Customer Reviews

The Standard & Poor's Guide to Building Wealth with Dividend Stocks (Standard & Poor's Guide to)

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An earlier version of this S&P Guide (The Dividend Rich Investor: Tigue and Lisanti, 1997) may have fallen on deaf ears. Investors were hungry for growth stocks with strong earnings in the last decade. Cash dividends were signs of corporate stodginess, a lack of vision, and they were fatly taxed as ordinary income. Many investors didn't want money in the mail. That was for another older generation of share owners. They wanted innovative companies in a rush to expand their market share and quick to buy back their own stock. They wanted companies to do headline deals and leverage their growth to score rich returns that could be realized at the investor's discretion when stock prices were dramatically higher.

In contrast the timing of this updated Guide could not be better. With the Tax Relief Act of 2003 most stock dividends 'qualify' for a low 15% maximum tax rate. Baby boomers, close to retirement, are beginning to look for cash distributions from their portfolios. 'Earnings' can be an accountant's definition, but dividends are cash in hand. Meanwhile corporations are now flush with cash and able to increase their dividends to investors.

A key point of this Guide is that investors are better off owning a modest dividend that is increasing at a rate that exceeds inflation versus a high current yielding investment. This may be intuitive to long term investors, but given a choice between a 2 or 3% dividend that is regularly increased or a 7 or 8% current dividend, I would have liked to have seen this case made more persuasively.

Tigue covers a range of investments and strategies designed to create income flow. Common stocks, mutual funds, REITS, Master Limited Partnerships, and ETFs get attention. He might also have mentioned Canadian oil and gas income trusts which have been around for twenty years, pay monthly distributions, offer diversification, and have appreciated smartly in recent years with the demand for these commodities.

There is not a lot that is new in this book, but it warrants a quick read from anyone looking for ways to generate income from their portfolios.

Note to editors: page 100, "IDX" should be "IDU". More importantly on page 95: "DVY does not pay out dividends to fundholders; instead the payments go toward buying additional shares of stock". This is not correct. DVY pays quarterly cash dividends. They are not reinvested. It is money in the mail to shareholders.

The book claims to be about dividends but the author covers a wide variety of topics - none well at all. He seems to have a difficult time staying on the subject of dividend stocks. I read two other excellent dividend books recently and comparing the three there was simply no contest. The only thing this book did well was list dividend stocks. I guess the author assumed if he listed the stocks then the reader would just buy 10 or 15 of these stocks and be satisfied. The problem is the author does not give a coherent system for picking dividend stocks, even though on the front cover he claims the book contains "Keys to selecting the Best Dividend-Paying stocks". He only mentions in passing the importance of how much a company grows its dividend from year to year. This is perhaps the single most important criteria when picking dividend stocks!
The most disapointing thing of all was the fact that Standard and Poor, an very credible and amazing organization, put its name and blessing on this book.
I did not learn anything about analyzing dividend stocks from this book.