Last updated by BM on March 9, 2022
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”
– Ben Graham, The Intelligent Investor
In our initial article on the Magic Pants Dividend Growth Investing process, we spoke about not getting fixated on the ‘outcomes’ from your investing activities and pay more attention to the process. Although the process in aggregate has worked well for us over the years it wasn’t without a few revisions along the way.
The natural thing to do would be to not dig into our process when we experienced a bad outcome and only show the good ones. The right approach however is to review all outcomes good or bad when they fall outside a ‘band’ of what we view as acceptable. Acceptable to us is an investment that grows its dividend over time and aligns well with an increase in the price of the company’s stock. We would like to achieve a Total Return CAGR (dividends included) in the 10-12% range over a decade.
As part of our ‘soon to be announced’ subscription service, we document all our outcomes (good and bad) to measure our success but also to refine our process and increase the probability we will be right in the future. To better understand our process in action we share our new time-stamped ‘Magic Pants DGI Real-Time Alerts’. The alerts are emailed when we make a trade and can be used as a signaling tool for our subscribers. Once received, subscribers can decide based on their own objectives (income vs capital gain or both) if they want to participate alongside our process. We do the work; you stay in control!
Here is an example of a recent DGI alert email sent out in January this year (Subscribers only).
The alert is sent out based on our own research and is representative of how we build our portfolios over time. Although we follow the position sizing outlined in our blog, understanding your own unique position sizing is also key to building a successful dividend growth machine.
Although not all our alerts turn out to be as successful in the short term, as Franco Nevada did early in 2022, we do have an impressive historical record of purchasing our good dividend growers (at sensible prices) over time.
In the past five years, we are proud to say that out of sixty-two trades in our Wealth-Builder (CDN) Portfolio, only six trades are below their initial purchase price at the time of this article. Of the six currently trading below their purchase price, we have owned five of them for less than a year. In defense of not having a perfect record, our trades typically need time to turn positive and then climb upwards (within 6-18 months).
Going forward we will publish all our trades with subscribers and the reasons we entered positions when we did. We will also review our trades that did not meet our expectations. Full transparency with time-stamped alerts, regardless of the outcome, will help build trust with our subscribers and those looking to get started with dividend growth investing. Stay tuned for a launch date for the subscription service. In the interim, sign up as a reader of the blog and you will still receive our DGI alerts.
