Payout Appreciation: Some Investors Pile Into Stocks Likely to Keep Raising Dividend

Note: I'm going to be traveling the next couple of weeks so there likely won't be any original posts from me.  I'll be reposting articles I find interesting and applicable during this time though. Below is an article from the Wall Street Journal that points out how money management firms are now focusing on companies that pay and grow their dividends each year.  What an interesting concept!

Call them the new growth stocks.  After rushing into dividend stocks of all stripes this year, some investors are homing in on a more select group: stocks of companies that are likely to keep raising their dividends at a fast clip.

It is all part of the chase for better returns on the heels of the Federal Reserve's announcement last week of another round of bond buying aimed to keep interest rates at rock-bottom levels until the economy improves. As yields on the 10-year Treasury wallow at near-record lows and "junk"-bond yields also are sinking, investors are seeking anything that offers some extra income. READ MORE

Disclosure: I am long VZ, HAS.

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When Do We Sell?

Since I reviewed Intel about a month ago the stock has gone up over 10%.  It was a nice jump and long overdue in my opinion.  The stock has been hanging around $20 area for several years now, all the while it has been beating analysts estimates and raising its revenue and income guidance. Personally I think Intel is still considerably undervalued based on present day valuation, but as a dividend investor I absolutely love being able to buy a dividend growth stock this cheap.  After all, the lower the price the higher the dividend yield.

But as dividend investors we don't care that much about the price of the stock.  We care about it when we are considering purchasing the stock, but after a purchase we should care about the dividend fundamentals and not the price.  I've gotten a few emails from people asking when I would consider selling part of my position in Intel and take some profits.  My answer of when I plan to sell Intel, "hopefully never".

I don't buy dividend stocks in order to make a gain on price.  I buy a dividend stock because I think that company will be around when I retire.  I believe that stock will continue to pay and raise their dividend for the rest of my life.  I want that stock to be providing me a passive income stream through dividend payments when I am 60+ years old.

Of course, that's in a perfect world.  There will be times when a dividend stock falters and its fundamentals forces us to sell.  Hopefully this is a rare situation, but we need to identify those situations that will cause us to sell our stock.