As we've been researching our new book on dividend investing (PDF available here), we've been scouring the Internet looking for the best sources of income investing inspiration. Here's the very best of what we've found. You might be surprised to find us recommending anywhere other than Stockopedia's screening & research centre, but we're big believers in reading as widely as possible (and leveraging the power of the Web), following Charlie Munger's words of counsel:
"In my whole life, I have known no wise people (over a broad subject area) who didn’t read all the time – none, zero... You’d be amazed at how much Warren [Buffett] reads – and how much I read."
Please feel free to add further resources that we've missed in the comments below...
Dividend Investing Blogs
There is a growing number of high quality investment blogs. In the UK, the best blogs are mostly value-focused (e.g. Richard Beddard of Interactive Investor). The best dividend blogs tend to be North American but they are well worth reading, especially:
- The Dividend Guy Blog (www.thedividendguyblog.com) - Dubbed as "one guy’s journey to passive income through dividend investing", this is a popular US stock idea & analysis blog that has been around since 2005.
- Dividend Growth Investor (www.dividendgrowthinvestor.com) - Set up in 2008, this blog shows how one investor has implemented the dividend growth strategy and is a useful source of stock ideas.
- Dividend Growth Stocks, previously DividendsValue (www.dividend-growth-stocks.com/) - A blog/site dedicated to the process of identifying superior dividend investing using a value-based approach. He also writes as Dividends4Life.
- Div-Net (www.thediv-net.com) - This is an aggregation site and investor network set up by various bloggers which is focused on dividend investing.
- Disciplined Investing (disciplinedinvesting.blogspot.co.uk) - This is the blog of David Templeton and Horan Capital Advisors. It covers a range of topics, including macro, but there’s some good dividend coverage in there.
Other useful North American blogs include Dividend Ninja (http://www.dividendninja.com), Dividend Monk (http://www.dividendmonk.com),Dividend Maven (http://dividendmaven.com) and Passive Income Earner (www.thepassiveincomeearner.com).
The UK Dividend blogging scene is still a bit more lacklustre frankly. Still, it’s worth checking out the blog of the Munro Fund (http://bit.ly/Q0mH0h) – Munro is a tracker fund which uses gross cash dividends to weight its holdings so they focus hard on the dividend universe. The Monevator blog has some good dividend coverage, including an excellent four part guide to building your own HYP. Another good blog is DIY Income Investor (www.the-diy-income-investor.com) – it also discusses bonds etc. but has some good coverage of dividends and a good/free e-book. Steven Dotsch’s Dividend Income Investor (www.dividend-income-investor.com) is also worth a read (there's also an e-book).
Social Media Sites
Bulletin boards can be a useful source of ideas and ways to track "scuttlebutt". Social finance site, Seeking Alpha is the spiritual home of income investing discussion, albeit with a strong US focus. The most followed/active contributors in the DGI space tend to be David Van, David Fish, Chuck Carnevale and Norman Tweed. The HYP discussion area on the Motley Fool UK (bit.ly/NI4qsK) is also worth perusing. It's worth being aware of the herding instinct that can exist on social media sites, though. Incidentally, on the Motley Fool USA, Todd Wenning has also published a number of useful 'Dividend Report Cards' for both the UK and US markets (bit.ly/TQqw9d).
Since we believe in self-education/reliance, we are generally not keen on tipsheets but we’d make an exception for Stephen Bland (a writer for TMF & Moneyweek/Agora). He writes the Dividend Letter, available here (bit.ly/OLaATP) and is one of the better online advocates for high yield. Amongst the investing magazines, the Mr Bearbull column from the Investor's Chronicle magazine is often insightful. From 2000-2011, the returns from the Bearbull Income Portfolio income fund were apparently 9%, versus just 0.3% for the FTSE All- Share index (http://bit.ly/OVloQL).
Tracking The Professionals
Fund managers tend to keep their cards fairly close to their chest (perhaps lest anyone realise how rubbish those cards often are!), so their public commentary can be a little bland. Still, the Web makes it relatively easy to built a list of the better professional investors, particularly those whose philosophy you share, and look at their holdings directly. This is much easier in the US due to diffferences in disclosure requirements, but TrustNet still provides a very useful resource for UK stocks.
Perhaps the best known dividend or "Equity Income" focused fundmanager is Neil Woodford, the feted manager of two of the UK's very largest retail funds (Invesco Perpetual High Income and Invesco Perpetual Income) which now hold almost £16 billion in assets but there are many other successful funds in the UK Equity Income sector.
