Ben Reynolds is the author and founder of the Sure Dividend blog. In his words: “My goal is to help people invest wisely for the long-term in high-quality dividend stocks through the Sure Dividend monthly newsletter.” I greatly admire Ben’s investment philosophy, and have learned a lot from his writings. That’s why I wanted to feature him on this blog.
- What’s your story? When did you first become interested in investing in the stock market?
As far back as I can remember I was always interested in starting businesses. I organized a group of friends in the neighborhood to sell Kool-Aid to cars, sold ‘art’ to neighbors (terrible drawings from 7 year olds), etc. I’ve always been entrepreneurial.
But I didn’t put a passion for business together with studying investing markets until I was in college.
I specifically remember the class that really caught my attention. I was pursuing a Finance degree (because I like math and business), and took a course that covered different market ‘anomalies’ – things like value investing, the January effect, and so on. Ever since then, I’ve been a voracious reader of all things investing.
To answer the question specifically, I became very interested in investing in my early 20’s.
- What sort of career did you have before pursuing Sure Dividend full-time?
I had a variety of different jobs before starting Sure Dividend. I have held the following full-time jobs in my life:
- Warehouse sales for a logistics company
- Sales for a startup ‘heated coat’ business
- Patent research for an independent inventor
- Independent registered investment advisor
Don’t try to find a theme in these jobs – there isn’t a good one. I have learned a lot from each of these jobs/careers.
Throughout all of these jobs, I was researching investing (usually individual stocks or market anomalies) on my free time. Investing is (and has been) my passion.
- Why did you start Sure Dividend? Why the focus on Dividend/Dividend Growth Investing?
I started Sure Dividend to help individual investors compound their wealth over time without onerous AUM charges.
My route to dividend growth investing may be different than many other people’s. I didn’t set out to follow specifically dividend growth stocks. I looked at a wide range of facts and felt (and still believe today) that dividend growth investing is the best method for individual investors to invest.
To that end, I built The 8 Rules of Dividend Investing – which combine several different market anomalies – to help individual investors find the best dividend growth stocks trading at fair or better prices.
The 2 reasons that dividend growth investing is so appealing are:
- Dividend growth stocks have historically outperformed the market (see 8 Rules above)
- Dividend growth investing is compatible with long-term investing
One of the biggest pitfalls investors make (both individual and professional) is frequent trading. When you look at many of the most successful investors (Warren Buffett comes to mind), they trade very rarely. When you hold for the long-run you minimize brokerage costs, slippage, and taxes (don’t have to pay capital gains tax when you don’t sell). It is the most efficient form of investing in my opinion.
- With the popularity of passive investing through ETFs, do you think that the individual investor has much to gain by purchasing shares of individual companies anymore? (Spoiler: I do)
Absolutely. There are several reasons to invest in high quality dividend growth stocks for the long-run over ETFs:
- Buying individual stocks is cheaper (when you hold for long periods) because there’s no asset management fees.
- You know what you own when you buy individual stocks. It’s a lot easier to hold shares of Wal-Mart (WMT) through a recession knowing their business model will be fine than it is to hold shares of a generic ETF – for me anyway.
- ETFs sever the link between stocks and investing in real businesses because you aren’t focusing on what businesses you are buying into.
- You can make a portfolio that’s perfect for you with individual stocks. If you only want stocks with 3%+ yields, 25+ years of rising dividends, only in the consumer durables sector, trading at below market price-to-earnings ratios, you can. No matter how many ETFs there are, they will never be able to match the customization of owning individual stocks.
- There are structural disadvantages to ETFs (forced buying/selling when companies enter/leave an index, etc.) that can drag down performance. Market cap weighted ETFs in general use a poorly thought out weighting scheme. Equal weighted (or value weighted) ETFs are better in this regard.
With all that said, I’m not against owning ETFs. The above 5 points probably makes me sound overly dogmatic toward individual stocks.
I prefer individual stocks, but do appreciate that many ETFs have much lower costs than actively managed mutual funds.
- What’s your favourite dividend stock right now?
As of now, I’d say it’s the last stock I purchased – Flowers Foods (FL). The company has been under a lot of scrutiny lately due to pending legal action.
But the underlying business remains strong. And the company has a long history of paying steady or rising dividends. I believe Flowers Foods to be one of the few bargain dividend stocks in the consumer goods sector today with a dividend yield above 4%.
- What’s your favorite Canadian dividend stock right now?
I’m going to duck this question a bit and name 2:
Both are fantastic businesses with 70+ years (!!!) each of paying steady or rising dividends (in Canadian dollars). Both trade at low price-to-earnings ratios relative to the overall market, and both have decent growth prospects, and both have high dividend yields.
Both are also conservatively run and have incredible track records of rewarding shareholders with dividends. The Canadian financial sector generally takes lower risks than those South of the Border.
(Unnecessary Note: I live in Texas, where South of the Border means Mexico not the US)
Thanks for the interview!