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The Ultimate Dividend Playbook by Josh Peters, CFA
Mr. Peters begins in the Introduction by introducing his favorite investor, Marjorie Bradt.
No, you’ve never heard of her. She was a client of a brokerage firm where he once worked as an assistant. Ms. Bradt’s father gave her about $6,000 worth of AT&T stock in the late 1950s and early 1960s. She signed up for AT&T’s dividend reinvestment program and simply kept the stock and continued to reinvest the dividends. In 1984, a court ordered AT&T to split into “Baby Bells,” and they’ve been separate companies ever since. Most of them paid dividends, which she continued to reinvest. By 1999, her portfolio was worth more than $1 million. Strangely, given the subject of this book, Mr. Peters does not tell us what her annual dividend income was.
I wish he could give us more insight into Ms. Bradt. Did she even remember that she owned these shares? Has she ever been tempted to liquidate stocks? At some point, she and her husband felt the need for more money. Why didn’t she add more money to the portfolio?
Still, it’s a great story. It’s not that easy to replicate because $6,000 was a lot of money at the time – a respectable middle-class annual income, believe it or not. And because AT&T’s story is unique. Not all stocks would do so well, even in forty years.
Unfortunately, Mr. Peters himself does not show so much patience. He mentions selling stocks that are not meeting his expectations.
And he really likes the analysis of individual stocks. Early on, he dismisses the value of mutual funds and exchange-traded funds, and later criticizes the concept of diversification, which of course is the reason why investors put their money into mutual funds and exchange-traded funds.
I find this a little strange in a book by an employee of Morningstar, which was founded to provide mutual fund recommendations to investors. (Mr. Peters is the editor of Morningstar DividendInvestor, their dividend investing newsletter.)
And this, in my opinion, is the weakness of the book. The author is a financial analyst and clearly understands a lot about companies that typically pay dividends and how to reduce their numbers.
However, this makes the whole process very complicated for the average non-CFA investor. They can spend many hours of their free time trying to replicate what he does and not come close. They are not paid for it as a full-time job, as he is.
Most readers don’t even try. They will either opt out of dividend investing or subscribe to DividendInvestor to receive Mr. Peters’ advice on a regular and ongoing basis. And it’s hard to believe that anyone at Morningstar, author or not, isn’t hoping for that outcome.
I applaud the author for making a point that I thought only I understood – that investment risk is not about price volatility, but about real events that cause companies to cut or stop paying dividends.
Overall, I recommend this book to anyone wondering if investing for dividends is a good idea.
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