Web Site Updated

The total publication process for 2012 is complete. I finished updating my Web site today. Practically every page in the site is new, if for no other reason than to update links pertaining to the new edition, TOP 40 DIVIDEND GROWTH STOCKS FOR 2012: How to Create and Maintain a Dividend Growth Portfolio.

If you would like to see the new description page for the eBook (aka the "landing page"), please click here. Also, if anyone finds a broken link or other error anywhere on the site, I'd appreciate it if you would let me know.

In its first week of publication, the new edition has set sales records. I appreciate so much your support, encouragement, and purchases.

Now I can turn my attention back to catching up with my email and writing articles for Seeking Alpha. I have published only one article since the end of October, but I have a lot of ideas in the pipeline. I hope that I run into you there!

Dave

TOP 40 DIVIDEND GROWTH STOCKS FOR 2012 IS NOW AVAILABLE!

The new edition of TOP 40 DIVIDEND GROWTH STOCKS FOR 2012 was published on January 14. For the next few days it will ONLY be available from this Newsletter. It will take a few days to update my main website.

If you know that you want to purchase the new edition without reading a complete description of it, click the "Buy Now" button that appears to the upper right. This is the only button that will work at the present time. The buttons on my main website have been disabled.

If you are reading this as an email subscription version of my newsletter, you cannot see the "Buy Now" button. Click on the blue title at the top of this article. That will take you to the online version of this Newsletter, and you can purchase the new edition from there.

Thanks to everyone for all your support! I hope that you find the new 2012 edition to be helpful in your investing!

NOW AVAILABLE!

2012 Edition -- Progress Report

I have received many inquiries about Top 40 Dividend Growth Stocks for 2012. Here is the latest news.

First, to answer the most basic question. Yes, there will be a 2012 edition. It will be available in a week or two.

I have been working on the 2012 edition since October, when I first began to update, add new material, and reorganize the text. When I needed a break from that, I turned my attention to the Top 40 stocks themselves. Beginning with a starting list of over 450 candidates, I used a series of preliminary tests to knock out obvious non-contenders. After that, the analysis became more detailed. I got the pile down to about 60 "Finalists" in December. Further study has reduced that number to 48. About 32-33 of those are "in," and the rest will be selected after further study.

The eBook's subtitle this year will be How to Create and Maintain a Dividend Growth Portfolio. I have received numerous comments from readers that the text--the investing guide--is more important than the Top 40 stocks themselves. I considered flipping the title, emphasizing the guide and dropping the Top 40 to subtitle status. Like this: 2012 Edition: How to Create and Maintain a Dividend Growth Portfolio featuring Top 40 Dividend Growth Stocks for 2012. But I rejected that because the ongoing Top 40 title has built up an identity of its own. A subtle change in the title this year is to drop the hyphen between DIVIDEND and GROWTH. I want to convey that in this strategy of investing, not only do dividends grow, but generally the stock values grow too.

I am making several improvements and upgrades to the text this year:

• The chapters have been expanded so that there is one full chapter for each "phase" of stock investing: (1) finding excellent companies; (2) valuing them so that you can buy them at attractive prices; and (3) portfolio management. The discussions of all these topics have been enhanced.
• I am adding a "Resource and Article Guide" chapter. This will collect in one place the various resources that I use in writing the eBook, and which I suggest that you use when you are evaluating companies. Plus it will contain a complete guide to the many articles that I have written on dividend growth investing, with direct links to the articles.
• Other new features this year include: a table of all stocks that have ever made a Top 40 list by year; a new chapter on the conceptual and theoretical foundations for dividend growth investing; and a new valuation metric using Morningstar’s "star" stock ratings.
• I decided to opened the Top 40 list to tobacco stocks this year. I had not done that previously, because smoking killed both of my parents. But I decided that I was allowing personal considerations to influence business decisions. People can decide for themselves what companies they do or don't want to invest in based on personal beliefs. I will also cap the number of MLPs (to around 6-8) in order to get a wider variety of stocks into the Top 40.

Publication of the new eBook may be delayed into the third week of January, because we will be having houseguests, and I will not be able to work on the manuscript for a few days. It's always something! Some of you may recall that last year, I had a hard-drive crash at the worst possible time. (And thanks for all of you who told me to get an online backup sytem. Several suggested Carbonite, and I use it now.)

When it is first available, I will announce the 2012 release in this newsletter only. That's not because I'm being coy, but rather it's because I can get an announcement in here almost immediately, including a "Buy" link for those who know they want the eBook without further information. It will take me 2-3 days to update my website to reflect the new edition, which will include a new "description page" about the eBook.

Thank you to everyone for your encouragement and suggestions throughout the year! The encouragement helps keep me going, and several of your suggestions have been implemented in this year's edition.

Stay tuned!

Portfolio Reviews

In dividend-growth investing, you are relieved from watching the market every day and agonizing over its every move. However, dividend-growth investing is not "buy and forget." It is "buy and monitor." I monitor my portfolio in two ways.

