up too badly. Instead, take a deep breath and go back to what you know.

Dividend Basics

Whether you have your dividends as a major part of your investing, even to the point of being mainly an income investor, or as one part of a portfolio, or even as a small portfolio along with larger holdings of other stocks or ETFs, refresh your memory as to why you are choosing dividend paying stocks. If you want high yields, you are going to choose certain types of stocks and you’ll do most of your dividend hunting in that arena. Maybe you don’t really go after capital appreciation in that case, not that you’d refuse it if it came along with the high income. Or perhaps you just like to mix and match. That is, maybe you like a combination of blue chip type large caps which pay more of what we might call medium yields, along with high yielders and some stocks that pay a small dividend but anchor your investments. Then there are other investors who simply take the dividends along with very conservative stocks and count the income as sort of an extra, along with the stability of slow growers.

Procter & Gamble’s Dividend Growth

Whatever your approach to how you put together your dividend stocks for your portfolio, take some time when the market has turned down as it has recently to re-evaluate your holdings-something you should do periodically, as you really should monitor them anyway-and your investment methods. Are you sticking to your discipline of selecting the kinds of stocks you want? Are you doing sufficient research on these stocks? Are you pruning your portfolio every so often? This personal portfolio review will hopefully lead you to the realization that you are sticking to your original plan and it’s been pretty successful, the recent market downturn notwithstanding. So you should polish your approach and go back into the search for dividend stocks you might like.

Some Simple Things To Remember

When stocks have fallen in price, it’s usually a good time to at least keep a list, either in your head or in your computer or wherever you choose to keep such things, of prospective stocks you might be interested in. One of the things to consider is a time honored idea that sometimes the best stocks to buy are more of the ones you own. That is, if you feel the company and its fundamentals are sound , so that those criteria for selecting the investment in the first place still exist, this might be good reason to buy more.

Annual Dividend Summary for Kraft Foods Security: KFT (Common Stock)

You’ll want to remember if you are primarily investing in dividend stocks to collect the income, whatever yield range or characteristics the particular stocks you hold have, that you can usually afford to ride out price fluctuations or even volatility in high yield stocks, so that you can collect the dividend. After all, if you are buying the stocks to collect the income and your evaluation tells you the underlying company is sound, you can afford to wait for the price to recover more in line with the stock’s value while you collect the income. This gives you the opportunity to ride out some market volatility when other investments might not be able to let you do that successfully. It doesn’t mean you blindly buy and hold, though if you find a long-term dividend stock that behaves well in bad and good markets and provides you with an attractive dividend, and your personal financial circumstances aren’t such that you need all the cash in the near term, you might be able to hold it for a long time. Then by all means do so if you’re comfortable with that.

The Basics Work

There are many investment techniques that can work well that are considered sophisticated or advanced, but there are also many that just confuse investors if investors are not really experienced nor comfortable using them. So don’t worry about it. You can grow a very handsome sum with rather straightforward, even basic, techniques in dividend investing. One of the secrets of the greatest investors is most of them found a niche and stuck with it and really didn’t deviate much. Buffett has his way, Templeton had his, Lynch his, O’Neil his and so on. Maybe yours is sitting back collecting cash from rather unexciting seeming dividend stocks. The cash you’ll get from this method, however, can be very exciting.

Committed to your Global Profits,

Jim Trippon
Chief Investment Analyst