Dividend Investing is the definitive book on how to construct a portfolio of dividend income paying stocks to create a dependable, consistent source of income.
Dividends have long provided a reliable source of income used by everyone from the ultra wealthy to pragmatic hard workers who have diligently saved for retirement. Once established, a dividend stock portfolio can provide income that is not only tax advantaged, but can grow steadily into the future, keeping up with inflation, all while requiring only minimal intellectual work and no physical effort on the part of the investor.
Readers will learn how to fully research a stock to reduce the risks of downside and ensure a steady future stream of dividend income. They will then learn how to construct and maintain a well organized portfolio that is appropriately diversified by style of company as well as industry and sector. Readers will learn how to navigate the inevitable missteps of dividend cuts and negative surprises, while maintaining the integrity and income generation ability of their portfolios.
The author shares insights and experiences of her clients as they have navigated dividend income investing, and in doing so, brings her readers into a world of like-minded, real people who have worked hard, saved responsibly and are able to use their dividend income streams to live their lives happily and without financial stress.
“Dividend Investing,” by Jenny Harrington, provides valuable insights on how to become an effective dividend investor and is ideal for those who need a steady and reliable source of income (e.g., retirees). To produce this income, the author recommends establishing a portfolio comprised of stocks with meaningful dividend yields. The overall portfolio should seek an average annual yield of 5%.
The first part of the book covers dividend investing theory. It conveys how a dedicated dividend income philosophy can lead to solid long-term returns, encourage good investment behavior, and offer emotional comfort. Despite stock price fluctuations, investors can rely on fixed dividend amounts that will generally receive favorable tax treatment when invested in taxable investment accounts.
The book then transitions to dividend investing practice. This includes screening, research, and portfolio management. For example, the author regularly screens U.S. publicly traded companies with dividend yields over 3.5% and market capitalizations over $150 million to produce a list of companies to research. Once you complete your screening process and create your own research list, the author proposes initially choosing 30-50 stocks to invest in (for meaningful diversification)—with each stock representing about 3% of the portfolio. The author also suggests periodically repeating these screening and research processes. This is to assess whether replacing an existing dividend stock with a new one can improve the overall yield and return potential of the portfolio. The author also discusses how to manage dividend cuts and reductions, and establish a sell discipline divorced from emotion.
The final part of the book presents numerous client, company, and personal stories. Each story emphasizes certain points, such as taking sensible risk to minimize significant long-term risk and avoiding value traps (i.e., companies with attractive dividends, but that are actually in a state of decline).
“Dividend Investing” is a worthwhile read that offers a sensible approach to help you become a successful dividend investor. The book has a light tone, is easy to understand, and is suitable for those seeking a steady and reliable source of dividend income or wishing to add dividend income to their portfolio.
[My special thanks to Harriman House and NetGalley for an advance reader’s copy of this book.]