• I keep up with news on my stocks. If a catastrophe happens, such as last year's oil spill by BP, I want to know about it and decide if it is likely to threaten the company's dividend.
• Twice per year, I conduct formal Portfolio Reviews. These are methdocial, stock-by-stock examinations that come from a higher, strategic point of view. I want to know if each stock is successfully fulfilling its role in the portfolio or whether it is a candidate for sale or swap. 

I have written several articles on actual portfolio reviews for my Dividend Growth Portfolio. These articles illustrate the information examined and the kind of thinking involved.

Portfolio Forensics (August 3, 2010). This first article in the series explained that during a Portfolio Review, the burden is placed on each company to prove why it should be kept. I described the sorts of questions that I ask about each company. This review led to the selling of three positions.

Dividend Growth Portfolio Review: Sherwin Williams Is Out (April 26, 2011). The review last April led to the decision to sell Sherwin Williams, because its dividend increases and yield had stagnated but its price had ballooned. I was able to redeploy the money to better advantage elsewhere.

Dividend Growth Portfolio Semi-Annual Review: Pretty Boring Stuff... The Dividends Just Keep Increasing (Yawn) (October 11, 2011). As the title of this article implies, this Portfolio Review led to no changes. Everything is working to my satisfaction.
__________

The complete methodology for Portfolio Reviews is explained in my annual eBook on dividend-growth investing. Top 40 Dividend Growth Stocks for 2012 is now being prepared. I'm working on it nearly every day, and I hope to release it in mid-January after I get my hands on year-end numbers. In addition to the Top 40 list (and complete analysis of each stock), the eBook will contain a comprehensive guide to the investing strategy, from how to pick stocks to how to manage your portfolio. Some readers have told me that the investment guide is more important than the list and analyses of the Top 40 stocks. In fact, I considered changing the title this year (to How to Create and Maintain a Dividend-Growth Portfolio), but I feel that the Top 40 title is now well established, so will leave it alone.

As soon as the new edition is available, I will announce it in this newsletter first.

Dividend Growth Investing and Retirement

I am continuing here with my Seeking Alpha articles organized by topic. This post's subject is retirement. I have written several articles on the subject of dividend growth investing's relationship to investing for retirement.

I have become frustrated with the retirement and investment advisory industries' failure to include dividend-growth investing as worthy of consideration for retirement planning. The "standard" industry approach to retirement funding goes something like this:

1. Invest all your life to reach "The Number." That's as big a collection of assets as you can amass. There are various ways to compute Your Number. One common method, and one which is usually extremely misleading, is to say that you will need retirement income equal to 70% of your final working year's salary.
2. As you approach retirement, convert a large portion of your assets from riskier to "safer." Safety is invariably associated with bonds, completely ignoring the fact that bond interest (and the principal itself) is powerless against inflation, because it stays static for the life of the bond.
3. In retirement, withdraw from your assets to create the income you need. That is, you sell your assets--you liquidate them.
4. Hope that you don't outlive your money. 

You can immediately see why I believe that dividend-growth investing should be considered as an alternative to the conventional approach to retirement planning. For one thing, while I too believe you should focus on a number, it is not the largest pile of assets you can assemble, but rather it is the annual income you will need each year in retirement. For another, if you have been accumulating assets that themselves produce income, then you don't have to convert them--thus sidestepping market risk during the conversion. Yet another point is that each dollar your assets produce as income wipes out a dollar that you would have to create by selling something off. In the ideal case, if your investments produce enough income each year that you do not ever have to sell anything, you guarantee that you won't outlive your money. Finally, dividend-growth portfolios produce income that rises each year, usually faster than inflation. Thus inflation is wiped out as a worry factor.

Topic: Retirement

The following series of four articles are the most highly-read articles that I have published on Seeking Alpha. The 4% Rule referred to in each title is the conventional rule for withdrawing assets in retirement: Withdraw 4% in Year 1, then increment that each year by 3% to account for inflation. (You wouldn't believe what that makes your withdrawal amounts in the later years of retirement.)

Retirement's 4% Rule: Surprising Answers You Need to Know About the Inflation Factor (July, 2011) This Editor's Pick article generated more than 350 comments. It introduces Mr. and Mrs. Growth, who plan their retirement according to conventional financial advice. Even though they save a cool $1,000,000 for retirement, they get surprised by how inflation (at 3% per year) forces them to withdraw more and more money each year. Despite similar-sized returns on their assets, their money runs out in Year 25 of a planned 30-year retirement. In other words, they're screwed.

Retirement's 4% Rule: The Importance of Return Sequence (August, 2011) In this article, we try some different withdrawal and return scenarios to see if they help Mr. and Mrs. Growth or hurt them even more. Along the way, we see how damaging it can be to need to make withdrawals early in retirement if that happens to coincide with a bear market. People who retired in 2008 can relate to this. So can people who retired in 2000-2001. The combination of a declining market and making withdrawals to fund retirement is a recipe for disaster.

Retirement's 4% Rule: Why Mr. & Mrs. Income Don't Need It (Part 1) (August, 2011) This article introduces Mr. and Mrs. Income, who saved for retirement by relying largely on dividend-growth concepts instead of amassing a Giant Number. They went to a financial planner who advised them on shooting for The Number, but they rejected that advice. Instead, they decided to do it themselves, creating a portfolio of some bonds and lots of dividend-growth stocks. This article was an Editors Pick and drew more than 300 comments.

