The Evergreen Investing blog aims to prove that a portfolio of stocks can generate decent annual returns through dividends and capital gains over a 5 year period. Just like an evergreen tree that maintains green leaves through the seasons, I aim to have a portfolio that will maintain a steady stream of income through the year.
My strategy involves picking two categories of dividend stocks: “Compounders” and “Deep value”.
“Compounders” are stocks which can increase their earnings over the long term. Holding such stocks over the long term is highly profitable while dividends from compounders tend to grow together with their earnings. Compounders benefit from moats (e.g. network effects, patents) which should help them to grow regardless of economic or market conditions.
“Deep value” stocks are stocks trading at a low multiple of their profit, cash flow or book value. Buying cheap stocks is well known for generating great long term returns which is an approach adopted by famous investors such as Benjamin Graham and Warren Buffett. One key risk involves buying value traps where the company stays cheap forever or continues falling. Choosing cheap stocks which pay a dividend ensures that a return is possible in the short term while waiting for a catalyst to unfold.
Big drawdowns and underperformance are inevitable with equity investing but a regular stream of dividends from my portfolio will help me to deal with the trauma of paper losses.
Contact me at TheEvergreenInvestor@gmail.com