My investment philosophy is rather simple as i believe that less is more.
As an employee, who doesn't like salary increment?
As an equity investor who invests primarily for dividend income, who doesn't like to receive an increasing amount of sustainable dividends?
DG plays an important role to enhance an investor's portfolio income.
DG is the Dividend Growth factor that is critical to compound our wealth.
Why is Dividend Growth Important?
1) Average inflation in Malaysia is around 3%, if we receive the same amount of dividend income every year, the purchasing power of the dividend income is likely to be eroded, hence result in weaker purchasing power.
2) If the company that we invest into is able to increase its dividend payout on a long term basis and the dividend growth rate is above the inflation rate, that means we will be receiving a growing stream of dividend income. If dividend growth is 5% and the inflation rate is 3%, your net real dividend growth will be 2% which is decent.
3) If the company is able to pay higher dividend every year, it is like receiving 'salary increment' from these companies. Sounds wonderful?
4) If you receive increasing dividend income, you could use the income to buy more shares of the same company in order to earn MORE dividends.
5) If you receive increasing dividend income, you could invest these cash-flows into other promising companies to boost your wealth.
6) If you receive increasing dividend income, you could use some of these extra cash-flows to fund your holiday trip. This is exactly the method that my friend is using to fund her holiday trip via dividend income! Sounds wonderful?
If you manage to invest into good companies that pay increasing amount of dividends, you would have successfully created a good money making machine.
While you focus on building your career, just let these money making machines work for you!
Hopefully, the rising amount of dividend income will improve our overall well-being as an investor.
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