Retirement's 4% Rule: Why Mr. & Mrs. Income Don't Need It (Part 2) (August, 2011) This article follows Mr. and Mrs. Income through their retirement. Using the same scenarios that destroyed Mr. and Mrs. Growth, we discover that the Incomes' portfolio worked wonderfully. The total income needed by the couple in 30 years of retirement was a little over $1.9 million. Their portfolio actually delivered more than $2.5 million. This article drew more than 450 comments, which as far as I know is the record on Seeking Alpha. I have never seen an article there with more comments.

The following series of articles appeared in 2010. The titles are pretty self-explanatory.

Financing Retirement: It's All About Income (July, 2010)

Financing Retirement: What's Your Real Number? (July, 2010) Hint: It's how much income you'll need.

Financing Retirement: Turning Capital into Income (July, 2010)

Financing Retirement: Asset Allocation (August, 2010)

Financing Retirement: The Cistern Analogy (August, 2010) I love this metaphor for visualizing retirement. It's better than "nest egg," because a cistern is dynamic, with inflows (dividends, interest, Social Security, pension payments), outflows (taking the income for spending money), and a leak (inflation).

The following articles are on various retirement subjects.

A Sampling of Investment Advisers Seeking Dividend Growth for Your Retirement Portfolio (May, 2011) Not all investment advisers follow the conventional path. There are a few who 'get it" about dividend growth approaches. This article drew more than 140 comments.

You're Retiring: Where Is Your Income Going to Come From? (March, 2011). This Editors Pick article was directed at professional financial planners. I asked them to tell me: "Why are the unique characteristics, benefits, and risks of dividend-growth portfolios ignored? Why are dividend-growth stocks never singled out as an investment category well suited to the needs of retirees, instead of being lumped in with all other stocks? Why are the rising-income-generating qualities of dividend-growth stocks never mentioned? Why is the dollar-for-dollar offset of dividend income against capital withdrawals never discussed?" There were nearly 400 comments.

Top 40 Dividend Growth Stocks for 2012

I have been receiving inquiries daily about whether there will be a 2012 edition of Top 40, and if so, when will it come out?

The answers are yes and mid-January. Readers of this newsletter will be the first to know, as I will announce the launch here. Thanks for your interest!!

Where Have I Been?

I had hoped to write some original material for this newsletter after I stopped the Timing Outlook in June, but that hasn’t worked out. Keeping up with articles on Seeking Alpha (SA), plus other activities, have burned up all of my available time.

I am in the process of preparing the 2012 edition of Top 40 Dividend Growth Stocks for 2012. A new feature I want to add in 2012 is a guide to all of the articles I have written over the years on dividend-growth investing. I think that will provide a library of sources for people who want to delve deeper into certain subjects. I already work the major points from articles into the eBook itself—that is a primary reason that the text changes from year to year. But I can’t work everything in—the text would become too long. Hence the desire to provide a guide to source articles.

I thought that I would start that work now, and provide it to you here prior to publishing Top 40 in January. My thinking right now is to present the guide in logical clusters of articles. It’s natural to start with the basics. So here is the first installment in next year’s guide to articles about dividend growth investing.

Dividend Growth Investing: The Basics

Here’s What Mr. Market Says: “Ban Dividends” A fun interview with Mr. Market, the fictional(?) fellow that controls all market movements. An Editors’ Pick that has picked up more than 115 comments. (October 31, 2011)

Debating Dividends: What Would You Want Your Company to Do With Its Excess Cash? Is it better for a company to retain all of its earnings or to send some of the earnings to shareholders as dividends? It depends on several factors that are discussed in this article. An Editors’ Pick that attracted more than 230 comments. (June 2, 2011)

Are Dividend-Growth Stocks a Distinct Asset Class? Asset classes are the major categories of investments, such as stocks and bonds. This article explores whether dividend-growth stocks are unique enough in their own right to comprise their own asset class. There are more than 100 comments to the article. (May 5, 2011)

The 5-Year Rule in Dividend Growth Investing. I require 5 straight years of dividend increases for a stock to be eligible for the Top 40 list. This article explains why. 123 comments. (April 15, 2011)

Portrait of a Beautiful Dividend Growth Stock. This article examines the stocks that have made every Top 40 list since I began the series in 2008 and investigates what they have in common. 89 comments. (March 23, 2011)

Why I Love Dividends. This article marked my entry into an age-old debate that continues to the current day. Some people love dividends and others do not. This article explains why I do. 139 comments. (February 9, 2010)

Dividends: A Company’s Leading Indicator. This article concludes from other studies that the amount by which a company raises its dividend is often a leading indicator of how it sees its own fortunes playing out over the next few years. (May 18, 2009)

Why Dividend Investors View Stocks Differently. The difference between traders and investors. (September 3, 2008)

4 Qualities of the Best Dividend Stocks. An Editors’ Pick. What to look for in a good dividend stock. (August 17, 2008)