Durable Dividends

Dividend Growth: Enjoy The Journey and the Destination

Nick Ward

56 postsMay 4, 2021

The vast majority of equity analysis is probably about buying or selling stocks.

Hey, I get it – making trades in the market is where the excitement lies…for most people.

Analysts and contributors in the investment space are generally focused on providing actionable information, so no wonder there are countless pieces of research generated on a daily basis that involve price targets or thresholds at which to enter or exit a potential position.

I’m not going to sit here and tell you that making trades in my portfolio isn’t fun, stimulating, or even thrilling at times. However, I am willing to say that the fascination with trading in the markets is misplaced and potentially harmful to investors’ long-term returns.

Even if you’re not a very active trader…even if you’re disciplined enough not to speculate in the market…even if you’ve conquered fear and greed and only make totally rational purchases of the highest quality companies trading at fair or better prices…the fact is, buying a stock is just small step in the journey towards financial freedom.

I write for the dividend growth investing crowd who are typically a rather conservative and even, dare I say, boring bunch; however, I totally understand why dividend growth investors, especially, get excited about buying shares.

I know some people like to think of their portfolios as fortresses, which they build up purchase by purchase, brick by brick, slowly but surely over time so eventually, their investment portfolio… their financial future… and ultimately, their financial freedom, is protected by hordes of shares of the best companies in the world. Who else would you rather have on your side during retirement than the best of the best?

I know other people who like to their of their portfolios in a more bucolic light, as gardens, vineyards, or orchards, with each purchase representing the addition of a new plant, which over time matures, grows larger, produces fruit, which then drops down onto the soil so that its seeds can multiply. As the quarters go by, not only does the size of the plants in the garden tend to increase, but so do their numbers, as organic growth via dividend re-investment turns just a few shares into a grand operation that produces a cornucopia of dividend income.

No matter which allegory you like to use to paint a comforting dividend growth picture in your mind, I imagine that the fact of buying shares, laying brick, or planting crops is generally under a spotlight, front and center in the story. But, if you take a step back it becomes clear that these are just mere moments in a much grander tale.

Now, don’t get me wrong… knowing how to efficiently and effectively accumulate a collection of high quality assets is important. But, what I’m going to argue in this piece is that the act of being disciplined and patient over the long-term is paramount to reaching long-term financial goals.

For many investors, as odd as it may seem, the act of sitting around, doing nothing, and allowing their assets to grow over time is actually the hardest part of their portfolio management process.

However, so long as you’re someone who is not speculating on low quality stocks, I continue to believe that inaction is likely going to be the best course of action to follow with regard to your existing positions, and when it comes to generating real wealth over the long-term (after you’ve taken that first step of accumulating shares).

Sitting on one’s hands can be daunting for several reasons.

First of all, it’s difficult for many people to maintain their focus on the long-term…especially in today’s day and age, where technology and social media has made instant gratification easily accessible.

We’ve become conditioned to getting what we want, when we want it…or at least, being persuaded that this is what is happening by elegant marketing that massages the ego, leading to unrealistic expectations.

I hate to break it to you, but outside of a company 401k match, there is no such thing as a free lunch in the journey towards retirement.

If something seems too good to be true, it likely is.

Get rich quick schemes are very rarely successful.

Simply put, as boring and unsatisfying as it may be, for the vast, vast majority of people, the journey towards financial freedom is going to be a long road.

But…it doesn’t have to be stressful.

This leads me to the second reason why many people are incapable of doing nothing and allowing the compounding process to play out over time: irrational emotion.

The short-term volatility that is typically at play in the market oftentimes leads to exuberant greed, which can lead to chasing dangerous momentum higher with unnecessarily risky equity purchases and/or fearful self doubt, which can result in the premature exit of high quality position that could have been major building blocks in your long-term success.

So often when I write about dividend growth investing and portfolio management strategies at a high level, I touch upon the dangers of falling prey to the natural human response to market volatility: fear and greed.

Frankly, it’s these two aspects of human nature that cause most people to fail in the stock market. But, it doesn’t have to be that way.

The core principle of dividend growth investing inspires investors to focus on the reliably increasing income that their holdings generate, as opposed to the short-term market movement.

When you’re focused primarily on reliably increasing income, it’s much easier to maintain an objective outlook on your holdings and not over-trade within your portfolio.

