Interview, Dividend Dollars š» | #34
Chasing reliable financial freedom through dividend growth investing | Regularly posting buys and market threads
Hello š
I had an opportunity to chat with fellow dividend investor, Tanner AKA Dividend Dollars.
I had the pleasure of knowing Dividend Dollars through CommonStock, knowing him via several stock pitching competitions where he consistently secures top positions. I talked to him about dividends, investing, life and goals. I hope you will like this. If you want to follow him, feel free to follow him in the bird app: https://twitter.com/DivDollars or follow him on this website: https://dividollars.com/
Investor from Nepal: Thank you Tanner aka Dividend Dollars for this opportunity to chat with you about investing, dividends, money habits, and so on. As a fellow dividend investor, I have been following the dividend journey that you document. Given most of my audience is looking at dividend investment I think it would be great to get your insight. Firstly, if you could introduce yourself to my audience who are not familiar with you?
Dividend Dollars: Sure thing! I am Tanner, aka Dividend Dollars as you mentioned. I am 24 and work in commercial banking as a credit analyst. Iāve been investing for over 6 years now. I got started by messing around with day trades and swing trades on Robinhood while I was in lecture halls during my freshman year of college. From there, I got sucked into the fintwit world. I watched the furus, joined discords, followed option day traders, and played with every other kind of strategy that you can find. I experimented with all of these things from 2016 to 2021. Towards the end of 2021, I left my work-from-home job for the banking job in-office. Working in an office meant I could no longer day trade, when I thought about how I wanted to invest going forward I remember getting my first ever bank statement that had a 2-cent dividend paid to me for my savings account. I was very young at the time and remember my mom explaining to me what a dividend was and thinking it was the easiest money hack! That memory inspired me to start dividend investing! This week Iāll have been a dividend investor for one year and have grown my portfolio to ~$11k with projected annual dividends of $500. Iāve been documenting everything about my portfolio since the beginning on my website. I hope that one day I will be able to live off of dividend income and my website will be an inspiration for others and a record of how I got there.
Investor from Nepal: Thank you Dividend Dollars for a quick intro. Always inspiring to see investors stumbling upon dividends and sticking to them. I see you shared about the dividends with mom. Could you let us know if financial talks are welcome at your dinner table and how important is it? Also, how did your childhood shape you into a financial beast?
Dividend Dollars: We talked about finances a lot. My mom was a high school teacher, so money was tight. She was smart with her money and owned a rental home to help make ends meet. As a kid, whenever I was curious about our money she would let me look at our home budget and how she tracked the rental income. She showed me how to budget and save. We never talked about investing, but personal finance management was not a rare topic. My dad also made some poor financial decisions when I was young. Those decisions, paired with the financial crisis of 2008 made me realize the power of money. I decided I wanted to learn about finances at that point and eventually did that when I studied finance in college. Learning about the markets in college and my momās passive income with her rental were definitely the main catalysts for me becoming a āfinancial beastā.
Investor from Nepal: It was kinda same for me as well, my American father being able to retire early with passive income from real estate was a big push. So, letās talk about how you select a dividend growth stock, what are your criteria, and what goals you want to achieve with your portfolio.
Dividend Dollars: I donāt have any criteria per se, but I do use some rules of thumb and personal knowledge to help me invest. First, Iāll look at the companyās business model, product, leadership, etc. and if I like what they do and understand the space, Iāll dive into their financials. For financials, I want to see good earnings and sales numbers with a history of growth, I like seeing substantial free cash flow, low debt, good ROI, and a growing dividend. The greenlight/redlight values of those statistics depend on the industry. For a basic example, a manufacturing company may carry more debt and have worse margins compared to a software company, the manufacturer may need financing to buy costly fixed assets whereas a software company would be pretty light on their assets. Last, I like to look at the historical dividend yield and P/E ratio compared to the current values and use that to gauge if the stock is undervalued or overvalued. So if a like a companyās strategy, and finances, and they look to be of good value, that to me is a buy. My goals for my portfolio are to one day live off of my dividend income! That is the ultimate long-term goal; in short term, I would like to hit a $1,000 monthly dividend income within the next 10 years.
Investor from Nepal: I hope you reach that lovely $1k per month in dividend income soon. Those are some good list of criteria. Is there any stock that you picked outside of those criteria too? If yes, what made you do it?
