Sunday, January 4, 2026

Building a Position and Risk Management

I invest in companies that meet my entry criteria.

Before I invest in a company, I decide how much money I am going to risk on that position. I also decide on the factors that would cause me to sell as well. 

Other decisions involve monitoring the situation while I build the position. I tend to build my positions slowly, and over time. 

Generally speaking, in order for me to invest in a company, it has to have a good valuation and good fundamentals. I would only try to invest in a company that I believe is a good quality one, that also sells at a good valuation.

When I build a position, I usually end up spreading this over a period of time. In some cases, this allows me to monitor how the company is doing relative to my original thesis. This allows me to limit capital allocated to a company that turns out to be a dud quickly.

For example, let's assume that the target position size is $1,000 per company in a hypothetical portfolio. This is the most I would allocate to said stock.

If I were to build this position, that would mean putting something like $100 or so at a time, over a period of many months. 

This exercise provides a few fundamental touch points to evaluate my thesis. Possibly a few quarterly reports, and a couple or so annual reports. Even more importantly one or two annual dividend increase announcements.

If I bought a security, and I saw that management all of a sudden stops raising the dividends at a typical rate of change, I would have red lights going in my head. I would investigate further. A slowdown in dividend growth is definitely a signal that something is going on in the business. This is possibly a good signal to pause new investments.

Losses of major customers, increased competition and stagnation in revenues and profits could also make me question my initial beliefs in the company, and pause investments.

I would continue monitoring the situation, and would consider investing again if fundamentals improve. Every company goes through a temporary lull in performance for various reasons. Only the solid ones tend to recover from those lulls (eventually). If they don't, then chances are that the previously impregnable moat is pierced, or the industry is now facing some new headwinds. Think newspapers in the old days when the internet came, or sadly my beloved consumer staples as of recently.

If fundamentals go as planned however, I would be interested and build that position until I reach the maximum I could risk per security. 

This fundamental exercise is of course going to be only performed if the valuation was attractive as well. However, value and growth are connected at the hip - meaning that valuation is part art, part science. It's not as simple as stating that a stock with a P/E of 10 is cheap - you have to take into consideration the growth in fundamentals, and how cyclical that earnings stream is as well as the likelihood of a long runway as well. You need to look at the trends at a company level, to ensure you are not overpaying for slowing growth or overpaying for past success as well. Furthermore, you have an opportunity cost to pay, because there may be other securities that fight for your capital attention. You need to rank them, and decide (and that ranking could be further complicated by whether you already have a full position in said security or a partial or none at all).


The upside of course in building out a position slowly is that I stand a chance of allocating as little as possible in a security that surprises to the downside. Hence, protecting valuable capital that could've been deployed elsewhere. 

The downside of building a position slowly is that many high class world quality companies tend to sell at a cheap valuation very rarely. Hence, buying slowly means that I could end up being too much underallocated to them. Knowing this information to me means that when I invest money every month, I should prioritize the "cheap" securities that are rarely in the attractively valued pile first, and only then should I focus on the companies that are more often attractive. Ironically, the companies that always look attractively valued are quite often the ones that turn out to be value traps.


Today, I presented my framework for building positions for my portfolio. This is the framework I had been using for the past couple of decades or so. You can watch it in action in my newsletter.
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Thursday, January 1, 2026

Roth IRA’s for Dividend Investors

Nothing is certain in this world except for death and taxes. For many dividend growth investors, this could be characterized as a feeling that they are being taxed to death. I am always on the lookout to legally minimize my investment taxes as much as possible. In fact there is an easy way to invest in dividend paying stocks without ever having to pay taxes on your investment.

The Roth IRA allows individuals who have earned income in a given year to contribute up to $7,500 in after-tax dollars to their retirement account for 2026. The contribution limit for 2025 was $7,000.. There is a catch-up contribution of $1,100 for individuals who are 50 years of age or older. While contributions to Roth IRA’s are not deductible on your tax returns, earnings and principal distributions are tax free once certain age and time requirements are met. 

Roth IRA’s allow for tax-free compounding of capital over time. This means that you will not pay taxes on dividends or capital gains on your investments that are placed in a Roth IRA.

The earned income includes compensation from salary, wages, commissions, bonuses and alimony. Income from interest, dividends, annuities or pensions does not count as earned income in the eyes of the IRS.

A non-working spouse can set-up a Spousal Roth IRA, even if they have no working income, as long as the other spouse has enough working income to contribute. For example, if one of the spouses earns $50,000/year, and the other one stays home, they can each contribute $7,500/year to their own Roth IRA's. If they are over the age of 50, the $1,100 catch-up contribution still applies.

