11 Interesting Points from Get Rich with Dividends Book by Marc Lichtenfeld

I recently came across this book and the title sounds catchy, hence the impulse purchase! I would like to share 11 interesting points from this book with my readers.



 Interesting Points:

1) If you are looking for growth, invest in dividend stocks. If you are looking for income, invest in dividend stocks. If you are looking for safety, invest in dividend stocks.

2) To grow the stream of dividend passive income, have a diversified income portfolio, select stocks with prospect of rising dividend payout, then reinvest the dividend to turbocharge the income portfolio.

3) Ideally, invest in dividend stock with dividend growth exceeding inflation rate to enjoy inflation adjusted stream of income.

4) Most people may not find company like Genuine Parts (NYSE: GPC), which makes auto replacement parts to be terribly interesting. Perhaps the CEO might think the business is boring too. But it makes ton of money and it has increased its dividend every year since 1956. That is exciting! 

Boring stock could be a treasure for income investor.

Boring stock such as Procter & Gamble , Colgate Palmolive may not be exciting,  but its dividend growth track record is.

5) Dividend stock idea particularly in US can be found from dividend champions list maintained by DRiP resource center.

6) From empirical research cited in the book, dividend payers in S&P 500 generated better returns compared to S&P 500 index.

7) Share buyback is also a way for company to return cash to shareholder, but dividend signals a stronger commitment although dividend and buyback are both discretionary. Imagine a company that has been paying dividend consistently and dividend needs to be paid from operating cash flow, any cut in dividend may result in negative reaction in share price. Management will usually try its best to maintain its dividend or increase its dividend if the capacity to pay is intact.

8) Empirical research by Miller and Modigliani (M&M) found out that dividend payers are less likely to report losses.  I firmly believe that this statement is applicable to Bursa Malaysia or any part of the global stock market as well.

9) Although dividend yield is important, serious income investor will also consider the safety of the dividend i.e. the likelihood we will get paid.

10) Always compare the company dividend payout against its free cash flow ( operating cash flow adjusted for capex or investing outflows). If a company pays more that its free cash flow, it may need to resort to borrowing to pay dividends which is not a good sign.

11) Dividend reinvestment plan (DRP) offered by some listed companies can be a cheaper way to reinvest the dividends.

Overall, this book is a good read and packed with actionable ideas.