Dave Van Knapp of SensibleStocks.com has just published a new e-book called The Top 40 Dividend Stocks For 2008: How (and Why) to Build a Cash Machine of Dividend Stocks.
Like all of Dave's work, it presents the case in logical steps that build a staircase to understanding and action. Dave is not about flash and show; he's about getting the job done.
The book shows:
What dividends are
Why they're a big part of succeeding in stocks
Characteristics that define the best dividend stocks
How to create and manage a dividend stock portfolio
The 40 best dividend stocks for 2008
From page 10:
"In 1934, Benjamin Graham and David Dodd wrote in their classic Security Analysis, "The prime purpose of a business corporation is to pay dividends to its owners [emphasis added]." Many investors agreed, considering the possibility of stock price increases to be speculative in comparison to a steady flow of dividends. "But 66 years later, by the end of the bull market of 1982-2000, there was far less interest in dividends among investors. The humongous rise in share prices during the long bull market dwarfed dividends' contribution to total returns. Many investors' interest in dividends dropped to near zero. "But times change. The bursting of the bubble from 2000-2002 sobered up many investors. There has been a rekindling in appreciation for dividends. Investors realize that a dividend stock portfolio can lower risk, grow principal, and steadily increase income over time. "Dividends are stocks' secret weapon. Studies show that -- despite their relatively small contribution during the bubble years -- dividends have accounted for half or more of the total return of the stock market over very long terms. This may be surprising considering how little publicity dividends get. There is no widely followed dividend index that gets the kind of publicity bestowed every day on the Dow, the S&P 500, and the NASDAQ -- all of which reflect price changes only, and therefore give a very incomplete picture of "how stocks are doing." "Dividend stocks are attractive as a core investment for anybody. Common misperceptions are that dividend stocks are slow-growing, boring investments; that a company's payment of dividends is a sign of weakness, that the company cannot think of anything better to do with the money; and that dividend stocks are good only for retirees needing income. These are all incorrect, unless you consider steady income and wealth-building to be boring. "In fact, dividend stocks may just be the best investment that anyone can own."
Dave explains his Easy-Rate scoring system for assembling the best dividend stocks. It looks at earnings, revenue growth, debt, and dividend history to assign points based on their values. A stock's points make it easy to see if it's Excellent, Good+, Good, Fair+, Fair, Poor, or Bubble.
Dave then runs his own system to come up with the top 40 current dividend stocks, presented in four tables for easy reference: alphabetically, by quality score, by total score, and by current dividend yield.
You may be surprised by some of the stocks not on the list. A sampling from that group:
Boeing (yield too low)
Citigroup (average 5-year return too low; cut its dividend)
ExxonMobil (yield too low)
Pfizer (made list of finalists but was outscored by others)
Among the 40 winning stocks, the highest yield is 9.0% and the lowest is 2.1%. The book includes completed Easy-Rate Scoresheets for each of the 40 winners.
Recently I received an interesting book on dividend investing, titled “The Top 40 Dividend Stocks for 2008 – How (and Why to Build a Cash Machine of Dividend Stocks, written by David P. Van Knapp. The author, who also maintains the site SensibleStocks.com, decided to skip the publishers altogether and has his book available to readers online in a PDF format. That made it easier for him to provide an up to date edition in order for his readers to stay competitive in the markets.
The book is very well written and is organized in 8 chapters, starting with an overview of dividend stocks in general, characteristics of the best dividend stocks, creating and managing a dividend portfolio and ending with the system that the author has created which has helped him identify the top 40 dividend stocks that he recommends. This book should be appealing not only to novice dividend investors but also to more seasoned stock pickers with its wealth of information on dividends. Almost everything you ever wanted to know about dividends could be found in it.
The author starts the book by giving an introduction of what dividends are and why investors should buy stocks which produce increasing streams of dividend income. He also discusses the pros and cons of dividends versus share buybacks, and proves that it pays to own the “boring” dividend stocks which provide the most efficient stream of income from a tax perspective right now. I especially enjoyed reading about his discussion on managing portfolios consisting of the best dividend stocks. I also liked his ideas on portfolio management where he set clear goals and objectives as well as strategies for achieving them. I also found the idea of avoiding to catch falling knives, and instead wait for the stock price to turn before accumulating shares particularly intriguing.
Another section focused on certain types of companies which are organized specifically to pay high dividends such as business development companies, real estate investment trusts as well as master limited partnerships.
Many investment services will sell you a cheap book which describes a system which is pre-sold throughout the book. Not this one – this author sells a buy one get one free type of deal as he not only shares his stock picking system but also provides specific picks as well as the reasoning behind selecting those picks. The last half of the book was specifically dedicated to analyzing the top 40 dividend stocks for 2008 in more detail, thirteen of which were non-US companies….
Despite the fact that I enjoyed his writings on the BDC, REITS and MLP’s, I believe that most investors overlook these vehicles because the distributions from the three types of firms are taxed somewhat differently compared to distributions from common stocks. I would have…enjoyed reading more about taxation on MLP’s from his own experience. Most other yield hungry investors would probably enjoy a small section on Canadian Income Trusts as well as tanker stocks….
Overall I enjoyed reading the book, and would recommend it to any serious dividend investor who wants to succeed in his or her endeavors. It is easy to read, well organized and provides a wealth of information not only for the novice investor but also for the seasoned pro!