The contribution limit for a Roth IRA is the same as the contribution limit for a regular IRA. However the amount that can be contributed to a Roth IRA is the amount remaining after subtracting any contribution made to a regular IRA. This means that if you contributed the maximum allowable amount to your regular IRA of $7,500, you would not be able to contribute anything to a Roth IRA in that year.

There are no required minimum distribution rules for Roth IRAs. 

However, there are phase-out income limits for high earning taxpayers, which reduce the opportunity to use this tax advantaged investment account. A modified adjusted gross income (MAGI) of $252,000 for a couple filing jointly, or $168,000 for an individual makes you ineligible to contribute to a Roth IRA in 2026. The following table outlines the Roth IRA Contribution limits for 2026.







Source: Schwab

There are ways around it of course, using the "Backdoor IRA Conversion" Strategy.  Basically, it entails contributing to a Regular IRA, and immediately converting it to a Roth.

In order to avoid paying taxes on distributions from Roth IRA accounts, investors need to become acquainted with the qualified nontaxable distribution rules.

According to the IRS, qualified nontaxable distributions for Roth IRA’s are those made at least 5 years after the taxpayer’s first contribution to a Roth IRA and made:

1) After the taxpayer become 59.5 years old
2) To a beneficiary after the death of the taxpayer
3) Because the taxpayer becomes disabled
4) For a use of a first time homebuyer

The biggest benefits of a Roth IRA are the long-term tax free compounding of capital, the fact that qualified distributions are tax-free and the fact that there are no required minimum distributions.

Another little known fact behind Roth IRA’s is that direct contributions may be withdrawn at any time. 

This makes them a perfect investment vehicle for investors who plan on retiring early and living off dividends before they reach typical retirement ages of 60 years.

I hold a portion of my assets in a Roth IRA. While the contribution limit is only $7,500, that is still a good start. For a married couple maxing out their Roth IRA's, you have $15,000 to invest. 

In today's commission free world and fractional shares, you can build a diversified portfolio fairly easily.







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Friday, December 26, 2025

Dividend Kings List for 2026

A dividend king is a company that has managed to increase dividends to shareholders for at least 50 years in a row.

There are only 52 such companies in the US, and perhaps a couple more in the rest of the world. It is not a small achievement to have been able to reward long-term shareholders with a dividend raise for over half a century.

Over the past 50 years, some calamities experienced include:

- Seven Recessions since 1967
- The Vietnam War
- The oil crisis in the 1970s
- Stagflationary 1970s
- Double digit interest rates in the 1980s
- Fall of the Soviet Union in 1991
- 9/11 in 2001
- The Dot-com bubble bursting in 2000
- The housing bubble bursting in 2007 - 2008
- ZIRP and NIRP since 2009

- The Covid-19 Pandemic


Throughout this calamity each of those businesses managed to grow earnings, and raise the dividend to their long-term shareholders. If you are looking for a long-term shareholder base, the best way to build it is by paying those owners more every single year. This is a simple, but novel idea for corporations to embrace.

When I first came up with the idea for the list of dividend kings in 2010, there were only eleven companies on it. Our 2025 list includes 52 companies. 

We had five additions and zero deletions.

The new additions for the current year include:

Archer Daniels Midland (ADM)
MGE Energy (MGEE)
Pentair (PNR)
RLI Corp (RLI)
United Bankshares (UBSI)


There were no companies that were deleted from the list in 2025. 

These actions brought the number of companies to 52, from 47 at the end of 2024. 


These were consistent with my predictions from last year. It is a testament to the predictable nature of their businesses, not in my forecasting abilities.

Note, there were two name changes amongst the Dividend Kings.

Lancaster Colony (LANC) renamed itself to Marzetti (MZTI)
SJW Corp renamed itself to H2O (HTO)

I expect the following companies to join the list of dividend kings by 2026/2027:

McDonald's (MCD)
Sysco (SYY)
Medtronic (MDT)
Clorox (CLX)

There are a few companies, which are incorrectly listed as dividend kings elsewhere. One is Sysco (SYY). Upon review of their dividend history, I realized they only have 49 years of consecutive annual dividend increases under their belt. They would be eligible for inclusion in 2026. They kept dividends unchanged in 1975 and 1976. It pays to review the dividend history, before deciding 

I did some research on historical changes of the Dividend Kings list, which you may find interesting. I reviewed the evolution of the dividend kings prior to 2007 in the article, which has not been done by anyone else. 

Since 2010, there have been only six companies that have left the list. One, Vectren (VVC) was acquired. The second, Diebold (DBD), kept dividends unchanged, but ultimately ended up cutting them. The third, V.F. Corp (VFC) became a dividend king in 2022, but left the list after 2 months as the company cut dividends in February 2023. The year 2024 had a record number of deletions, as 3M (MMM), Walgreens (WBA) and Leggett & Platt (LEG) cut dividends.

