After some consideration, I decided to become part of the dividend growth blogosphere to share my experiences and get a better view of my progress. I created my dividend portfolio in summer 2014 but I have been interesting in the stock market for a very long time.
My first contact with the stock market was in the late 1990s, I was still a kid and it was one of those times when people rushed into the stock market to chase profits. I still remember stocks were a pretty hot topic back then but that changed rather quickly as a lot of folks suffered big losses as the tech bubble popped.
As a young boy I found stocks intriguing and for a brief time I even had a paper portfolio that I updated by checking the newspaper or teletext on the television. After that I always had an above average interest in personal finance and economics but it wasn’t until 2007 when I bought my first stocks – a couple of months before the financial crisis made a big turmoil. Long story short: I thought I was pretty smart and like a lot of people I lost a bunch of money betting on financials, tech firms, biotech, and so on. I liquidated most of my portfolio at a loss and afterwards I didn’t really look at the stock market until mid 2014 when I stumbled upon dividend investing. One of the stocks I had bought in 2007 was Intel (INTC), I had subscribed to the news section on the company’s investor page so every once in a while I received e-mails about Intel’s financial results, new products, new investments and of course also the company’s dividend declarations.
When I first bought my Intel shares the stock paid 11.25 cents per share, which corresponded to a dividend yield of around 2 percent. I didn’t think much of this as the yield was small versus a savings account back then, especially because the dividend got double-taxed and I only got to keep about 2/3rds of it after tax.
I sold the stock after a short time but over the years I kept getting these dividend e-mails from Intel and around mid-2014 it finally hit me that Intel’s dividend had doubled in only seven years time! I was intrigued by this realization and after a couple of Google searches I discovered there’s a pretty big online community centered around dividend growth investing. Sadly I missed the massive stock market boom that started in 2009 but after a couple of weeks of research I decided to give dividend investing a shot as I felt very comfortable with this strategy. While valuations of a lot of companies were pretty stretched, I felt dividend growth investing in large and/or stable companies offered a pretty good way to generate decent returns over the long run without taking excessive risk.
While it’s conceivable that one or perhaps even several of the companies I invest in may face severe headwinds or even go belly up, I believe the chance of a diversified dividend portfolio becoming worthless is unthinkable unless we face an event similar to the fall of the Western Roman Empire. As such, I figured the risk of this strategy is small if you’re doing this with a multi-decade focus.
I know a lot of people favor S&P500 index trackers (or other ETFs) and/or mutual funds but that’s not really my cup of tea. While investing in index trackers immediately gives you wide diversification, it’s a bit too boring for my taste. I like the personal connection to companies that you get by buying individual stocks.
So in the summer of 2014, I opened an investing account and started my dividend growth investing journey by buying 50 shares of Coca Cola (KO).