In this episode I talk to my listener Clemens from Austria. He is a dividend investor of a different kind and focuses on dividend growth rates with continuity and increasing cash flow. In the interview, he reveals what metrics he looks for when buying and what his sector diversification looks like. We also take a closer look at some of his individual stocks and talk about his blog and Instagram channel “The Dividend Post”.
Overview Interview with Clemens
My podcast guest today, Clemens, lives near Vienna and is a dividend investor of a different kind. To start things off, we talk about why building wealth on his own is so important to Clemens and how he came to focus on dividend growth stocks with continuity and increasing cash flow.
We also discuss which key figures are decisive for him when buying. Clemens then tells us why diversification is so important to him and what his sector diversification looks like in concrete terms.
We also take a closer look at the individual stocks Tractor Supply Company and T. Rowe Price. Finally, we also talk about his Instagram channel and blog called “The Dividend Post,” his asset allocation away from stocks, and his goals for the future.
What are dividend growth stocks?
So-called dividend growth stocks are publicly traded companies that have a high percentage growth rate in their dividends. Often, the compound annual growth rate (CAGR) for dividend growth stocks is over 10%.
Behind CAGR is the term “compound annual growth rate.” This particular metric is used to measure how the dividend has performed. The dividend growth rate is calculated by dividing the selected final value by the initial value .
Frequently, share price gains go hand in hand with a rising dividend for these companies with a continuously rising payout, which is why these stocks perform very well over the long term. Compared to stocks with a high dividend yield, which often do not have large price gains, dividend growth stocks have the edge.
Shownotes Dividend Growth
Brought to you by ETF Guide
This episode is brought to you by the brand new ETF Guide from extraETF. Are you looking for a basic guide to investing with ETFs?
Then I have just the thing for you. With the ETF Guide, you don’t need any prior knowledge and will learn what you need to know to get started with ETFs in just 60 minutes.
In the ETF Guide, you’ll learn, among other things…
- what the best ETFs are for your savings plans
- how to find the optimal share ratio for your portfolio
- where you can get free custody accounts and ETF savings plans
- how you can easily analyze and optimize your portfolio
- and much more
The perfect starter kit with 120 pages of concentrated financial power for everyone who wants to get started in 2022! The ETF Guide is available now for just 8 euros.
You can order the booklet here.
Finanzrocker Podcast on all platforms
Here you can find the Finanzrocker Podcast on all platforms.
Interview now listen
Summary of the interview
- Clemens describes himself as an eternal child of the 80s and lives with his family near Vienna. He studied business administration with a focus on controlling and accounting and has been working in the financial sector for several years.
- Clemens has been investing in the capital market since 2005, but has been focusing entirely on individual stocks for the past ten years. On his blog and Instagram channel “The Dividend Post”, he has been sharing his passion for investing with others since early 2021.
You sent me a very long thank you email over a year ago. How did that come about?
- I’ve been following you for many years and listen to all your podcasts. You’ve been a courage giver for me because, yes, I’ve now slipped from the consuming to the content-providing part as well. I appreciate it when you put so much passion and in energy into a topic and just wanted to say thank you.
You describe yourself as an advocate of self-reliant wealth creation and an active investor. Why is that so important to you?
- Personal responsibility is generally an important thing – to take your destiny into your own hands, no matter what phase of life you are in. Here in Austria and in Europe, we have a lot of opportunities when it comes to building up wealth.
- Very early in my life I got to know what it means to slip from a comfortable position of my parents into a situation where there is still little money, but a lot of month. This situation had a great impact on me and therefore the topic of asset accumulation plays a major role for me.
- As far as active investing is concerned, passion plays a big role here. When I had to stop playing active soccer, I was able to devote more time to investing in 2019 and 2020.
In your portfolio, you focus on dividend growth stocks with continuity and increasing cash flow. How did you come to focus more on dividend payers?
- First and foremost, I invest in the quality of companies. Actually, a growing dividend is the consequence of this corporate quality. It is based on growth in the substance of the company. Of course, my background from my studies also plays a role: Business Administration with a focus on controlling and accounting.
- When I say I have a dividend strategy, it is almost a dogmatic fixation on the subject of increased dividend yield. Here I put a very strong focus on the real economic substance. Can a company afford to grow dividends at all? This shift to this strategy has emerged over the course of my now ten years of single stock investing.
Are there specific metrics that are critical to a purchase?
- First and foremost, whether I understand the company and how it makes money. But I don’t equate that with an understanding of the product, that would be too much of a good thing. Then I collect anecdotal evidence: whether people know the product, whether the environment knows the product, or whether there are acquaintances who work in this company or this industry.
- Then I go into key figures. What does the debt situation look like, the interest coverage, does the company havehmen cash reserves that could cover the current net debt, etc.? What are the general development trends at sales and earnings level?