As a guide to the better UK income funds, Principal Investment Management in Bath publishes an influential guide (http://bit.ly/NYlO6D). Its half-year review divides UK Equity Income funds into a white ‘buy’ list, a grey ‘hold’ list, and a black ‘sell’ list based on total returns and risk over five years. Clearly, this is just a backward-looking exercise but it's as useful a way as any other for separating the sheep from the goats.
- The White List (www.whitelist.co.uk/) is the group of funds that have established over five years an ability to produce superior risk/return profile. There are 14 names on the White List at present, including one of Neil Woodford's Equity Income funds (Invesco Perpetual High Income). Here's the top five funds:
- Troy Trojan Income (you can see an interview with the fund manager, Francis Brooke, here)
- Threadneedle UK Equity Income & Threadneedle UK Equity Alpha Income (managed by Leigh Harrison, interviewed here, and Richard Colwell) &
- RBS Equity Income (Christopher Murphy - you can see a presentation on the fund here)
- Cazenove UK Equity Income (managed by Matthew Hudson, profiled here).
- The Grey List is usually a temporary home for a manager with an out of favour style or an early warning signal for a fund in decline. This includes Invesco Perpetual Income as well as the fund of another big name in UK equity income, Bill Mott who runs PSigma Income.
- The Black List is for consistent underperformers. Some of the surprising names on here include Tony Nutt's £2bn Jupiter Income trust (apparently fourth quartile over the three years to July 2012 although, in fairness, it did still return 34.7% over that timeframe!) and James Henderson's £304m Henderson (LON:HGG) UK Equity Income fund.
In the case of Woodford, TMF have done a helpful analysis of his top holdings, "8 Top Dividend Shares Held By Britain's Super Investor" but you can easily see a list of the top holdings for any manager on TrustNet. As an example, you can see the top 10 holdings of the Troy Trojan Income fund here.
Top 10 lists are just a starting point as they are usually only a small-ish sample (and the managers may have hidden reasons for owning some of their positions, e.g hedging). To dig a bit deeper, it's best to revert back to the Annual Report for each Fund. These reports are not always that easy to find but, in the case of Neil Woodford, if you go here to the Invesco Library, you can download the High Income fund holdings here:
- UK Investment Series Annual Report Issued February 2012 (see pages 34-37)
- UK 2 Investment Series Annual Report Issued May 2012 (see pages 18-21)
According to TrustNet, as of July 2012, Woodford's ten largest investments in his High Income Fund were:
- Astrazeneca Plc - 8.38%
- GlaxoSmithKline (LON:GSK) - 8.08%
- Reynolds American Inc - 6.43%
- British American Tobacco (LON:BATS) - 5.97%
- BT (LON:BT.A) - 4.9%
- Imperial Tobacco (LON:IMT) - 4.76%
- Reckitt Benckiser (LON:RB.) - 4.47%
- Vodafone (LON:VOD) - 4.35%
- BAE Systems (LON:BA.) - 4%
- Roche Hldg Ag - 3.83%
However, close inspection of the Annual Report reveals a long tail of almost 100 investments, including the likes of Juridica, Catlin, Helphire, Phytopharm and his rather more surprising 29.5% stake in Masawara, a Jersey-incorporated fund that will apparently invest in Zimbabwean resource companies!
Dividend Data Sites
Apart from Stockopedia's own income screening and dividend data-set (including our Dividend Screens), there are the usual financial data website suspects, but relatively few of these sites have a strong income focus. One site that does is DividendInvestor.com. Registration is required but it has a handy UK version (www.dividendinvestor.co.uk). It provides investors with basic dividend data as well as its Dividend All-Star Ranking, which lists top-performing dividend-paying stocks. It also includes some basic income screening capabilities, along the lines of our High Yield lists and our screens like the Dogs of the FTSE.
The Dynamic Dividend (http://www.dynamicdividend.com/) is a US-only data site which monitors when dividends are increased, decreased or frozen, as well as listing many dividend ex dates for the given day. It's worth a browse-around, although it seems to be in a bit of a hiatus at present. A more basic UK version that gives ex-dividend information is www.exdividenddate.co.uk/ (you can also access this information on any Stockopedia stock report).
Another new UK site that looks interesting is Dividend Max (http://www.dividendmax.co.uk/). It provides some useful filters for tracking dividend income, although it's subscription only - and at £24.99 per month, it seems relatively expensive.
Dividend History Indices / Lists
Any dividend growth investor worth his salt is keen to examine dividend histories over long time-frames. In the US, this is easy. You can access the following indices/lists:
- Dividend Achievers (http://www.dividendachievers.com/) - This is a list maintained by Indxis of US companies that have increased their annual regular dividend payments for the last 10 consecutive years.
