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8 Top Dividend Blogs

Dividends should be a central focus for any sound investing plan. Luckily for us, the recent explosion in internet blogging has created a vast number of reputable and educational dividend blogs to follow.

dividend blogs

I’ve written in the past about why you should invest in stocks with dividends. Simply put, the income from an investment is an instant boost to your portfolio.

Income, or interest, from an investment or loan creates an reward for money upfront. The lender gives up capital now with the risk of not getting it back in order to earn more money through interest.

This interest can either compound for you or against you. It’s the same reason why your credit card won’t be paid off for decades with minimum payments, and why even a small amount invested over the long term can create massive amounts of wealth.

Stocks that don’t pay dividends give no incentive for the investor’s risk other than the potential of going up in price. How is that any different than gambling? At least in gambling it’s clear that you can lose money.

Since the best dividend stocks tend to increase their dividend payments each year, the income received increases exponentially. Smart investors additionally reinvest their dividends which also increases the income received exponentially.

So now you have two forces of compounding interest working for you in a single investment. That’s the power of dividends, and that’s why you should learn how to invest with dividends.

Of course I blog extensively about dividends, value investing and tips for beginners. But there are other dividend blogs that I both have read and recommend you follow.

  1. The Conservative Income Investor

This is an excellent dividend blog written by Tim McAleenan Jr. which teaches about combining the power of dividend growth and long term holding periods with the attractive prices and valuations of prudent value investing. Sounds a lot like me.

Tim’s Income Investing Archives are filled with articles covering many top stocks such as Walmart, Coca Cola, IBM, Bank of America, and more. What I especially like is that he takes the time to talk about the strategy and mindset behind why certain stocks are good investments at the current price.

Like I did when co-founding The Money Tree Investing Podcast, Tim uses the metaphor of investing in dividends as planting a dividend tree. The great thing is that you could stop adding to your investments during a tough financial period and your “tree” would naturally continue to grow. I couldn’t agree more.

The focus behind the blog is finding income period, whether that’s in treasuries, bonds, or dividend paying stocks. It just so happens that today’s best income opportunities are in stocks, which is why Tim writes about them.

This emphasis on income is exactly why you should follow this blog. Turns out, I’m not the only one who has figured out the importance of income and compound interest with your investing.

  1. Sure Dividend

Ben Reynolds is the founder behind the popular dividend blog, Sure Dividend. Ben frequently writes about and updates lists on “Dividend Aristocrats”, which are S&P 500 stocks with a track record of raising their dividend for 25 consecutive years or more.

The investing philosophy behind this website is to use Ben’s “8 Rules of Dividend Investing”, which combine particular valuations and dividend health metrics with common prudent investing advice such as diversification.  [click to continue…]

A Complete Breakdown of the Diluted EPS Formula

The Diluted EPS formula is a valuation metric that financial analysts use to determine the quality of a company’s earnings per share with respect to its convertible securities.

valuation metric

Diluted EPS is completely different than the basic EPS that you already know because it assumes that all the convertible securities of the company are converted into common stock. With the term convertible securities, we mean the company’s preferred shares, employee stock options, warrants, and debentures, if any.

Diluted EPS or Basic EPS?

The income statement of a company gives you an idea of how profitable a firm is as a whole; however, what you really want to know is whether the company can deliver shareholder value.

The basic EPS investigates the earnings per share without taking into account any potential dilution. That means that it calculates the company’s earnings per share by dividing the net income by the number of shares outstanding during the same period.

Therefore, if the net income is $1,250,000 and the number of shares outstanding is 800,000, the basic EPS is $1,250,000 / 800,000 = $1.56. If the number of shares outstanding changes during the accounting period, you need to use the average number of shares:

Number of shares outstanding at the beginning of period = 800,000

Number of shares outstanding at the end of period = 300,000

Basic EPS = $1,250,000 / [(800,000 + 300,000)/2] = $1,250,000 / 550,000 = $2.27

Notice that the basic EPS increases as the number of shares decreases. Nevertheless, the calculation of the basic EPS is straightforward.

On the other hand, the diluted EPS adjusts the number of shares by considering all the potential dilution that a company can be subject to, and if triggered, it will lower the reported EPS because it will increase the weighted number of shares outstanding. As an investor, you need to know the diluted EPS because, even if a company has remarkable valuation metrics, it cannot deliver a high dividend per share with a heavy percentage of dilution.

Consider this: in the previous example, the company issues 300,000 more common stocks following a conversion of employee stock options. In this case:

Diluted EPS = $1,250,000 / [(800,000 + 300,000)/ 2 + 300,000] = $1,250,000 / 850,000 = $1.47

Here is the entire picture of the basic EPS and the diluted EPS calculations.


diluted eps example

Where to Find or How to Calculate the Diluted EPS

Diluted EPS is normally provided in the firm’s income statement. The reason for stating diluted EPS is so that you know, as an investor, how the company attributes its earnings per share and how can these earnings be reduced should the company use its convertible securities.

