May 25

The Dividend Tactics

Dividend Tactics – Best Dividend Paying Stocks

After several years of investing with some success and some mistakes, I concluded that knowing the best penny stocks to watch wasn’t particularly helpful. The key is investing in the best dividend paying stocks. Sure, there is much less alpha to be had, but the volatility is so much less. And with the right knowledge and strategies, dividend paying stocks can also deliver capital growth opportunities.

In reality there are three key challenges getting in the way of investors like you and me from achieving our investment goals:

  • Common investment products such as mutual funds charge fees but routinely under-perform, and do not allow for tailored investment customization to match individual investor needs.  Bonds and GICs limit risk, but low returns and loss of access to funds can prevent you from enjoying the success during a strong market, or from taking advantage of buying opportunities when they arise.
  • We are our own worst enemies.  Without defined rules in place to dictate what to invest in and in how, we are subject to the human error factor.  For a variety of reasons we buy too high and sell too low, we make these trades far too often.  We hold poor investments too long because we are not sure how or when to re-balance, and we play favourites based upon past performance or dividend yield levels.
  • We think we know more than we do.  We watch financial shows on TV, read books and gain an inflated sense of confidence to find the best penny stocks to watch.  We hear stories of success from friends and colleagues and blindly believe that we can achieve the same success, and our emotions cloud us from seeing warning signs until it is too late.

I came to the conclusion about three years ago, with the help of a good friend that the best way for me to work towards achieving my investment goals was to attack to root cause of the problems identified above.  I decided to remove investment products such as mutual funds from my portfolio and developed clear, simple, mathematical rules to help dictate how I invest – a focus on finding the top dividend paying stocks which in turn will assist with the production of stable and growing dividend income, while still maintaining exposure for capital growth.

These mathematical rules are what I call my Dividend Tactics.  To me, they provide discipline, composure and clarity that strengthens the management of my investment portfolio – and I am more than happy to share my strategy with anyone interested.