- I am someone who also listens to my gut, i.e. my intuition. Of course, that’s kind of uncomfortable for an investor trimmed for rationality, but on the other hand, things haven’t gone all that badly so far.
How many and what kind of stocks do you have in your portfolio?
- I don’t keep such precise records anymore. There must be between 70 and 80 stocks at the moment. However, this number includes all the different strategic approaches, which are clearly delimited from each other. One should not be under the illusion that a strategy works permanently in every market phase.
On your site you have an interesting slogan, which is “Diversification instead of Nostradamus”. What do you mean by that?
- I am not Nostradamus and I don’t have a crystal ball hidden here to tell you how the world will go on. That means I diversify and distinguish between systematic and unsystematic risk, and I can manage some of that very strongly through diversification.
- That means I go very broadly into the market and, because of the large number of companies, I diversify quite strongly. That is part of my risk management.
What kind of stocks do you have in your portfolio? You have a similar sector diversification as I do. Does that mean you also focus on certain industry clusters?
- Exactly, I am broadly diversified, whereby I define so-called core positions for myself within sectors. In the basic consumer goods sector, for example, that would be PepsiCo, and in the industrial goods sector it would be 3M. In this way, I build additions around these core positions, but in some cases there are also overlaps, which cannot be avoided.
- There is the Global Industry Classification Standard, which divides the market into eleven sectors. I am present in each of these sectors, with the exception of real estate, because I invest privately in so-called concrete gold. I would think that’s a very balanced sector allocation.
How have the returns developed over the years?
- For me, it is always important how the ratio looks like to the invested amount and less to book values. I have the investment under control and also what risk I am taking.
- On the level of performance, I have to say in all fairness that I can’t give you a full answer. I would think that the whole thing moves with the market. I don’t have the claim that I permanently beat the market. I feel comfortable with it.
Do you track your dividend development?
- Yes, I track it in the sense of “what comes in during the year”, i.e. current distributions, in a straightforward Excel spreadsheet. Of course, I can already see a positive trend here.
- And through my work in my active content part, I naturally get to see a lot of what’s going on in the companies. So I’m quite well informed and, to be honest, that’s more important to me. The market tends to be irrational from time to time…
Do you have a specific goal that you want to achieve with your dividend approach?ow would you like to?
- We as a family have a very flexible goal. I once said it would be very nice if the fixed costs we have were covered by this, but I wouldn’t then immediately stop and quit my job, where I am very happy.
Profile of Tractor Supply by The Dividend Post on Instagram
Parts of our individual stocks overlap for similar reasons. You recently published an interesting article on Tractor Supply Company. Why are you invested in that company?
- Tractor Supply is a wonderful example of quality companies with amazing growth. They had 77% percent dividend growth this year in January, so there’s some real substance there.
- What impressed me most about this company is the “Neighbor’s Club” customer loyalty program, which reminds me a lot of Costco. And then there’s the impressive logistics system they’ve developed.
- They have over 2000 stores in America, but with so-called distribution centers. You only really get to see that when you look at investor relations. I think this company is very strongly positioned, it’s a clear niche play and a US only business. They have been raising dividends for 13 years now.
Profile of The Dividend Post on Instagram about T. Rowe Price
We also both have T. Rowe Price in the portfolio. That’s a large fund provider. Why did you invest in that company?
- T. Rowe is a very interesting investment. I’ve been invested in this stock for a little bit longer, and I’ve also added to it as the price has declined. T. Rowe has focused on active fund management.
- I think it’s a very interesting and especially complementary investment to BlackRock. BlackRock has a very strong focus on ETFs, T. Rowe has a very strong focus on investment funds in the equity genre.
- And they’ve also made a very interesting acquisition with Oak Hill, which again has a very large bond and multi-asset fund offering. And that, of course, is a very interesting strategic development for the company.
- And the company is virtually debt free, they have almost no interest bearing debt.
What assets are you invested in besides stocks?
- The famous owner-occupied property, whereby the owner-occupied property is divided into several residential units. That’s a very big part in our asset allocation.
- There are the various personal insurances I have, both state, company and private. In Austria, there is also the construct of the so-called “Mitarbeitervorsorgekasse” (employee pension fund), where, if you change jobs, you would in principle be entitled to severance pay. The employer pays in just under 2 percent of your gross salary per month.
- Otherwise, I have a modest amount of cryptos, predominantly an Ethereum. But that’s a position I’ve rather mentally written off.
- And a little cash to be prepared for emergencies.
- A very important aspect is also the topic of human capital. We always talk about the compound interest effect on invested capital, but we should also think about the compound interest effect on the knowledge we have about…
Continue reading: https://finanzrocker.net/dividendenwachstumswerte-clemens-the-dividend-post/