Income Investing | MarketFoolery - 08/19/2014 | The Motley Fool

TL;DR

Dividend investing provides a statistical advantage as dividend stocks, on average, outperform growth stocks. Academic studies support this claim, making it an appealing investment strategy.

Transcript

it's tuesday august 19th welcome to market foolery i'm chris hell joining me in studio today for monthly income investor james earley thanks for being here anytime chris it is my pleasure see as i promised listeners last thursday i said we're gonna we're gonna have a couple of special guests this week people who are not normally on the market foole... Read More

Key Insights

• 🅰️ Dividend investing provides a statistical advantage over other types of investing.
• 💄 Growth stocks tend to underperform, making dividend stocks more attractive.
• 💻 Screening for specific criteria can help identify promising dividend stocks.
• ❓ Longevity in dividend-paying companies is important as it indicates company stability.
• 🤨 Dividend raises are generally viewed as positive, but some companies may raise dividends to appear healthier than they actually are.
• 🛩️ Smaller companies are more prone to using unsustainable tactics to increase their dividends.
• ❓ The banking and financial industry is an underfollowed story with potential opportunities for investors.

Questions & Answers

Q: Why does dividend investing appeal to James Early?

James Early is attracted to dividend investing because academic studies show that it outperforms other types of investing, providing him with a statistical advantage.

Q: Why do dividend stocks tend to outperform growth stocks?

Dividend stocks outperform growth stocks because growth stocks have more losers than winners, leaving dividend stocks underfollowed and underappreciated. Dividend stocks deliver better cash flows than investors expect.

Q: What is James Early's process for finding dividend stocks?

James Early uses a screening process that includes criteria such as a return on equity above 12, long-term management with inside ownership, and a significant market share. He then performs full-blown valuations on a smaller number of recommendations.

Q: How important is longevity in dividend-paying companies to James Early?

Longevity is essential to James Early, particularly in the US market. Companies with a long history of paying and ideally increasing dividends are less likely to cut their dividend payments.

Summary & Key Takeaways

• Dividend investing appeals to investors because academic studies show that it outperforms other types of investing, providing a statistical advantage.

• Growth stocks, on average, do not outperform as they have many losers with only a few big winners, making dividend stocks underfollowed and underappreciated.

• The key to finding dividend stocks is to screen for companies with a return on equity above 12, long-term management with inside ownership, a significant market share, and a history of dividend growth.