Category: Why a Dividend Tycoon

This week I have been doing a bit more stock research than normal because I will have some fresh funds in the not too distant future, thanks to the proposed sale of my hotels.

Reading various pieces of business news, you realize the world is not an easy place, business is tough, things are changing so quickly. When I think of stocks, I am always trying to project 5, 10, 15, even 20 years out, and how the business will look then.

It is not as easy as it used to be. The pace of change seems to be accelerating. This was really brought home to me when I read an article in the New York Post (see article here). The article is about Nino Hervias, who used his life savings to purchase a yellow taxi medallion in New York City in 1991. I am sure that like me you have seen thousands of these yellow cabs while watching movies set in New York. This medallion was a license to riches as the number of taxis in New York was restricted to those holding the medallion. The value of the medallion increased every year, peaking at $1.3m in 2014. He thought he was rich. Hell, he was rich!

However, it has all gone wrong for him since then, the value of the medallion has plummeted, thanks to apps like Uber. He is now struggling to get passengers. His exact words in the article were “We are waking up in the middle of the night not knowing what our future is going to be.” Not a good place to be. I feel for him as who could have predicted the rise of Uber?

So how does this relate to the topic at hand. Well I think the one thing that does give me some comfort in this fast changing world is dividends. I would not get the same level of comfort from a salary (job), from sales commissions, from social security, from blogging income (if I had any) or any of the new or traditional ways we make our money.

I can think of several ways any of the above income sources may disappear. Robotics and outsourcing may steal your job, excessive government debt may put your social security in jeopardy, changing technology or fashions may threaten your blogging income, apps might threaten..anything. This is why I believe it has never been a better time to see yourself as a Dividend Tycoon.

Think of yourself as a business and stocks as being on your payroll, some of which have been paying ever increasing dividends for over 50 years. These employees will pitch up for work , despite what may be happening to you. Their only job is to send their dividends to your bank account every quarter, or a couple of times a year at least. The good ones are remarkably loyal, shrugging off political problems and recessions.

Being a Dividend Tycoon is perhaps the most diversified business possible. A portfolio of 12 stocks could cover several industries in several countries. I believe this is far safer than a job. Even a rental property may suddenly find itself in the wrong part of town, or a tenant who does not pay for 6 months.

Had Nino Hervias rather taken a job driving for someone else and simply invested his $118000 in Johnson & Johnson stock, he would not be in his current predicament. No, he would now have Johnson & Johnson stock worth over $1.8m, and a dividend stream of close to $50000 a year. I am using Johnson & Johnson as an example because it was hardly a yet to be discovered microcap. It had almost 50 years of dividend history and was a household name, you can read an article I wrote about Johnson & Johnson here. He would also not have to go out hustling for passengers on the streets of New York. He would be a free man.

So make it a priority to set some capital aside. If you have none, make some. Find some expenses to cut if necessary, read my article The Millionaire Minute, do surveys for extra income, drive an Uber cab on weekends (please just dont tell Nino Hervias I told you that!), but just get yourself some capital and get yourself some stocks, and then get yourself some dividends.

Alternatively, you may believe yourself immune from these changes, and perhaps you are. The bonus though is that if you become a Dividend Tycoon, your life will get better anyway. There will be more income for unexpected expenses, to pay for a child’s education, to buy some new clothes, to visit New York.. and should you take an Uber cab, and the driver is rude as some are made out to be, smile and ask them what they think of driverless cars..and then suggest they visit ww.dividendtycoon.com..

 

 

 

 

 

 

I had a small taste of what it would like to be a fully fledged Dividend Tycoon recently. My Mother, who lives in England, came to visit me in Cape Town for three weeks. It was a special time for me as she has not been here for over 10 years, and it is not always easy to go there. My girlfriend also had some leave so we were all able to take a holiday together within the three weeks.

During the three weeks my Mother was here I did not do very much work, mostly I kept up to date on my portfolio stocks and made some minor trades when the opportunity looked too good to pass. I always kept up with my reading however, as this is a crucial part of becoming a better investor. This enabled me to spend a lot of time going for walks, swimming in the sea, taking drives, going for coffee and going away for a few days. Now had I been earning a salary I probably not have been able to get the leave, and certainly would not have had nearly as much time to do these things while my Mother was here. I would most likely have come home tired and late from my job.

Now, do not get me wrong, I have to work especially hard this month to make up for the time off, I am not completely independent, but I did have some dividends come in from my South African stocks which meant I had a cushion to pay the necessities, and some savings covered the rest. The point is, that those dividends were the key to me being able to take the time off, and I did not have to sit in an office all day so that I would receive my salary at month end.

In other words, I was not working, but my stocks were. I had people making and serving burgers at Burger King on my behalf (through the company that has the South African license for Burger King), I had people running a hotel on my behalf (through a small cap hotel group I have stocks in). I did not have to do any of the work involved in these and other businesses, but as a stock holder I am entitled to my share of the income, and receive part of that as a dividend.

I will write a future post on some of these businesses as I believe some are world class despite being based in a developing country.

So this is why I say I had a taste of being a fully fledged Dividend Tycoon, and it does feel great. It has made me more motivated than ever to be able to not worry where the next bit of income is going to come from. I still rely to some extent on short term trading opportunities in order to generate income, but I am very focused on building a portfolio of dividend paying stocks which will work full time for me. I have been focused on this for some time in South Africa and have made good progress, but the aim of this site is to obtain this level of freedom with international stocks, that journey has only just begun though. What I have learnt over the last few weeks however, is that having time to spend as you wish, with the people you want to spend time with, is priceless and worth striving for.

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.