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But a combination of factors, both internal and external, have contributed to my decision. I started blogging to share my passion and my somehow limited knowledge about dividend investing.
I figured that I could deepen my understand and knowledge of dividend investing by teaching what I knew. I still joke with my family that I would make more money bringing back my aluminum cans for the deposit.
But still, despite the long hours, I kept at it because I liked it. I liked the fact of being able to share. But what used to be an activity I enjoyed has now become a chore. Sometimes, when the fun is gone, you need to step back and think.
You need to step back to see the big picture. This is what I need to do. I need to step back from my blog and refocus. I will come back when I feel blogging is becoming fun again. For the time being, I intend to keep the site online. After all, there is still valuable content on it and the dividend valuation tool is useful.
I may even add content to it, mainly to add resources that I find useful. I also intend to stay around the dividend investing community.
In the end, this is my passion for dividend investing that brought me here. Frank The Dividend Engineer thedividendengineer gmail. For my review of the last month, there are two themes: BAX declared a special stock dividend of one share in Baxalta for each share of Baxter. As you may know, Baxter International announced back in March that it would split the company in two, Baxter, and a new entity called Baxalta. In essence, Baxter would spin off its biopharmaceutical division as a separate company.
The spin off took a little more than a year to come into fruition but I think the waiting was worthwhile. Since July 1st, I now own shares of both Baxter and Baxalta. By the way, I think Baxalta sounds more like a drug than a company. It was far from certain when I initiated my stake in Baxter in anticipation of the spin-off that Baxalta would pay a dividend.
Also, my sole experience with spin-offs was the AbbVie spin-off from Abbott Laboratories. In that case, Abbott kept paying a dividend and AbbVie quickly initiated one. And as I have written earlier this year, from the point of view of a dividend investor, spin-offs generally have limited downside if you own the parent company before the spin-off.
Furthermore, smaller companies are generally more focused on their respective businesses, allowing them to grow unhindered, for instance, by other divisions of a parent company. Also, it is far easier for a smaller company to double in size than it is for a larger company.
And the same reasoning can be applied to their dividends. MDT increased its quarterly dividend by By historical measure, this last increase is rather large.
If you remember, last year, Medtronic announced its intention to acquire Covidien in order to perform a so-called tax inversion transaction. The deal closed earlier this year. Still, by acquiring Covidien, Medtronic did two things which will benefit dividend investors in the long run.
First, Medtronic moved its tax residence to Ireland which taxes corporations at a lower rate than the US. As such, Medtronic has reduced its tax burden. As I mentioned earlier this year:. When a dividend-paying company buys another dividend-paying company, it is, in effect, dividend investing.
The buying company effectively purchases the income streams of the other company. And these income streams can be passed along to shareholders in the form of larger dividends. For me, this last month was a clear reminder that when you build a portfolio of quality dividend stocks, your portfolio will end up taking a life of its own.
Some stocks will multiply via splits or spin-offs. Other stocks will grow via acquisitions or mergers. In the end, this autonomous life further contributes to grow my portfolio, and to grow my dividend streams. This autonomous life is dividend investing at work, literally.
To conclude the first half of , I made my seventh scheduled purchase of the year. Before pulling the trigger, I tried to see whether there were other buying opportunities out there. I believe there are always pockets of value in the stock market. Currently however, not many stocks appear undervalued.
With these new shares, I now own 21 shares of IBM which represent 4. Basically, I decided to buy IBM because it was still the stock having the highest normalized intrinsic value in my watchlist. IBM was closely followed by Telus which I purchased last time. Since I last purchased IBM, the share price has remained fairly stable, even declining a bit. IBM now yields about 3.
So, in my view, IBM is still offering extremely good value given its dividend prospects. The main reason behind my purchase of Baxter was the upcoming spin off.
For Chevron, it was to take advantage of the drop in oil prices which was pulling down all oil stocks. So, basically, for Baxter and Chevron, the purchases were opportunistic. But for IBM and Telus, the purchases were entirely based on their valuation which I calculate to be the present worth of their future dividends. Based on my calculations, both IBM and Telus were the stocks offering the best value.
Dividend investing is about buying dividend stocks paying growing dividends. Preferably, you buy these stocks for less than the present value of their future dividends. This is why, I think, the underlying principle of value-based dollar cost averaging — regularly buying stocks which provide the best value — is extremely valuable as an approach to building a portfolio of dividend stocks.
As an aside, I previously coined the expression dollar cost averaging with a twist to describe my investing methodology. I prefer an expression that highlights the fact that the methodology implies something more than blind dollar cost averaging. It remains that value-based dollar cost averaging forces us to look for pockets of value in the stock market and then systematically buy stocks hidden in these pockets.
If you systematically purchase the stocks that provide the best value, meaning that the present value of the future dividends is worth more, and ideally much more, than the current share price, you will most likely end up with a great dividend portfolio. Well, to begin with, I intend to continue investing using value-based dollar cost averaging. I remain convinced that this approach is a sure way to build a great portfolio of dividend stocks. If prices remain at their current levels, I will most likely increase my stakes in both IBM and Telus.
If opportunity knocks, I will open the door. Hence, if everything goes according to plan, I will own stocks in two dividend-paying companies.
Smaller companies have better growth opportunities. Smaller companies make better acquisition targets. But behind the nice dividend increase is a much more interesting aspect. As I mentioned earlier this year: Final Thoughts For me, this last month was a clear reminder that when you build a portfolio of quality dividend stocks, your portfolio will end up taking a life of its own. So, for this seventh purchase, I decided to increase my stake in IBM.
Looking Ahead at the Second Half of Dividend investing is about buying dividend stocks paying growing dividends. So, what can we expect for the second half of ?