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.