An update for 2019: In 2019, the book's portfolio again outperformed the market, returning 32 percent, making it 12 years out of the last 13 that the portfolio has beaten the market, and a perfect 5 years out of 5 since and including the year of publication (2015-2019). Not an easy feat -- at all -- since the portfolio is permanently fixed in time! Cumulatively, over the 13 years ending 12/31/2019, the portfolio has returned 491 percent, or 14.65 percent a year vs 8.69 percent a year for the market. Over this period, $1.0 million invested in the book's portfolio, dividends reinvested, is worth $5.9 million -- $3.0 million ahead of the market -- and with much less risk, about 85 percent of the market's, meaning as well, for instance, that you are much more likely to actually hold these stocks and actually realize these returns. Such is the benefit to long-term investors of picking these wonderful companies correctly, that is, intelligently.
Dividend growth stocks are like the quiet, modest, unassuming, straight A students in class. Without much of a fuss, they march quietly up and to the right, making their long-term holders incredibly rich.
The 20 stocks to consider in this book have compounded wealth at 14.2 percent a year -- well ahead of the market's 7.5 percent a year -- for the 10+ years beginning 31 December 2006 and ending 5 May 2017. Over the ten years ending 31 December 2016, they have also beaten all diversified mutual funds in Value Line's Mutual Fund Survey (ignoring two leveraged funds which returned a bit more but which simply do not count -- because of the leverage). They performed very similarly for the ten years ending 31 December 2015. How many broad portfolios do you know have done the same?
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To succeed as a dividend growth investor, you need patience, time, and high-quality dividend growth stocks growing at stable, moderate, and sustainable rates and selling at reasonable valuations or better.
Written for the intelligent long-term investor, this book explains all you need to know about investing in dividend growth stocks. The book divides naturally into three parts:
Part I explains dividends, dividend reinvestment, and dividend growth. The secondary focus is to correct many misconceptions with dividends and share buybacks -- unfortunately, much of what you find in other books and media about dividends is pedestrian, outmoded, and badly mistaken, in turn leading to all sorts of bad decisions and reasoning.
Part II builds toward criteria for picking great dividend growth stocks and explains how to value these stocks properly. Primarily, these criteria revolve around traits of the business with dividends falling out almost naturally from companies of the right maturity and quality -- and proper valuation putting the defining mark to the whole story.
Part III shows you how to search for dividend growth stocks. It presents twenty high-quality dividend growth stocks to consider, explaining the businesses and risks, and analyzing and valuing them correctly. In addition, it describes dividend growth mutual funds and dividend growth ETFs. Finally, it explains how to build and monitor a dividend growth portfolio, including examples of conservative and more aggressive dividend growth portfolios.
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Over the long term, great companies grow at rates few investors can match. The trick is to ensure that the companies are actually great -- with stable, moderate, and sustainable growth -- and, as always, it helps to get the valuations right -- many simplistic ideas about valuation are wrong, and thus, incredibly damaging. Let the long-term compounding of earnings and dividends of dividend growth stocks, properly selected, work for you. In time, your wealth will soar.