How General Mills and Mad Money turned me into a Dividend Growth Investor

Back when I was starting to learn about investing, I spent most of my free time reading investing and personal finance books such as those by Peter Lynch, Robert Kiyosaki (Rich Dad, Poor Dad series), and Jim Cramer.

I also watched Jim Cramer’s Mad Money show almost every evening.* Although his investing style is a lot different than what I’m doing now with dividend growth stocks, I did learn a lot about stock investing that can applied to DGI such as maintaining proper diversification in your portfolio and how to value companies.

Although I hadn’t started investing any money yet, I researched stock ideas a lot, including many of the ones featured on the show. At the time, I was thinking I would eventually start a portfolio that was based only on total return, that is, capital gains. Basing a portfolio off of dividends never even occurred to me. On the show and in all the books I had read, dividends were always mentioned as sort of a bonus that stocks sometimes paid with investing for stock price appreciation being the main focus.

One day, Cramer spent some time discussing some potential investments in the consumer staples sector. I don’t remember all of them but both General Mills (GIS) and Kellogg (K) were mentioned with Cramer thinking that General Mills was the more attractive option at the time as far as valuation went. I researched GIS online and quickly discovered that the company had been paying out dividends for 113 straight years (at that time, now 115!) without ever cutting it. It had been kept at the same level for multiple years occasionally over the company’s history but never cut. That amazed me, especially with so much of the investing talk in 2012 still about recovering from the 2009 recession where so many companies cut or eliminated dividend payments due to the tanking economy. “How was GIS able to sustain and grow their dividend through this latest financial crisis and all the other ones over the last 100 plus years?” I asked. My research online eventually led to Seeking Alpha where I learned all about dividend growth investing from some of the great contributors on the site and from there began focusing most of my research activities to dividend paying stocks. I eventually started investing at the beginning of 2013.

Ironically, I still don’t own GIS in my portfolio (I valued stocks a little too conservatively when I started out and was trying to look for a better entry point), but it was the one stock that really started me on this journey to financial independence. It seems like dividend growth investing and early retirement seem to go hand on so many of the articles and blogs about the topic on the web and I soon realized that this strategy gave me a concrete and seemingly easy plan to be able to achieve my goal of financial independence. Well at least easier than becoming an expert stock picker of growth stocks. 😉 Dividend growth investing could provide me with a steady stream of income that I could live off of instead of trying to just build up a large portfolio and then gradually sell off stocks to fund my retirement, being completely vulnerable to the whims of the market.

 

*Wow, I sound like a huge geek, what kind of 20 year old watches Mad Money everyday? 😉

For all my fellow dividend growth investors out there, how did you get started with this type of investing strategy? Was it a particular stock like me or something else? Comment and share your story. Thank you for reading.

6 comments

  1. Hi StartingFromZero,
    My story is slightly different. I knew of dividend investing, but it didnt really catch my attention until I started noticing the deposits in my accounts from the mutual funds that I held at the time. I was brash and was focused on growth focused. When I started seeing the distributions from those funds, albeit small percentages, it intrigued me and I started reading up more about it. Once the markets crashed and I lost qite a bit of money, I started getting more excited about dividend investing. More reading and research later, I jumped in.

    One of the first stocks I bought was REI.UN (RioCan REIT) which is Canada’s largest retail REIT. It’ll be 5 years next month that I’ve held this stock….- the stock price has doubled and I have a YOC of over 10%.

    regards

    1. Thanks for sharing your story Roadmap2Retire. Whenever I read about other dividend growth investors, it seems like quite a few of them started using the strategy after the recession. It can definitely help you weather the ups and downs of the market when you are focusing on building up a reliable stream of dividend income instead of just growth.
      Nice first pick with RioCan and getting a 10% YOC in only 5 years is impressive. I only own Realty Income (O) for REIT’s right now and would like to diversify more. I’ll have to look into RioCan.

      Thanks for stopping by and commenting.

      Best wishes,
      SFZ

      1. Realty Income (O) is a great REIT. I just started a position this January. For now, I have 60 shares and generate just under $11 every month. I will look for better stock prices before adding again to this position.

        Have a look at Healthcare REITs – its a great opportunity with the aging population over the next few years and decades. I own OHI but HCP is also a great company. There was a great analysis done by dgmachine a few months ago on the Healthcare REIT options. Let me know if you cant find it.

        Best wishes
        R2R

        1. Yeah it is a great REIT, though I may have gone a little overboard when buying O last year, up to 124 shares now(couldn’t resist that monthly dividend 😉 ) so I definitely need to diversify a bit more and balance out my REIT exposure. I’ve started looking at both HCP and OHI but haven’t done enough research yet to be comfortable buying them.

          I found the post you were talking about on dgmachine’s site. Very informative and I’ll be using that to help me in researching them. Thanks for pointing it out!

          Best wishes,
          SFZ

  2. Geek or not, the important fact is that you’ve started. In 5 years from now you will be light years ahead of your peers and accelerating faster and faster as each month goes by. Waiting to invest is tremendously costly, and whether it is Cramer or Buffett or anyone else doesn’t matter!

    For me, DG investing just grew out of my desire to develop additional streams of passive income. Since I already had started with P2P lending, it seemed like a natural extension. So after rolling an old 401k into an account, I started picking up stocks specifically for DG. I still have a variety of other investments, but plan on growing my DG portfolio aggressively over the next decade or so.

    1. writing2reality,
      Thank you for sharing how you got started with DGI.
      I’ve been looking into P2P myself recently to see if I can diversify my income stream a little more than just equities.
      Great job on your DG portfolio, especially with the blue chips you’ve added recently through Loyal3, those should make a great foundation for you to build upon and expand your portfolio in the coming years..
      Best regards,
      SFZ

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