I know that to many investors and traders alike, this dividend growth-centric concept is foreign.

I can imagine readers thinking to themselves, “But wait, isn’t the point of investments to make money? Don’t I need to be wealthy to reach financial freedom?”

The answers to both questions above is, “Yes.” (Unless, of course, your desired lifestyle in retirement is ascetic…and hey, whatever floats your boat, right?)

But, I imagine most readers desire a certain degree of experience and creature comforts which will require a sizable nest egg to sustain over a long period of time without the benefit of active income.

But, here’s the deal – the quality metrics that support rising dividends tend to support rising share prices as well. It’s no coincidence that the companies with the two largest market caps in the entire world, Apple (AAPL) and Microsoft (MSFT) are both wonderful dividend growth companies.

Over time, for dividends to increase in a sustainable way, they must be supported by regularly increasing fundamentals. And, as the underlying fundamentals of companies increase, so do their share prices (typically speaking). With that in mind, the recipe for reliably growing dividends also happens to be the recipe for long-term capital gains as well.

Because of this, getting rich doesn’t have to be more complicated than simply buying and holding onto shares of blue chip companies.

After accumulating shares of a company, when determining whether or not a stock should be held or sold, rather than stressing over near-term results, speculating on future growth, and/or becoming too enamored with fears surrounding potential overvaluation, the first thing I do is ask myself a simple question…

“Is the dividend rising at an acceptable fast pace?”

If the answer is yes, I ask myself another question…

“Is the dividend safe?”

If that answer is yes as well, then I’m very content to ignore things like share price volatility, headline news items, and even concerns about overvaluation, and simply hold onto my dividend producing shares.

Over the years, I’ve attempted to get cute and time the market when it came to selling shares that looked expensive because I thought I would be able to buy them back lower at a later date. Well, in the end, I’ve come to the realization that these trades are mistakes. Trading blue chips isn’t the best way to make money over the long-term, simply owning them is.

I’ve learned lessons from my blunders and now I’ve become content to trust the generous management teams that I’ve partnered with as a shareholder, and relax as they compound my wealth, year after year, one dividend increase at a time.

I sleep well at night doing so, feeling secure because as I lay my head down on my pillow, I know that by being disciplined and patient, I’m actually making money while I sleep. I know that my passive income is growing organically year in and year out, and that I don’t run the risk of outliving my nest egg in retirement because I won’t have to liquidate assets to pay my bills. In short, my reliance on a reliably growing stream of dividend income not only provides peace of mind in the present, but also far into the future as well.

It doesn’t get much better than that, does it?

A comfortable retirement is a destination that we know we’ll love once we get there, but that doesn’t mean we can’t enjoy the journey as well. The simple and stress free nature of dividend growth investing allows investors like me to do just that!

If this sounds like a good plan to you, and if the dividend growth strategy is something that you’d like to learn more about, then please visit us over at The Intelligent Dividend Investor.

This newsletter service is 100% focused on creating a reliably increasing dividend income stream with a portfolio chock full of some of the highest quality companies in the world. The IDI portfolio has beaten the S&P 500 by a wide margin since its inception and we’ve maintained a perfect annual dividend growth record. Dividend growth investing might not be right for everyone, but as for me, I’ve yet to come across another strategy that offers a simpler, easier, and more efficient way to compound money in the markets on the way towards financial freedom.

Nick Ward

56 posts

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Nicholas Ward is a research analyst who currently writes for Seeking Alpha, The Dividend Kings, iREIT, and Forbes Real Estate Investor. Before that, he was Founder and Editor-in-Chief of The Dividend Growth Club, as well as the Income Minded Millennial. Nicholas has also contributed to Sure Dividend, Investing Daily, and The Street, where he covered stocks in Jim Cramer's Action Alerts PLUS Portfolio.

Nicholas holds a bachelor of arts from The University of Virginia, where he studied English and studio art. Prior to transitioning into the financial industry, he managed a vineyard in the foothills of the Blue Ridge Mountains.

Earnings Look Pretty Good, but Don’t Forget Valuations

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

Dividend Growth: Enjoy The Journey and the Destination

Nick Ward

56 postsMay 4, 2021

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Dividend Growth: Enjoy The Journey and the Destination

56 postsMay 4, 2021

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