Am I really a dividend investor?

Based on the title of the blog, one would think the answer to be yes.

I started focusing on dividend stocks from early this year. But even before that, I had always looked at getting good stocks and holding them for long-term. I have always been a buy and hold kinda investor (but for a few mistakes where I sold stocks like WMT and V). The majority of the stocks that I hold now have been purchased at least 3-4 years back and some even before that and I plan to hold them for several more years.

I hold some stocks that I had purchased for growth potential rather than dividends. CMG (Chipotle), AAPL, GOOG are some prime examples.

  • AAPL – I purchased 10 (pre-split) shares of AAPL at different price points. I liked the company for their growth potential with quality products. When I purchased the stocks, they were not paying any dividends, even though since then they have started paying (and increasing) the payouts. The stock also has gone up quite a bit since the purchase.
  • CMG – Chipotle is another prime example of my investment in growth stocks. I am a big fan of their food and restaurants and they enjoy a good market share in the fast-casual segment. In fact, I think they were one of the early restaurants to define a fast-casual segment along with Panera Bread. They enjoy a niche in the market which enables them pass increasing costs to the consumers by raising prices and not affecting their margins (witnessed by their recent quarterly results). I purchased CMG stocks primarily for their growth potential and I don’t see them offering dividends anytime soon (if at all). Hopefully, they are able to grow their revenues for years to come.
  • GOOG – I purchased 1 share of Google a while back just for the heck of it. I got it around 550 pre-split. The share doesn’t pay any dividends and probably will not for a foreseeable future.

AET and C could also be added to this list since they pay negligible dividends. AET has been a growth stock like I expected, but C has just languished.

So looking at all these, do I call myself a dividend investor or a growth investor. I would like to think myself as someone who does both. While I focus on for dividend stocks to invest in, I would definitely look at investing in growth stocks if I believe in the company.

But this also leads to another question:

Aren’t all dividend focused investors also growth focused investors?

Most of the dividend focused investors buy stocks that are quality dividend payers who are able to pay and grow their dividends consistently over time. This ensures reliable and growing income stream. And the only way for a company to grow their dividends is if the revenues/profits go up. So in a way, we all hope for the company revenues/profits to continue to up thus allowing the company to raise the dividend year after year. So indirectly we all are looking forward for capital appreciation while looking for dividend growth.

Disclosure: Long on AAPL, GOOG, C, AET and CMG

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8 thoughts on “Am I really a dividend investor?

  1. Good point, DGJ. Profitability is the goal whether it comes from dividends or growth – and even the two cant be split as two unrelated entities – as they go hand in hand. Without any growth in revs and earnings, you dont have any growth in dividends. But rising dividends are always a good feedback to the investors to remind them how the company is doing, which is more tangible than unrealized gains.
    I hear you on the growth stocks – and good picks on AAPL, GOOG and CMG. I wish I had got in on them.

    Best wishes
    R2R

    • Thanks R2R. I would say I just got lucky with my picks on AAPL, CMG etc. CMG for example could have gone either way (and it still can). But I believed that the company had a special niche and it paid off. Hopefully, they can continue to execute nicely and become the next MCD 🙂
      The three I have mentioned are some of the hits. I have had lot of misses too. C for example hasn’t gone anywhere even though the market is at all time highs. And I missed on some promising growth stocks few years back like Netflix at 60s, AMZN at 100s. One just can’t have everything 🙂

      Thanks for stopping by.

  2. Hi DGJ,
    An interesting post!
    I suppose I think the classification of growth / value / dividend investing is really about the lens through which you view shares; a true growth investor may be interested more in future EPS growth than dividend yield (e.g. Berkshire which pays no dividends); whereas a dividend investor wouldn’t consider a non-dividend paying stock and a value investor would perhaps look specifically for undervalued stocks.
    But diversification is always good and there’s nothing wrong in a using a blend of different stock strategies.
    Best wishes,
    -DL

    • Thanks DL. You are correct. Having a good mix of stocks will definitely help especially if you are investing for long term and don’t rely on the passive income right away. Also, a growth stock of today might become a dividend stock of tomorrow – AAPL is a good example of that.
      Thanks for stopping by.

  3. By default, investing in solid companies with the ability to grow revenues and earnings while increasing their dividends is a recipe for a stock that will gain value in the markets long-term as the rest of the world recognizes their value. Even without the sole focus on dividends, companies that succeed will be championed by those looking for capital appreciation. If you look at some of the folks portfolios who have been investing in DG stocks for a while, the capital appreciation (bull market disclaimer here) has tracked well against the broader market. Certainly doesn’t hurt if we every do need to sell a position and there are some gains to be had!

  4. I’m glad to see I’m not alone with that! A small portion of my portfolio is in growth stocks as well. I did own AAPL years ago, and owned GOOG pre-split, but sold both for different reasons. I hope to own them both again someday. Do you intend to expand that portion of your portfolio? I’ve personally been examining PCLN and FB for potential purchases in the past few months.

    • Like I mentioned, I started focusing on dividend stocks from early this year and before that I was investing in stocks that I found had value (dividend or growth). AAPL and CMG turned out to be good investments in that sense though I missed out on stocks like FB, TWTR or Netflix.
      I am always on the lookout for good growth stocks at reasonable prices. BABA is a recent addition to the watch list along with the ones mentioned above.

      Thanks for stopping by.

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