I trust all my readers had a very Merry Christmas and you’re looking forward to ringing-in the New Year. I know I am.
Before we leave 2012, I wanted to provide you with a review and some takeaways from an extensive investing ebook I read earlier this fall. Check out this excellent guide for any dividend growth investor: The Dividend Toolkit.
About the author and ebook
Matt Alden is the knowledgeable investor and blogger behind Dividend Monk and many months ago, he released an ebook entitled The Dividend Toolkit. I received my copy a while back and I want to thank Matt for it. A few months ago, I took some time to dig into this book, reading it cover to cover. Here is my review of this detailed toolkit for the do-it-yourself (DIY) investor and why you might want a copy.
My first impression of this ebook was the volume – as in lots of it. I expect most ebooks (rightly or wrongly) to be leaner when compared to traditional hardcopy books. In this case, I was flat out wrong. An avid investor for about seven years now, Matt didn’t hold back anything to demonstrate his thorough knowledge of the stock market and investing principles; the ebook is 200 pages long. If you’re a DIY investor who appreciates details then this ebook was written for you.
Here are some of my favourite takeaways and what I enjoyed about The Dividend Toolkit.
Matt on living modestly and lightly
“….we’re living like kings and queens compared to most of the people that have ever lived on this planet, materially speaking. This includes most people that don’t have much money. It takes only a fraction of a decent income to support a comfortable and healthy lifestyle by most historical or global standards.”
“Here’s what we can all do instead: Produce more value than we consume, and make a lot more money than we spend. Reduce expenditure on depreciating assets. Forget about status symbols. Let ourselves be rich rather than look rich. We can invest our money to get a good rate of return, and spend money where it actually matters, such as investing in ourselves through school, or knowledge, or training, or experience.”
Matt on dividend investing basics
The Dividend Toolkit provides readers with an overview on how the markets operate, brokers and dividend reinvestment plans. The book also provides good definitions for company and dividend metrics, such as revenue, free cash flow, interest coverage ratio, dividend payout ratio and dividend growth rate.
Matt on dividend investing and investing psychology
“There isn’t just one way to invest. There are plenty of successful investing strategies that one can utilize, dividend growth investing is just one of those strategies, and this is just one individual investor’s view of dividend growth investing. However, dividend growth investing combined with other approaches such as index investing, is among the most suitable of strategies for many individual investors. A good strategy not only offers good returns, but also works well with human psychology.”
“The most important aspect of investing is the discipline to consistently add fresh money. Individual investment decisions are secondary. To build wealth, one must be the wealth builder rather than the “dabbler”. Consistently add money to your portfolio, ensure you have adequate asset allocation and diversification, and think strategically far ahead.”
“Dividend Growth Investing is not just about investing in stocks with a high dividend; it’s also about investing in companies that grow their dividends year after year, like clockwork. A passive income stream is typically unimpressive over the long term if it doesn’t grow. By investing in dividend growth companies, you’ll be building passive streams of income that grow over time. Each year with this investment strategy, assuming your companies stay healthy and profitable, your dividend passive income will increase.”
“…unless you’re planning on living off of your dividends right now, you can reinvest your dividends to buy more dividend paying stocks to further increase your passive income. The growth is exponential, and the strategy works over a long period of time to dramatically build your net worth and passive income.”
“With dividend growth investing and aggressive saving habits, a person can benefit from a diversified portfolio of companies that provides enough dividend income to comfortably support all expenses. And investments like bonds and real estate can be included for support as well.”
Matt on how many companies to own
“Personally, I keep my number of individual stock holdings at any given time to under 25. I’d also recommend not putting more than 10% of your liquid net worth into any one company, and preferably less.”
And then so much more…
The first part of The Dividend Toolkit includes six core topics that discuss Matt Alden’s philosophies about living below your means, why dividend growth investing can be a powerful investing approach and how to construct your investment portfolio. The second part of the book includes six advanced topics that focus on asset allocation, how to value stock investments and some information about alternative investments. Matt discusses the cost-benefits of share buybacks and reinvested dividends and why companies who have economic moats should be the ones you want to own.
What’s more, Matt has included in his ebook the Pareto Principle Analysis Workbook – a step-by-step guide and workbook to analyze any prospective dividend paying company for your portfolio. Matt writes:
“This guide explains how to maximize your time: spend a relatively small amount of time to get a rather thorough understanding of the companies you own or want to own. It states specifically what metrics I use when I quickly go through a company’s information to produce a report.”
The Dividend Toolkit is a comprehensive, well researched tool for the ardent stock investor. This ebook was written for any DIY investor looking to get the most out of dividend growth investing – just like Matt aspires and writes about passionately on his blog. More information on The Dividend Toolkit is available here. To follow Matt, read all his detailed stock analyses for free and follow his investing journey be sure to check out Dividend Monk.