The Ultimate Dividend Playbook by Josh Peters, CFA

Mr. Peters starts out in the Introduction introducing his favorite investor, Marjorie Bradt.

No, you’ve never heard of her. She was a client of the brokerage he once worked for as an assistant. Ms. Bradt’s father gave her around $6,000 worth of shares of AT&T stock in the late 1950s and early 1960s. She signed up for AT&T’s dividend reinvestment program, and simply held on to the shares and kept on reinvesting dividends. In 1984 a court ordered AT&T to increasing rapidly into the “Baby Bells,” and they have since spun off various companies. Most of them pay dividends which she continued to reinvest. By 1999 her portfolio was worth over $1 million dollars. Oddly, given the subject of this book, Mr. Peters doesn’t tell us what her annual dividend income was.

I have to wish he’d been able to give us more insight into Ms. Bradt. Did she already remembered she owned this stock? Did she ever feel tempted to liquidate the stock? At some point she and her husband must have felt the need for more money. Why didn’t she add more money to the portfolio?

nevertheless, it’s a great story. It’s not freely duplicatable, because $6,000 was a lot of money back in those day — a respectable middle-class annual income, believe it or not. And because AT&T’s history is rare. Not all stocks would have performed so well, already over forty years.

Unfortunately, Mr. Peters himself doesn’t characterize as much patience. He mentions selling stocks that don’t meet his expectations.

And he’s very much into the examination 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 for investors putting 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 established to provide investors guidance on mutual funds. (Mr. Peters is the editor of Morningstar DividendInvestor, their newsletter on dividend investing.)

And this is the book’s weakness, to my mind. The author is a financial analyst and clearly understands a lot about the businesses that generally pay dividends and how to crunch their numbers.

However, this makes the complete course of action look very difficult to the average investor who is not a CFA. They may use many hours of their spare time attempting to duplicate what he does, and won’t come close. They’re not paid to do it as a complete-time job, as he is.

Most readers won’t already try. They’ll either give up on dividend investing or subscribe to DividendInvestor to get Mr. Peters’ advice on a regular, current basis. And it’s difficult to believe that someone at Morningstar, whether the author or not, is not hoping for that consequence.

I do salute the author for making a point I thought only I understood — that investing risk is not price volatility but real world events that force businesses to cut or stop paying dividends.

All in all, I recommend this book to everyone wondering whether investing for dividends is a good idea.

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