Here is where you can find diluted EPS in an income statement:  [click to continue…]

Living off Dividends

Dividend growth investing allows you to construct a diversified portfolio of companies that pay and raise their dividends consistently. Most investors focus on dividend yield, but this is not the strategy that will provide you with a steady stream of monthly income. Living off dividends is a straightforward strategy that requires focusing on stocks that pay and increase their dividends over time.

living off dividends

A key benefit of dividend growth investing is that you can take advantage of a bear market while compounding your returns. Put simply you reinvest your dividends when the market is low to purchase more shares with less money.

When prices recover, you realize a higher return on the accumulated shares you have purchased during the bear market.

Another benefit is the growing dividends. A growing dividend suggests growing earnings. More than that, it suggests dividend growth compounding because you can calculate your portfolio growth on a higher number of shares and a higher dividend.

Moreover, you can hedge the inflation risk by raising your dividend income and maintain the purchasing power of your portfolio.

The 25x Rule in Dividend Investing

Based on your annual income, you can estimate how much money you want to earn from dividends. That said, you can start living off dividends using the 25x rule, which suggests that you should invest 25x your annual income to realize a portfolio return of 4% or higher.

For example, if you want to withdraw $80,000 per year from your retirement portfolio, you need to have $2,000,000 invested ($80,000 x 25). If you want to withdraw $65,000 per year, you need $1,625,000 invested, and so on. This rule-of-thumb gives you an idea of how much money you can withdraw from your portfolio by realizing an annualized 4% portfolio return.

Why 4%? Because your portfolio will, most likely, include long-term stocks that generate 7% or higher, and you should take a 3% inflation into account So, the actual return of your portfolio is 4%. The 4% retirement rule gives you an idea of how much money you can withdraw from your retirement account.

Here’s how your retirement account will look like after 10 years:  [click to continue…]

Millennial Investing Guide

There’s a lot of information about the world of investing out there. It is easily overwhelming. It seems everyone has their own agenda and opinion about money.

Yet there’s nothing more frustrating than reading an article that just doesn’t apply to you. Too much information means that most of it is just a waste of time. So if you’re a Millennial, why should you read this piece?

Well for one, I’m a Millennial too. I have ambitions of being able to pursue my passions and achieve financial freedom. I’d like to travel frequently. I grew up computer savvy.

millennial investing

Not only that but I’ve also spent several years teaching thousands of people how to take a subject as intimidating as investing and making it palatable. My specialty is helping the absolute beginner.

So if I had to make a millennial investing guide, it’d probably look like this:

  1. Why to Invest
  2. Requirements
  3. How to Get Started
  4. Achieving Superior Results

The goal here is to get you excited about investing. There’s a lot of options and you don’t have to be an expert. It also doesn’t have to be a boring corporate presentation that leaves you wanting to pull the skin down on your cheeks until they bleed. Do you agree with me? Good, I’ll keep that in mind.

Why to Invest

So I could easily throw a bunch of numbers at you and show you why investing is good for you. I’m also sure I could show you the nutritional facts of a piece of broccoli too.

But we don’t care about that. We care about results. We want to see a six pack, not nutritional information.

Let me give you a quick story.

I knew I wanted to learn more about the stock market one day after work. My lead at the time had always been telling me about investing, but I wasn’t particularly interested. Then he showed up in a brand new shiny Corvette. Keep in mind he already had a Lexus.

What my lead told me changed my mindset real quick. He said he bought the car with some shares that he sold. That’s right, he used the stock market to buy a hot sports car. After that day, I decided I’d pay a lot more attention to his talks about investing.

Investing Requirements

Here’s the part that gets tricky for most people. The truth is, you need your personal finances in order to make money in the stock market. I know that’s like telling you to eat your vegetables.

But this is something that could make the difference between working for the man your whole life versus choosing when and how you want to work, if you want to work at all. Like I said, I’ll make it palatable. Forget all the theory, here’s what I do and it works.  [click to continue…]

A Beginner’s Guide to Becoming Financially Independent and Retiring Early

The following is a guest post from Amber Tree Leaves. He started investing 15 years ago and works in the financial industry now. He is passionate about financial independence and tracks his progress on his blog

When talking about investing, there is a lot of focus on how to invest: What strategy do I pick, how do I select a stock, when do I take a profit. What if you think about the reasons to invest before deciding where to invest? What would come to mind?

Think about it… Why do you want to invest? What is your goal? There are no right or wrong answers: The future, my kids, my pension, a world trip. Those are all good answers.

Did Financial Independence/ Retire Early come to your mind, or short: FIRE?

financially independent

The concept can be broken down in two parts. The first being Financial Independence, the second being Retire Early.

Let’s look at the first: Financial Independence. Wikipedia has a great definition:

Financial independence is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses.

Aside from the definition, there is much more to add. I will address 3 aspects. 1. How much do you need? 2. Why would you aim for it? 3. How do you do it?

  1. How much do you need?

The definition gives it away: you need to generate more income out of your assets than you spend.

Imagine you live on 40K a year. You are then financially independent when your investment portfolio generates 40K in dividends. Or you are financially independent when you have rentals that generates 40K of income. What if you invest in ETF trackers, like I do? They accumulate and pay me nothing. When will I be Financially independent?

There is a rule of thumb (The trinity study) that says that you are financially independent when your investments portfolio has the size of 25 times your yearly living expenses. So, that would mean in the case above that you have a portfolio of 40K times 25, or 1 million.  [click to continue…]