Dividend Investing Book Recommendations

[mathiverse]

Can I get a few book recommendations for learning about dividend investing?

[jacob]

Read the original "Theory of Investment Value" ( https://en.wikipedia.org/wiki/John_Burr_Williams#Theory ) which is still in print. The idea behind of dividend investing is to calculate valuation based on the expectation of all future (discounted) payouts is buy if the netpresent value of those is > the current market price and vice versa. Simple as that. What it does is to give your a valuation tool that's different (better?) than gut feeling, historical trends, reddit popularity, ... etc. For example, it makes the distinction between value and market price, whereas more modern opinions suggests that these are identical whereas postmoderns opinions suggest that value is more or less made up.

In terms of taxonomy, I'd say dividend investing is a subset of the value investing school. Valuation is just based on the expectation of future dividends rather than the book value, say. All value investing relies on the ability to read financial statements in order to calculate said value or at least understand the summary/crib sheet provided by your generous brokerage. The most relevant books from http://earlyretirementextreme.com/start ... sting.html would be the ones on analyzing financial statements.

If you want to play around with it before reading the curriculum look up the Gordon growth model. It's usually just given as the result of an infinite series of payments which is what it really is, so understand how to derive it. Playing around the numbers, especially the growth rate---extra credit if you implement a version where it's not constant of subject to dividend cuts---should make it pretty clear that you need to have a very very good idea about that rate in terms of making precise estimate of the value.

[kane]

It might be hard to give something without context, i.e. where do you stand on the investing learning curve, does it have to be straight about dividend investing or you're fine with books about value etc.

From a more noobie perspective which I represent (and value/dividend investing is something I lean on), learning about reading financial statements (cash flows!) is indispensable in the long run. It gives you a feeling about what values (ha!) the company represents (how much it reinvests vs how much it gives away as dividends [none is good or bad per se], how much it leans on credit [how does it perceive risk] and so on). I also understand that this can be gamed to some extent, but I guess you have to look at something and you're not after some simple formula which will give you a green/red result whether it's worth buying the company or not (e.g. grep for top x companies that have been giving [rising] dividends in the lasy y years...).

I also would like to repost/bring again here a book that helped me think about value/risk/dividends in general: "The Dhandho Investor".

[ertyu]

1 hour 20 min of Damodaran on Dividends

[Humanofearth]

If you’re into cash flow, consider that t-bills are currently paying out more than most dividend stocks.

Treasury.gov

[ertyu]

can non-citizens buy treasuries through that website?

[Humanofearth]

You need a US tax id number. You could also buy through a brokerage.

[jacob]

can non-citizens buy treasuries through that website?

The easiest way to get exposure to the long end of the curve would be to just buy the TLT ETF. If you want the entire curve, BND is your friend. Unlike the actual bonds, you can lose money on the former insofar interest rates have been rising during the past 10 years because TLT force sells bonds with less than 20 years to maturity. I'm not sure what BND does if anything; I mean technically they should never trade in or out since they are tracking the entire market. In practice, they may do something else.

[zbigi]

I guess the nice thing about dividends is that they allow to, at least partially, avoid the "market staying irrational for too long" situation that is one of the biggest risks of value investing (because, even if you can't wait any longer and have to sell the dividend stock at the end at a disappointing price, the total amount of collected dividends makes the whole deal much better that it would've been otherwise).

[jacob]

I guess the nice thing about dividends is that they allow to, at least partially, avoid the "market staying irrational for too long" situation that is one of the biggest risks of value investing (because, even if you can't wait any longer and have to sell the dividend stock at the end at a disappointing price, the total amount of collected dividends makes the whole deal much better that it would've been otherwise).

I would say that the dividend-framework does get the investor closer to thinking as an owner of a business. I can't help but imagine what the world would look like and what these kind of investment threads would look like insofar the financial markets did not provide an instant proxy for the "worth" of one's holdings. What if the alternative to the instagooglespreadsheet calculation of NW was a loose estimate of the value of a business provided on an annual basis. This would force people to shift their framework from "My investment portfolio is worth $451,578.91 in this particular second of this particular month" to "I own 345 shares of XYZ and 678 shares of ABC ... and last year they paid me $21,000/year in dividends which is 8% more than the year before. What are the shares worth? I don't know, make me an offer?"

This is the difference between private and public equity. You'll see this in some companies that offer employee shares. The company will only calculate the worth once a year along with an offer to cash out.

[WFJ]

Most introductory finance textbooks have a thorough explanation of dividends and how one can use them for investing. Corporate Finance by Jordan or Investments by Bodie are good resources that have extensive treatments of what creates a dividend and how they are used for investing.

From a practical standpoint, SCHD, SPYD and VYM are almost impossible to beat for any income investor and take seconds per year to hold while doing your own research, trading and paying taxes on trades can take 100+ hours a year and dwarf any edge an individual perceives they have over these funds. For Treasury Bills, FSIXX, SPAXX and SWVXX are also funds that are easier than direct T-bill purchases which yields close to T-Bills. I own or have owned all of the above-mentioned investments.

[Humanofearth]

@WFJ
FSIXX seems the best choice if you have enough to get in.

Otherwise, brokers often allow you to buy through them both directly (at auction) and on the secondary market and have autorollover options.

[C40]

This was the first dividend investing book I read, and I think it's a great starting point. It's easy to understand but not overly simple: The Single Best Investment: Creating Wealth with Dividend Growth Hardcover – April 1, 2006
by Lowell Miller