Wednesday, September 3, 2008

Dividend Investing, Measured In Years

I've been through a lot as a dividend investor, but yet I've been through nothing. As I mentioned in my previous post, I've been seriously investing in dividend paying companies for about 2 years. It is important to note that this is an incredibly short period of time to be invested in equities. In order to garner the maximum benefit from the risk that you assume when you're invested in equities, I believe you should hold them for a time frame of at least 7 years. Looking at things in this light, I've really been through nothing as a dividend investor. So why do I feel as though I've been through so much. Well there are are likely several reasons for this:

Personally

  • Investing has required me to postpone spending the thousands of dollars that I've accumulated over the past 2 years. How many times has temptation crept up; and it's not like I don't 'have' the money.
  • I've weeded out a few stocks that I should never have bought in the first place by selling them. Some were sold for gains and some for losses.

The Market

  • The market has been an ugly place to have your money for the past several quarters. The S&P 500 Index is down about 18% since October of 2007.
  • The credit/housing crisis has dragged on for several quarters and the end is not in sight
  • I've watched my some of my individual stocks plummet, while others have spiked; some have gone both ways.

It's important to keep perspective through all of this, as a dividend investor, and realize that the journey is very long and is measured in years rather than months, weeks, or days. After all, I've seen many dividend raises and no cuts within my portfolio. When it comes right down to it, dividend growth over the many years is the key to success, and will bring share price growth. Solid companies that raise their dividends regularly and run profitable businesses for the long term will become cash generating machines, and share price growth engines over time. What goes on day to day and week to week is just noise.


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