Dividend Dollars: Not necessarily. The closest positions I have that are on the fringe of my criteria are Atlantica Sustainable Infrastructure (AY) and AT&T (T). Atlanticaās ROE and debt levels are a bit outside of my comfort zone, but I believe that green energy is going to grow substantially in the coming decades and Atlantica should improve greatly over the years. AT&Tās returns are also lower than I would like, however, they are going through some very extreme structural changes to their business. I am okay with holding through some rough waters while they correct the ship.
Investor from Nepal: Sweet, thanks for discussing $AY and $T. I was wondering if you could talk about the traps that you have fallen for during investment or if you have seen others fall that can be avoided easily and that my audience can learn from.
Dividend Dollars: Thereās really only one that I have āfallen forā and I could even argue that it may not even be a trap. But that position was $UWMC. UWM Holdings went public during the SPAC craze. They are a huge wholesale mortgage lender and on the surface look like a pretty solid company. They pay a $0.10 dividend and an average cost of around $5.00 per share, so the yield was pretty large. I donāt think Iāve seen any SPAC perform well since their acquisition date and this holding was no exception! I lost around 30-40% when I finally decided to sell. There were a lot of underlying issues with this stock. First is that the CEO still contained a majority of the stock, and because the price was so low, he wouldnāt sell more to the public. So the available shares stayed really low and he controlled the shares, funds, and institutions didnāt like that and didnāt buy in. So share prices just kept falling, the float is never being improved, the CEO has way too many shares, some SPACs have come under pressure for being a less than transparent IPO, and the mortgage industry is now one of the first to slow down as a result of rate hikes. There was just a lot going against this one, but I thought if I could get in low, and benefit from the high yield, it could be a great move from my portfolio. It wasnāt! The lessons here are to look at what the average yield is for competitors in that industry. If a stock has a substantially higher yield than that, ask why. In the case of $UWMC, the answer to that question is because of the CEO's majority ownership and a small float. Most traps can be easily avoided, if youāre finding that you have to search for an answer to a high yield, itās probably a trap!
Investor from Nepal: Oh yeah! The high-yield dividend trap is a serious one for new dividend investors. But, glad you did damage control early. Also, congrats on the second position in Commonstock Stock Pitching competition. I would love to know how the communities like Twitter and Commonstock have helped you in your journey.
Dividend Dollars: Thank you! I got third place in the competition before that, so hopefully, I keep the upward trend going! Twitter and CommonStock have been super invaluable for me. I started my journey on Twitter and accounts like @TD_Investor and @BasenjiInvest were big inspirations to me. Their portfolios helped me to develop my own. Their portfolios also put up some seriously impressive numbers, numbers that I want to get to and document how all the while. So Twitter helped me access some awesome investors to learn from and gave me the idea to start my website. It also helped me form some good friendships by building a network. People like you, @ScoreDBInvestor, @DividendDandy, @TagTrades, @JRDividends, @Blind__Luck, @DividendDynasty, @theDividendKid, @Investmentkage, @KarbonKopy, and @wealth_turtle are often the folks that I have really engaging and enlightening investing conversations with. Theyāre the main highlight of the community for me. Those people are also the group that inspired me to keep writing and staying active in the space. Because of that activity, Iāve been fortunate enough to build partnerships with CommonStock and Sharesight. Both are great resources for me and are things that I am happy to share with the hopes that they help others. CommonStock is like fintwit but with 10x the good and minus all the bad. There are some seriously smart people on there sharing tons of content and research that have helped me improve my own investing.
Investor from Nepal: Itās incredible that these communities have helped you a lot. We are coming toward the end of the interview. Do you have any wise words for my audience?
Dividend Dollars: I would say my most important words of wisdom for readers would be to āIGNORE THE NOISEā. Investing is a hectic pursuit. Everywhere you look there are conflicting opinions, there are investors posting their gains in the millions, others posting their losses in the millions, Twitter users criticizing each other, gurus promoting the next big crypto, and economists forecasting doom and gloom. The list of noises goes on and on. All of these things can make you emotional. And it certainly doesnāt help that you can check in on your stock prices or news headlines any time of day.Ā
The truth of it is: nobody can predict which way the markets are going to move with complete and consistent accuracy. The best strategy, even when the market seems to be falling out from under our feet, is to keep level-headed and stick to your plan.
Warren Buffet has even said that he doesnāt pay attention to economists. They donāt make a lot of money trading or investing, so why listen to them? Watch the data, read your earnings reports/filings, and make sound decisions and youāll be better off than most.
You can follow Dividend Dollars on Twitter:
or his website: https://dividollars.com/
Great interview! Enjoyed learning more about Tanner