Late last year, I met up with a new co-worker of mine.
He recognized me back in the office when he remembered seeing me at a recent Annual General Meeting (AGM) for a company that I invested in.
So we had a lunch date.
When I met him for lunch, I noticed he drives a big car, a vehicle that is more fitting for a director than your typical engineer. That puts a question in my head, whether an engineer can get rich working for a long time, or that being a stock investor is able to get us a nice life like that.
Always curious about another investor’s thought process, I asked him about his investment process.
And I came away not having a good idea about his investment process.
He shared with me that he was punting stocks for the longest time in a haphazard manner until an old-timer told him how important dividends are.
He works hard to understand the businesses, the opportunity that some stocks provide and size up the company by attending AGMs.
Yet in the countless investing tales shared, it was littered with many stocks that I doubt I would consider as dividend stocks, or that they were sold too fast, which feels to me like short term trades.
What pained me was the stories of the big losses he incurred for investing in some high dividend-yielding companies, oil and gas companies.
If you make a 5% portfolio loss, you need a 5.2% gain to make back your capital. If you make a 30% portfolio loss, you need a 42.8% gain to make back your capital.
Having large draw-downs hurt, whether you invest for dividends or not.
There are some declines about Dividend Investing that CAN be Avoided
I have seen how my co-worker’s way of investing in dividends many times.
What they relied on are the “golden lessons” from some gurus within their circles.
The problem is that these plans can be rather half baked. They worked when things are very nice when everything is going up.
However, they do not help you question whether the stocks can continue to pay dividends, yet have good capital appreciation.
Some of the dividend stocks with the biggest price collapse can be identified beforehand
Rickmers Maritime was a business trust that provides a dividend yield of 10% at $0.30. They have to severely cut down on their dividends because the ships that were chartered out in the past at a high rate, could only be chartered out at a fraction.
I written a little bit about this in the past, these slides were provided by Rickmers Maritime. It is not hidden information.
It gives us an idea very clearly what are the potential headwinds coming for Rickmers. You would be able to steer away from this.
Update 2021 Feb: Rickmers Maritime ceases to exist anymore after numerous past challenges.
Asian Pay Television Trust is another stock that provides a 10% dividend yield.
It is also one he has a vast holding in.
APTT’s ability to continue to pay a high dividend per share can be easily identified if you look through its cash flow statement.
I wrote about it more in detail here.
Knowledge helps you look at Very Good Opportunities in a Different Light
Some financial ratios and key metrics made me look at these good dividend stocks in a different light.
I see them as unsustainable dividend payers that will take a hit either sooner or later.
These financial ratios and key metrics are not rocket science, but they are the things that prevent you from going 200 km/h and killing yourself.
Do they prevent you from investing in all of these problematic dividend stocks? No.
But it eliminates you from a whole number of them.
What you need is:
- To know what these metrics or guard rails are
- Put a prospective dividend stock through these metrics
- Then move on to look at the business aspect of these dividend stocks
An Alternate Cash Flow Stream Still Matters
Despite the setbacks, what I learned from my co-worker is that you can have a different way of living your life.
His life was about being very hard-charging at work for a long time, as the nature of work demands of him.
All this starts crashing down to earth when he encountered health problems due to neglect and the stresses of work.
He came to a realization that not being dependent on his main income cash flow, building up assets that provide an alternate form of cash flow can provide the optionality in life.
He could say no to the promotion that increases his pay BUT also increases his stress level.
He chose to take advantage of a stable job to channel as much as he could so that he becomes less dependent on it. It is perhaps why he could afford a car that is a boss level.
An Affordable Way to gain the Required Knowledge to Invest in Dividend Stocks in a Sustainable Manner
My friends Rusmin and Victor started Dividend Machines some time ago, focusing on providing the necessary resources for investors who want to invest in dividend stocks to be well equipped to deal with that.
The course is conducted in an online manner.
There are 5 modules that bring you from a raw investor to one who knows how to systematically prospect stocks for dividends:
- The first module gives you an idea of the appeal of dividends and why you should invest this way
- The second module is important. It lays the framework that this way of investing is not unlike any other investment in that it requires you to have a good wealth foundation in order for you to succeed (and many just jump straight into investing oblivious that these aspects are important)
- The third module goes into the nuances of investing in dividend stocks, according to Rusmin and Victor. Here they lay out their idea how to select the stocks, what to watch out for, why do they prefer some metrics over the others
- The fourth module goes into the Mumbo Jumbo of REITs, which happens to be a popular subject.
- The final module ties everything together and shares with you how to manage the stocks from a portfolio perspective.
The curriculum is online, which means you do not have to rush to classes when your boss wants you to work longer. Or when your children suddenly fall sick.
It is more flexible for the modern employee.
All Access Workshop
I realize from my friends that people still prefer human interaction.
While technology can provide such an advantage to make learning interactive and flexible, people still prefer to interact in a face to face manner.
Dividend Machines will organize all-access workshops that allow you to talk with the trainers and revisit the curriculum.
It is a full day event where you can interact with trainers, who will revisit the action plan. The trainers will highlight certain more important nuances of the action plan that you might missed out (if someone keeps repeating something, it might sounds lame, but its probably important enough to keep repeating!). You can also ask them what you are unclear about.
In 2018, Rusmin and Victor hosted 8 such sessions last year and if you are a Paid Member, you have access to these workshops.
Affordable Price for the Resource
Dividend Machines comes with a special price tag of US$368 or SG$488 during this limited period.
I thought that is a very affordable price to pay considering what is provided and how it can bridge the gap of time required to self educate to gain competency, avoid common mistakes, set up efficient systems in dividend investing.
When you signed up today, you will gain access to a free workshop conducted by Rusmin and Victor.
On an $8000 worth of stock, SG$488 could be a potential 6.1% loss. Gaining the knowledge might help you avoid the mistake, over and over again.
I wonder if my friend would prefer not losing $70,000 last year if he could have avoided this by understanding some nuances of dividend investing if he could enrol into something like dividend machines.
Dividend Machines is Open with a Limited Window
The course closes on 14th March 2020. This means you have a small window of 21 days to sign up.
If you would like to take action and build a secondary stream of cash flow today, check out and signed up for Dividend Machines today here while stock last!
Just a heads up to readers that this is a Sponsored Post. I believe you will gain value out of Dividend Machines if that is what you are leaning towards in terms of wealth building at a good price range. I do not gain any commission if you click through the links. Let me know the feedback for the course so that I can improve the recommendations.