- Dividend Aristocrats (http://bit.ly/cc2K4i) – This is a list of large cap, blue chip companies within the S&P 500 that have consistently increasing dividends every year for at least 25 years. It is maintained by the S&P.
In addition to these lists, it's also worth consulting the DRip Investing Resource Center (http://dripinvesting.org/) – This site is updated by David Fish and the spreadsheet includes 3 different lists:
- Dividend Champions - a list of US companies that have increased their dividends for 25 years
- Dividend Contenders - a list of US dividend streak companies from 10-24 consecutive years.
- Dividend Challengers - a list of US companies who have increased their dividends from 5-9 consecutive years.
Until recently, there’s been no real UK equivalent to these lists, apart from within the investment trust space where the Association of Investment Companies (AIC) publishes a list of trusts that have increased dividends for the longest number of consecutive years (http://bit.ly/PVSkfE). Top of the table are the City of London Investment Trust, the Alliance Trust and the Bankers Investment Trust, all of which 45 year dividend growth streaks!
This year, Indxis launched a UK Dividend Achievers index but it just defines Achievers as a meagre 5 years of increased dividends (not such an achievement!). Fortunately, S&P has now launched a UK equivalent of its Dividend Aristocrats Index, SPDR S&P UK Dividend Aristocrats (http://bit.ly/UzWhpb). This tracks the 30 highest dividend-yielding UK companies that have increased or held dividends stable for at least 10 consecutive years. Its top 10 holdings are:
- Amlin (LON:AML) - 5.39% of total holdings
- Bae Systems Plc - 5.28%
- Carillion (LON:CLLN) - 4.41%
- SSE (LON:SSE) - 4.38%
- Vodafone Group - 4.30%
- ICAP (LON:IAP) - 4.16%
- Daily Mail&General Tst-A Nv - 3.98%
- Balfour Beatty (LON:BBY) - - 3.92%
- Tesco (LON:TSCO) - 3.78%
- Centrica (LON:CNA) - 3.75
You can see a list of all 30 qualifiying stocks here. They have also launched a related ETF (http://bit.ly/PbImFh). S&P also produces an index of consistent dividend payers for European companies, the S&P Europe 350 Dividend Aristocrat index.
While very helpful, these lists do mean that you are effectively held hostage by S&P's methodology & assumptions, which may or may not suit your needs. However, you can also screen for up to 10 years of Dividend Streak on Stockopedia, and then layer on any other value, growth or other filters as you see fit.
For internationally minded investors, it’s worth checking out a Dutch site (www.topyields.nl), which has some good global data (it also sometimes discusses British equities). And for those interested in fixed income more generally, it’s worth checking out the excellent (free!) resource built by Mark Taber at Fixed Income Investments.
Dividend investing books
For some reason, the dividend investing literature is just not as interesting / well populated as in the value space but, overall, we'd say that the best books are:
- Aswath Damadoran: Investment Fables (punctures a lot of investing myths)
- Geraldine Weiss: “Dividend Don’t Lie” & “The Dividend Connection” (there has also been a revised edition by Kelley Wright – “Dividends Still Don’t Lie”, although - in fairness, we've not yet read it).
- Charles Carlson: “The Little Book of Big Dividends” (pushes his BSD system but it's still an interesting take on the topic)
- Rodney Hobson: “The Dividend Investor” (a good introductory text to the subject)
- van Knapp: "Top 40 Dividend Stocks of 2012" (a good, practical exposition of the DGI philosophy)
Dividend Investing Research
In terms of the best research papers on dividends, one handy synthesis is "Tweedy Browne – the Dividend Yield Advantage". It is available as a free PDF download. It summarises a number of studies analyzing the importance of dividends and how they drive investment returns (for example Robert D. Arnott's renowned paper, "Surprise! Higher Dividends = Higher Earnings Growth").
Finally, it's not mentioned in the Tweedy Browne study but well worth reading is a study by Cass University called "Consistent Dividend Growth Investment Strategies". This paper examined data for the London Stock Exchange from 1975-2006 for a range of strategies. Amongst other findings, it concluded that firms with over 10-years of consistent dividend growth (especially small-caps) beat the market, with the additional benefits of lower volatility and smaller drawdowns.
What essential dividend investing resources have we missed - for either the US, UK or European markets? Do let us know below, and don't forget to download your complimentary copy of our forthcoming dividend book here.
Filed Under: Income Investing,