So when I start to analyze companies, one of the things I look at is both the amount I can get from the dividend and the amount I can get from the growth in the price of the shares. If the two add up to twelve percent over the next twelve months, then that's a company I'm interested in buying. Or holding onto if I already own it. It's how I judge new buys and how I determine whether to hold on to the positions I already have. As most Texas ranchers would agree, sometimes you need to add to the herd and sometimes you need to cull the herd. But the herd needs to stay healthy.
So I'm constantly going through my positions to ensure I have a solid group of companies that are producing wealth. This means that I expect each company's dividend will continue to grow each year and that the stock price of each of my positions will grow too. Anything less is sold and the proceeds are reinvested in better investments. Ones that will produce that twelve percent goal.
By having a total return emphasis the world of investing opens up nicely. I can find a stock that's expected to grow at a ten percent rate with a two percent dividend, or a stock that's growing at two percent with a ten percent dividend. Or any combination that adds up to at least twelve. I do, however, reject companies that don't pay any dividend at all simply because I like to get paid something. And being a dividend growth investor, that dividend needs to be growing at a rate faster than inflation.
Unfortunately this strategy has kept me out of some spectacular stocks over the years. It has kept me out of Amazon and Facebook while getting me into Apple only these last few years. Many may think that was a mistake, but the rule has also gotten me out of stocks that were once moving higher but more recently have stagnated. So while my personal rules may be a little inhibitive at times, they've also kept me out of trouble at other times.
I know most people won't agree with my strategies for investing because they're entrenched in growth strategies or income strategies, but I'm entrenched in wealth strategies. I use dividend growth, stock price appreciation, options strategies, and reinvestment of income to enhance my wealth. Hopefully one day it will all pay off.