March 2016 – Dividend Tycoon

Dividend update – March 2016

March 2016 Dividend Income: Nil

I do not have any dividend income from international stocks to report. As I said in the section of the site about myself, I expected a slow start. On the positive side, I am expecting some good cash flow soon, as my largest holding in South Africa is due to declare a dividend, hopefully.

There are a few reasons for the slow start. There is the current issue facing any investor from an emerging market economy, a weak currency. South Africa, like Brazil and Russia, has experienced a sharp depreciation in the value of the currency with which I earn. This can be due to issues as random as the country’s credit rating, over which one has no control. This has been quite scary at times, and added to that the political risk which has increased as a result, has been one of the reasons which made me want to become a Dividend Tycoon with international stocks.

However, one of the keys of investment success is not too rush into an investment due to fear, or to sell when there is blood on the floor. Currently there is blood on the floor when it comes to the South African rand, the Brazilian real or the Russian ruble, and converting these currencies into dollars or pounds right now may be a classic investment mistake. So, in short there is no rush right now. However, one should also not try to time the markets too much, and I am determined as ever to start on this road, so watch this space in the coming (perhaps a few) months. I am warming up and ready to go. I am increasing my knowledge on international stocks, I am currently reading a book on Wal-Mart in fact, and i have some stocks in mind. I cannot wait to deploy some capital into these stocks!

Please bear with me for now, or let me know about any suggestions or comments you may have.

Lessons from Johnson & Johnson

I came across a book in my local library a few weeks ago, called Johnson vs Johnson. I have been fairly busy, so am only about a quarter of the way through it, and the book is more about the sad saga of battle between family members contesting the will of one of the second generation Johnsons, and the sometimes blighted lives of the children who inherited stock in the company. The book is fairly old now too, it was published in 1987.

However, the idea for an article came to me very early on in the book, as I read some amazing facts about the stock, even though the book is almost 30 years old, and the stock has in that time multiplied by about 30 times the price it was back then (split adjusted), and a dividend which is approaching the then price of the stock. The amazing thing is that if I had read the book back in 1987 I may have thought that the growth in the stock was fantastic, but surely it must come to an end soon, given such an incredible return.

So what did I read? “Seward Johnson was a second-generation inheritor. In order to accumulate his vast fortune, all he had to do was hold on to the stock in Johnson & Johnson bequeathed to him by his father and let his brother run the show.” This to me was very powerful in its relevance to becoming a Dividend Tycoon, because you could quite easily replace his brother with the current board of directors or employees, the key point is you do not have to do any work yourself, you can sit back after making the investment and enjoy the growth and subsequent dividends. However, what I read next was even more powerful. “In 1944 Seward Johnson’s stockholdings were worth approximately $9 million. Today those same holdings would be worth approximately $2 billion.” This was in 1987! Imagine what they would have been worth today, and all he had to do was hold on to the stock.

Now you may say he was lucky because nobody knew in 1944 where the stock would go, but if you had bought the stock in 1987 after watching this success over the previous 43 years, you would have a Johnson & Johnson dividend machine by now, it was hardly a secret success story in 1987.

Now, I have only just read part of this book, and have not analysed Johnson & Johnson in detail yet (I plan to though!), but the key point for me is that this is why it is great to be a Dividend Tycoon, and to hold stocks that are consistently profitable, and raise their dividends every year like clockwork, you are almost guaranteed a great result. It is not even hard to find them, it did not take me long to look around my house until I found a Johnson & Johnson product.

Now please excuse me as I go and look through the bathroom cabinet and kitchen cupboards for some other ideas for becoming a Dividend Tycoon.

Why I regret being impatient

I believe one of the most important skills one has too learn in order to become a Dividend Tycoon is patience. The act of being patient can result in a higher level of initial income when acquiring a business, whereas impatience may lead to you paying a high price for a business and getting little initial income.

There is no need to rush, as becoming a Dividend Tycoon will in most cases take several years anyway, so why rush into buying a stock at any price. There are many great businesses such as Johnson & Johnson or Unilever, which are always tempting to buy, whatever the price, because you see their products in your house and think you want to own them, and you probably should. But there is a time and place for everything and sometimes it pays to sit on your hands. Sometimes cash is king.

I felt this acutely when the markets took a big dip recently, and even more during the 2008/2009 financial crisis. Wonderful companies being sold off cheaply, but I did not have any cash to participate in the feast. I could have turbo-charged my Dividend income and moved more quickly to becoming a Dividend Tycoon, so it was painful to watch these opportunities slip away. Charlie Munger has said that inactivity is the key, and waiting for a fat pitch, but then loading up.

I would be further ahead on the road to financial independence if I was more patient, but have resolved to not rush into buying stocks anymore, and too keep cash aside for those once in a while market crashes.

This site is not only about what one needs to do to become a Dividend Tycoon, but also about what one needs to not do, and being impatient is not good on your path to becoming a Dividend Tycoon.

Happy waiting!

Becoming a Dividend Tycoon

I scrapped the idea for my first post, which deals with impatience in investing, specifically my own impatience. I felt that for the first post I would like it to be a positive message, and what this site is about.

This site is meant to inspire you to become a Dividend Tycoon. So what exactly do I mean by that? What i mean is that by being financially astute, and putting some of your income or capital into stocks, you are first and foremost a business owner, a tycoon. A stock is not just a piece of paper, you are a tycoon as soon as you purchase a stock..

However, in order for you to become a Dividend Tycoon, good choices need to be made. Firstly stock selection, investing in the best businesses on the planet; a Coca-Cola, a Unilever or a Starbuck’s for example. Secondly you need to buy your businesses at reasonable prices. Then there are other factors such as patience, having the conviction to hold a stock when it declines, not trading in and out of stocks, and allowing your dividends to compound.

In future posts I will discuss stocks that i believe could be the foundations of a dividend portfolio, as well as the mental strength one needs to persevere and continue the journey when things are not going well, or it looks like it is impossible.

Compounding dividends are really the force that will start slowly, but over time, should you do the right things, will become an unstoppable force, that could change your life. The reason I chose the logo of a powerful wave for this site was not only because I love the sea, but because it represents compounding in action, where what was at first a ripple thousands of miles away can become a massive and powerful wave. My wish is that you will join me on this journey. Start small and let that first step be the catalyst to what will ultimately become a torrent of dividends, and that one day you may wake up and realize that you have become a Dividend Tycoon.