Customer Reviews

Beating the S&P with Dividends: How to Build a Superior Portfolio of Dividend Yielding Stocks

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If this is your first book on dividends and how they can help in improving total returns, this book will not disappoint you. However, if you are looking for any new ground-breaking research or novel trading/investing strategies, the book has very little new to offer. Most of the book will be educational for the new investor, despite most examples in the book are taken from IRS's website. Much of the book is also devoted to lists of companies that have been increasing dividends consistently...information that is mostly freely available. The book talks about an index focusing on dividend paying companies and shows how it has beaten the broad market in short and long terms. however, there is very little information on the composition of the index, how it is weighted and so on. SP and other indices clearly specify the composition and their weights. Overall, the book is good for a new investor, with good explanations on dividends, different ratios that can be used to evaluate a company, and so on. But it comes short of adding new material to the already crowded investment literature.

It makes sense that retiring baby boomers, who by most accounts are better at spending than saving, will want to supplement their retirement income with a stream of dividends from their stock portfolios. A shrinking number of traditional pension plans that guarantee an inflation adjusted income and a general anxiety about the adequacy of social security benefits will only heighten the need for additional income for future retirees. Happily current regulations favor most common stock dividends with a reduced tax rate. More companies appear to be returning profits to shareholders with dividend increases in this post-bubble period. Indeed companies that steadily increase their cash distributions may raise their credibility over companies that retain their profits and parse their definition of earnings.

BEATING THE S&P... is a good introduction to some names that could constitute a dividend-growth portfolio model. Almost half the text consists of various lists and company profiles. The Do It Yourself investor will find this information to be a good starting point with the obvious understanding that statistical data is constantly changing. Be aware that REIT distributions get no special tax rate from the IRS (clearly noted). This is also partially true of MLPs (master limited partnerships) which have attractive yields but annoying K-1 tax forms and potentially problematic issues when used in retirement accounts.

The authors are also promoting with this book Mergent Inc.'s various indexes which are based on companies that consistently raise their dividends. Some closed end funds that follow this strategy are mentioned. In any event their key point is that dividend producing portfolios tend to outperform pure growth portfolios and the popular S&P 500 Index over the long run. This is a 'get rich slowly' approach to portfolio design that has worked well since 2000 and has a demographic wind at its back that should provide ongoing momentum.

This is a very good book for the buy-and-hold investor to read. Until I came accross the Mergent's list recently, I was quite skeptical about the buy and hold philosophy. Now I am convinced that a Mergent's list ETF such as PEY, DVY or a similar ETF is all one needs for care-free investment to give returns of about 12 or 13 percent or more over 10 years or more. Or, one can generate steady income and have modest capital appreciation too. Buying individual stocks from the list may not achieve the desired outcome.

The book may be further improved by explaining some points better.

If not convinced, read the book "Beating the Street by Peter Lynch and John Rothchild" to reassure you about Mergent's stretegy.

I was looking for a piece of gold, but most of the stuff presented here I knew. It was a okay read and no book is ever wasted.