Dividend investing is as sexy as watching paint dry on your wall. It’s not exciting to define an entry criterion that will pick quality dividend stocks with dividends that rise over time, and then patiently reinvest those dividends while you sit on your hands. While active traders have an abundance of hedge fund managers on the front pages of Forbes magazine, there aren’t many successfully publicized dividend investors. Even value investing has its own superstars – Ben Graham and Warren Buffett.
I’ve done some research and discovered several successful dividend investors whose stories have reassurance that the characteristics of successful dividend investing that I described in a previous post are indeed correct.
The dividend investor to be profiled today is Ronald Read, who left a fortune of $ 8 million on his death in 2015. What is fascinating about him is that he never made a high income because he worked as a gas station worker or janitor.
I find this story very inspiring because it showed how an ordinary person who never had a high income could build a dividend portfolio worth $ 8 million by the time he died. The portfolio averaged nearly $ 20,000 in monthly dividend income. This portfolio was the result of thrift, hard work, and the ability to buy stocks to hold them for decades while dividends were patiently reinvested.
When Ronald Read died in 2014 at the age of 92, he left a dividend portfolio worth $ 8 million for charity and his children. This story shows that Ronald Read earned nearly $ 20,000 in monthly dividend income from this diversified portfolio of 95 blue chip stocks. They were spread across a variety of sectors including railways, utilities, banking, healthcare, telecommunications, and consumer goods. He avoided technology stocks. It looked like Mr. Read invested solely for dividend income, and his portfolio was well put together. In addition to being a good stockpicker, he showed remarkable frugality and patience that brought him many years of sustained growth.
Ronald Read had neither a finance nor an MBA, but was just a common Joe who managed to save and invest over the long term. The story appeals to me because it shows that investors who choose high quality blue chip stocks that they hold for decades and patiently reinvest those dividends can build a sizable portfolio over time. The most important quality is patience. I follow the same slow and steady approach to long-term dividend investing as Ronald Read.
Below is a list of Ronald Read’s largest holdings in portfolios:
Mr. Read left a five-inch stack of stock certificates in a safe. Direct ownership of the stock is old-fashioned, but it also reinforces the behavior of buying and holding stocks of solid blue chips.
His longstanding holdings have included blue-chip stars such as Procter & Gamble, JP Morgan Chase, General Electric and Dow Chemical. When he died, he also had large stakes in JM Smucker, CVS Health, and Johnson & Johnson. He was able to hold onto his securities for many years. Not all of his securities worked, but ended up doing pretty well. In his portfolio, for example, were stocks of the 2008 collapsed financial company Lehman Brothers Holdings.
An example of a long-term investment was the purchase of 39 shares in Pacific Gas & Electric on January 13, 1959 for $ 2,380. Adjusted for stock splits, those stocks would have been worth $ 10,735 at the time of his death. He ended up owning 578 shares of PG&E valued at just over $ 26,500, some of which he may have bought with dividend payments to shareholders.
He researched his ideas thoroughly, read business publications like the Wall Street Journal, went to the library, and chatted with close friends about investing.
Ronald Read’s success depended on several important factors:
1) Be thrifty and live within your means
2) Invest savings with high returns over a long period of time
3) Invest in companies with lasting competitive advantages with long runways
4) Stay patiently invested for decades without selling
5) Reinvest those dividends along the way
This dividend investor has managed to turn small investments into an ATM that generates big dividends. He did this by identifying quality dividend growth companies at attractive valuations, patiently reinvesting distributions, and mostly maintaining a diversified portfolio of stocks. These are the lessons that all investors could benefit from.