Retirees should ignore stock price fluctuations and focus on their dividend checks. This is where it pays to focus on dividend dependability for each company you bought in the first place.
Intelligent dividend investors view stocks as partial ownership shares of real businesses. They do their research in uncovering those businesses, and then try to buy existing owners out at bargain prices. They can then sit back, monitor their business interests, and collect dividends one check at a time. After all, if you owned an apartment building next to a college that is always occupied, you won’t give a damn if their quoted valued fell by 5% - 10%- 20% in one single day. As long as you can rent your building out, you should do just fine by ignoring “quoted values”.
I am starting to get giddy for a change. While I have hit my objectives, I am still saving and investing. This is why I will continue buying one or twice per month, whenever I have money to invest. Some of my money is automatically invested through my 401 (k), while the rest is invested manually in my taxable accounts.
It is important to stick to the plan of earning money, saving money and investing money on a regular basis, and staying the course through thick or thin. As you can imagine, long-term investing is a marathon, not a sprint. This is why it is important to keep investing for years, while building out that cash machine.
You then need to be able to stay invested throughout your retirement years, while living off those dividends.
For my taxable accounts, I usually screen the list of dividend champions regularly, using the following entry criteria:
1) A ten year track record of annual dividend increases (being a dividend champion is more than enough)
2) Having a forward P/E at or below 20
3) Having a dividend payout ratio below 70%
4) Having earnings per share growth over the past decade
5) Having a more than nominal dividend growth over the past decade ( at least 3%/year)
I came up with the following list of thirty dividend champions for further research:
|
Symbol
|
Name
|
Years of Annual
Dividend Increases
|
P/E ratio
|
Dividend Yield
|
Dividend Payout Ratio
|
Last Price
|
10 Year Dividend Growth
|
|
(T
|
AT&T Inc.
|
34
|
12.59
|
5.35%
|
67.35%
|
36.63
|
3.28%
|
(AFL
|
AFLAC Inc.
|
35
|
12.77
|
2.00%
|
25.48%
|
86.21
|
8.08%
|
(MO
|
Altria Group Inc.
|
48
|
16.72
|
3.77%
|
63.04%
|
66.04
|
11.26%
|
(CPKF
|
Chesapeake Financial
Shares
|
26
|
14.22
|
1.23%
|
17.51%
|
30.85
|
7.70%
|
(UMBF
|
UMB Financial Corp.
|
26
|
16.33
|
1.39%
|
22.72%
|
73.31
|
6.37%
|
(CBU
|
Community Bank System
|
25
|
17.47
|
2.50%
|
43.62%
|
52.07
|
4.84%
|
(KMB
|
Kimberly-Clark Corp.
|
45
|
16.12
|
3.42%
|
55.19%
|
111.88
|
6.75%
|
(TROW
|
T. Rowe Price Group
|
31
|
15.14
|
2.14%
|
32.37%
|
105.25
|
12.86%
|
(LEG
|
Leggett & Platt
Inc.
|
46
|
17.52
|
3.22%
|
56.45%
|
43.45
|
7.18%
|
(PPG
|
PPG Industries Inc.
|
46
|
16.97
|
1.47%
|
25.00%
|
111.98
|
5.24%
|
(UGI
|
UGI Corp.
|
30
|
17.36
|
2.17%
|
37.60%
|
44.79
|
7.31%
|
(SCL
|
Stepan Company
|
50
|
16.47
|
1.15%
|
18.89%
|
71.47
|
7.37%
|
(PNR
|
Pentair Ltd.
|
42
|
17.42
|
2.02%
|
35.20%
|
68.28
|
8.69%
|
(RPM
|
RPM International Inc.
|
44
|
16.21
|
2.49%
|
40.40%
|
48.94
|
5.49%
|
(SRCE
|
1st Source Corp.
|
30
|
15.05
|
1.49%
|
22.36%
|
49.81
|
4.09%
|
(CSVI
|
Computer Services Inc.
|
46
|
19.17
|
2.61%
|
50.00%
|
45.25
|
15.07%
|
(WBA
|
Walgreens Boots
Alliance Inc.
|
42
|
12.23
|
2.20%
|
26.91%
|
70.43
|
16.21%
|
(CBSH
|
Commerce Bancshares
|
49
|
16.74
|
1.50%
|
25.07%
|
56.75
|
4.41%
|
(SWK
|
Stanley Black &
Decker
|
50
|
18.76
|
1.50%
|
28.11%
|
158.15
|
7.09%
|
(HRL
|
Hormel Foods Corp.
|
52
|
19.11
|
2.09%
|
40.00%
|
32.49
|
16.32%
|
(SHW
|
Sherwin-Williams Co.
|
39
|
20.97
|
0.86%
|
18.08%
|
393.23
|
10.44%
|
(ATO
|
Atmos Energy
|
34
|
20.76
|
2.27%
|
47.12%
|
79.31
|
3.63%
|
(GD
|
General Dynamics
|
26
|
18.74
|
1.55%
|
29.10%
|
211.22
|
11.54%
|
(MDT
|
Medtronic plc
|
40
|
17.07
|
2.19%
|
37.32%
|
81.42
|
14.24%
|
(EV
|
Eaton Vance Corp.
|
37
|
16.71
|
2.11%
|
35.28%
|
54.48
|
8.47%
|
(TMP
|
Tompkins Financial
Corp.
|
31
|
14.29
|
2.25%
|
32.20%
|
79.88
|
4.91%
|
(MKC
|
McCormick & Co.
|
32
|
20.98
|
1.81%
|
38.02%
|
101.53
|
8.92%
|
(BMS
|
Bemis Company
|
34
|
16.04
|
2.63%
|
42.20%
|
45.24
|
3.63%
|
(BDX
|
Becton Dickinson &
Co.
|
46
|
20.66
|
1.30%
|
26.84%
|
224.82
|
11.61%
|
(JNJ)
|
Johnson & Johnson
|
55
|
16.10
|
2.52%
|
40.49%
|
130.39
|
7.44%
|
None of these are recommendations for your to invest in. Rather, this is an example of the process I go through to identify quality dividend companies for further research, and potentially invest into.
It is quite possible that the quoted prices on the securities listed above nosedive from here. If you are going to be a buyer of equities over the next several years or even decades, you should be rooting for lower prices, as long as fundamentals are solid of course. Stock price declines are a normal part of the long-term investing game. To paraphrase Warren Buffett, if you are not willing to sit through a 50% decline in the price of common stocks, you should not be in equities.
As a part owner of solid businesses, your goal is simple:
1) Buy quality businesses at attractive valuations
2) Focus on the fundamentals ( growth in earnings, revenues, dividends + dividend safety)
3) Either reinvest dividends in the accumulation phase or spend them in retirement phase
4) Ignore all noise ( short term price fluctuations)
I believe that the patient accumulation of quality companies on a regular basis, coupled with low costs, and patient reinvestment of dividends along with new cash contributions are the key to long-term success in investing.
Relevant Articles:
- Lower Entry Prices Mean Locking Higher Yields Today
- Your Retirement Income is on Sale!
- How to value dividend stocks
- Dividend Investors Should Ignore Market Fluctuations