I'm
passionate about dividends and share my thoughts about stocks on my blog but
there are also many other bloggers with good ideas.
Most
of them share their personal journey to financial freedom on the internet and
educate people how they grow their passive income with dividend stocks. Their
plan: Retire at the age of 40.
I love those stories and the hard work they do. I'm
also a guy who worked hard for his success. That's the reason why I want to
support them and like to distribute their thoughts to a wider audience.
I
share fresh articles from them on my Twitter and Facebook account. If you like
you can join the conversation there. It’s always great.
Today I'd like to interview a great Blogger who has a nice dividend investing space on the internet, a site calling All About Interest.
Tom: AA Interest, you are a dividend
investor and publishing your journey to a financial independence at the age of
40 on the web. On your blog, you show people your asset structure with a net
worth of $725,000. What are your main growth drivers for your financial freedom
goal?
AA Interest: My main
growth driver is my savings each month that I plow back into investments that
offer passive income streams. These
passive income streams are real estate (rental properties) and dividend growth
stocks.
This passive income is then
added to my savings the following month and put right back to work for me,
causing a compounding, or snowball
effect.
Tom: Out there are so many people who
have the dream to retiree with a high passive dividend income stream. Can you
give them three important tips to follow in order to achieve this aim?
AA Interest: My advice
is simple:
1.) Start investing
as soon as possible
2.) Save as
much as you can each month
3.)
Research your investments
These are
the three biggest factors that will produce your desired retirement amounts:
time, money and rate of return. You need
to know the time you have available for compounding to work its magic. You need to know the amount of money you have
available to invest. You also need to do
your research so you have a good return on your investments.
Tom: Back to stock market financials.
What are the best places to be when you think about putting money into stocks
now; can you tell us something about your recent trades or your current ideas.
AA Interest: Whether the
market is in a bull or bear cycle, I believe there are always companies that
offer a fair value or better. Currently,
I have a large portion of my portfolio in the energy sector.
I'm invested in big names like Chevron,
Conoco Phillips, British Petroleum and Kinder Morgan to name a few. From a p/e standpoint, a lot of these energy
companies offer some of the best values in the market.
They also happen to pay a generous and
growing dividend, usually in excess of 3.5%.
I'm also a fan of companies that generate large amounts of free cash
flow and have little or no debt. A
company like this that I've recently been investing in is Visa.
I also look for short-term, negative
catalysts that can suppress a stock's price. One such company I've been investing in lately is Target.
Shares are trailing the S&P significantly
since the credit card breach and lackluster Canadian results.
However, Target is a dividend champion,
having increased their dividend consecutively for over 47 years! I'm a fan of the company long-term and
believe shares currently offer a good value.
Tom: Final Question: You’ve published a long Watchlist on your Blog. What are your main criteria to
consider a buy? Do you look at P/E multiples, high yields or other ratios?
AA Interest: I actually
laid out a Business Plan so that I could monitor my stock
purchasing like running an actual business. As outlined in this plan, my main criteria to buy are:
1.) At least 90% of all stocks chosen should be in the CCC list,
that is the Champions, Contenders and Challengers list maintained by David
Fish. This list can be found on my Resources tab.
2.) Small-Cap or larger ( >250 million market cap).
3.) 10-year YOC should be 10% or higher (typically using 5-year
CAGR).
4.) Minimum yield of 2.5% (exception can be made as long as target
total portfolio yield holds).
5.) Dividend growth over last 5 years (5-year CAGR) must
be over 4%.
6.) Large moat or competitive advantages.
7.) Sound fundamentals.
These are
the basic rules that I follow. Some of
these rules leave flexibility and some room for being subjective.
For instance, Visa doesn't meet rule number
4. However, since my portfolio average
yield is well above 3.5%, I made an exception.
In a nutshell, I'm looking for companies that pay and raise dividends at
a rate higher than inflation, have a large barrier to entry and are
fundamentally sound. This is why I
consider myself a dividend growth investor.
Tom: Thank you for
your great interview. If you like to follow AA Interest, please visit his Blog
at http://www.allaboutinterest.com.
If
you also like to be interviewed or release a guest article, please contact
us.