There were no deletions in 2025.

The companies in the 2026 dividend kings list include: 




Note: Data as of Dec 26, 2025



This track record is a testament to the stability of the underlying businesses that generated the earnings growth necessary to grow the dividend for half a century (and longer). This track record is an indication of a business that is relatively immune to outside shocks. This resilience throughout the period manifests itself into the long stretch of dividend increases, spanning over half a century.

While these companies are not investment recommendations, I post them as examples for further study by serious dividend investors. Studying the businesses, their industries, could give you clues as to the type of business that can flourish over a half of a century.


As I mentioned above, I have been compiling the list of dividend kings since 2010. To view the historical changes in the list, please follow the links below:






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Monday, December 22, 2025

Sixteen Companies Raising Dividends Last Week

I review the list of dividend increases every single week, as part of my monitoring process. This exercise helps monitor existing holdings. I am a firm believer that these dividend increases provide strong signaling for how businesses are doing. They are especially helpful to review compared to the historical average, and trends in fundamentals.

This exercise also helps uncover potential companies for further research.

Over the past week, there were 16 dividend growth companies that raised dividends. All of these companies have a minimum ten year track record of consistent annual dividend increases: 



This list of course is not a recommendation to do anything. It is simply a listing of companies that raised dividends last week, which also have a ten year track record of annual dividend increases under their belt.

I find it helpful to check the most recent dividend increase and compare it to the 5 or 10 year average. This provides helpful insight as to where things are going, fundamentally.

It is also helpful to review trends in earnings and payout ratios, for further context.

Last but not least, it is helpful to review growth relative to valuations too. This helps me identify a list of companies to prioritize researching further from here.


Relevant Articles:

- Sixteen Companies Raising Dividends Last Week






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Wednesday, December 17, 2025

Focusing on the Losers and Missing the Big Picture

Many investors I talk to always seem focused on the losers. Just because you lose some money on a portion of investments, doesn't mean that the whole strategy is bad. What matters is making money overall on the portfolio level. Losing money is part of the game on a portion of investments. Even Warren Buffett and Peter Lynch are not right 100% of the time.

Everyone is focused on the losers, and thus ends up missing on the big picture.

As they keep losing, their relative weight in the portfolio decreases and if I did not risk more than a certain amount (decreased by dividends received), they become a footnote.

At this point, they do not matter. Unless they turn around, which some time they do. (e.g. in 1999 everyone thought Philip Morris would fail... and it didn't. Also in 2003-4 many thought McDonald's is toast.)


For example, if I invested $1,000 in Lehman Brothers in 2007, I lost $1,000. 

If I invested $1,000 in 3M in 2007, I broke even when I sold

But if I invested $1,000 into Microsoft in 2007, I have $15,000.

Note, these three examples ignore dividends received and allocated elsewhere from a risk management perspective. Those dividends shift the return expectations higher.


Back in 2007, it would have been impossible how each one would do.

Most of my investments won't be Microsoft, but most won't be Lehman either.

I expect to make most of my money on about 40% of my investments. The other 60% will likely end up break even on average.

I just do not know which one today will do great, and which one would falter.

Hence, my goal is to make sure I took my entry signal and not mess up with the compounding early on. (TL;DR - Stick to my process)

I sell rarely, because my audit showed me my sales have been a mistake, on average. I do it after a dividend cut, and if a stock is acquired. the longer i invest, the more inactive/passive in holding I try to be...


The main point behind the post could further be strengthtened with the example of Ronald Read, the janitor millionaire who died with a portfolio worth $8 Million at 92. He managed to amass his fortune with a patient, long-term, and disciplined approach that favored blue chip dividend paying stocks. One of his investments was Lehman Brothers, which resulted in a 100% loss. However, he also had 90+ other securities in his portfolio which helped him overcome this one big loss, and end up with a multi-million dollar portfolio regardless.

Ronald Read's story shows that can lose 100% on a single security in a diversified portfolio.

And still end up with $8 Million, because you are diversified and hold 100 companies.


Today we discussed a few important principles. First, focus on the big picture, and do not get lost in the weeds. Second, design a strategy with built in protections (e.g. diversify, and invest regularly). Third, stick to your strategy through thick or thin - that's how long-term wealth is accumulated. Fourth - you won't be right on every investment. But if you stick to it when you are right, you can make a lot in capital gains and dividends - it's potentially unlimited. And if you are wrong, the most you can lose is what you invested (sans any dividends received and invested elsewhere)

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