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The little books of big dividends – Book review

It is important to keep educate yourself. Stephen Covey calls it Sharpen the saw.

To do this, I follow seminars and/or webinars, read books and blog posts from fellow DGI’s. This to gain new insights and of course learn something new.

I read a lot of books, all kind of books. From biographies, management books to of course financial books. I really enjoy reading. This joy I hope to give to my kids! Reading books opens up a whole new life and you enrich yourself with new knowledge. What a great gift!

In my 2016 goals I wrote that I would read at least one book every quarter. And I will share my new knowledge with you, my readers. I will do this to keep the snowball of knowledge rolling.

Here is the fourth book review for Polliesdividend.

 

little book of big dividend

 

The Little Book of Big Dividends – by Charles B Carlson.

The Little book of big dividends is one of the many entries of the long “Little book of“ series from Wiley. Books that are written in simple terms which everyone can understand. And each “Little Book of” focuses intensely on a specific investing topic. Charles B. Carlson, the CEO of Horizon Investment Services, an investment advisory business, and Horizon Publishing, a publisher of investment newsletters, wrote the Little Book of Big Dividends. Horizon’s flagship publication, Dow Theory Forecasts, is one of the longest-standing investment newsletters in the US.

He starts with his basic principle: You can make big money by investing for the long term in dividend-paying stocks. And he really likes stocks with, what he calls, big, safe dividend (BSD).

In this book he tells you how to find stocks with big, safe dividends. His basic formula consists of just two data points: payout ratio and his proprietary Quadrix score. Quadrix is a somewhat “black box” quantitative scoring system which ranks stocks based on more than 100 different variables across six categories, including Momentum (e.g. growth in earnings, cash flow, and sales), Quality (e.g. return on equity; return on assets), Value, financial strength, earnings estimates; relative stock price performance. The idea with Quadrix is to focus on stocks that score in the upper quartile (75 and above out of 100). But don’t worry; you don’t have to calculate het Quadrix for each stock yourself. Charles Carlson provides you with a free website were you can find these scores.

Besides the BSD formula, Carlson also has an advanced BSD formula, which can also be used to evaluate real estate investment trusts and master limited partnerships. According to the book, the formula outperformed the S&P 1500 Index by more than 6 percentage points annually from 1994 to the time he wrote this book. He adds that the advanced BSD formula achieved those superior returns with less risk than the index, as measured by standard deviation. Most importantly, of the stocks selected by the advanced BSD formula at the beginning of 2008—one of the worst years ever in terms of dividend cuts—only two reduced their dividends during that year.

Furthermore Carlson strongly recommends direct stock purchase plans and dividend reinvestment plans (DRIPs), which are offered by more than 1,000 companies. Investment minimums are small, and fees to purchase shares are modest.

I really like “The little books of” series. They are easy to read and understand (also for new investors) and offer great introductions to various investing topics.

The Little Book of Big Dividends is  a good read. It’s tight, informative, and easy to understand. Of course, on the other hand, if you know the basics of how dividends work and know what a DRIP is, you might not get too much out of this one.

I enjoyed this book. A lot of basics were covered. After reading this book I got some new investing ideas. So reading this book was time well spend.

 

Pollie-rating

Pollie-rating

 

Have you read this book? What do you think of the lessons from this book?

Cheers,

Pollie

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7 thoughts on “The little books of big dividends – Book review

  1. DivHut

    Believe it or not, I actually walked into a Barnes & Noble store a few weeks ago just to browse and reminisce about walking into a bookstore when I came across this book on the shelf. The title alone grabbed my attention and I flipped through it a bit. I got a very general sense of the book but appreciate your review as well. It would be interesting to learn more about “Quadrix” though.

  2. Pursuit 2 Freedom

    Hej Pollie,

    Half a year since this book review. Do you use the site with the Scores now that you have read the book? Do you think it is usefull to incorporate in your searches for new investing ideas?

    Greetz,

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