Wednesday, March 15, 2023

My Dividend Growth Investing Origin Story

Every November when it comes time to renew the domain name for this blog, I promise myself that I'll write more in the new year. My best intentions usually lose steam in late January or early February. In order to recreate the spark, here is the first of what could best be described as 15-minute, quality over quantity, blog entries. 

Since I love hearing about how people decided to adopt a certain approach to investing, I wanted to share my “origin story”.
Like most 20-somethings, I started to make lots of mistakes after I opened my self-directed brokerage account. A couple of my first purchases of shares were in companies that ended up going to $0 (Nortel and 360 networks). I also bought shares in a China ETF that ended up losing ~80% of its value, and a Canadian technology ETF whose performance was only slightly better than that of Nortel. On the other hand, the shares I bought in the Bank of Montreal and RioCan REIT, climbed steadily, and also distributed cash regularly.
Collecting dividends and distributions felt great given I was working in a series of entry level accounting and finance jobs that are notoriously difficult. Realizing that by investing some of my salary from these tough jobs, I could built a side income that could be leveraged to perhaps work less in the future, or at least pick a more enjoyable, if slightly less well paying job, held strong appeal to me.
For context, during this period in the early 2000s, a number of large corporate fraud cases were being discovered, leading to the downfall of such companies as Worldcom, Tyco and Enron. Hearing about these frauds caused me to distrust corporate executives, which coincided well with the idea of looking for companies who decided to return funds to shareholders, instead of retaining them to build their personal vanity projects.
Although the transition from a growth oriented, story-focused form of stock picking to dividend growth took almost ten years, I’m still proud of making that change. Looking back, I see lots of mistakes I made chasing yield, being seduced by management guidance, and concentrating my holdings in obscure, semi-illiquid shares, but those are the type of mistakes that pay figurative dividends now that I can hopefully avoid them, or at least minimize them.

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