Dividend growth investing

Dividend investing is not new. Far from it. But it seemingly has easy answers for people who want to invest their money. One uses a screener to look for increasing profits, dividends, EPS [… plugin more items] and then does a cursory analysis of the balance sheet to see if they are “financially sound” and the business model makes sense. One you have all this you look at any number of valuation models/online calculators like the dividend discount model and come up with a fair price. You buy if you see that the company is selling on a discount to the fair value.

I have several reservations about dividend growth investing as it is practiced by a lot of people at the moment. I believe that it is too superficial and glosses over several things which should be considered before investing. I am not in a position to criticise though — given my track record.

I think though that the next bear market will severely effect the dividend growth investors — by wiping out their collected dividends against capital losses i.e., loss in share prices. I would be interested to see how the dividend investors will react in such a case. For the sake of this study, I am going to link the blogs I have followed for some time.

Dividend Mantra
Passive Income Pursuit
Dividend Monk
Dividend Guy Blog

I am going to stop following them and check back with them when the next bear market hits i.e., S&P drops at least 20%.


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