The Power of a Unique Dividend Investing Strategy [Interview]

Sometimes, you meet people who impress you immediately and continue to do so afterward. Allan, whom I had the pleasure of interviewing today, is one such person to me.

From the moment I met him, he has shown a highly methodical approach with a passion for dividends. His unique dividend investing strategy frequently inspires me and stimulates my thinking and I truly appreciate that.

I strongly believe that surrounding ourselves, as retail investors, with bright minds like Allan’s is crucial.

It’s not about blindly copying their actions, but rather listening to their insights and evaluating how we can enhance our investment philosophies with small but meaningful adjustments.

Therefore, I am extremely happy that Allan agreed to this interview. Especially considering it’s the first time he does this and I know how much courage it took for him to agree to this opportunity.

So, without further delay, I hope you enjoy this interview.

I also encourage you to share your feedback and questions in the comment section below. I’m sure Allan would greatly appreciate it. 🙏


Q: Hi Allan, can you briefly introduce yourself to our readers? 

Yes of course. I’m in my 40s, married, and have 2 daughters. I’m originally from Denmark but now I’m living in Sweden and I work with IT within the financial industry.

I have invested in individual stocks since 2015 where I initially followed a model portfolio from a bank.

Later I changed to dividend and dividend growth investing in 2017. However, in 2019 I transformed my strategy to focus more on income generation.

I only invested some small amounts in mutual funds before 2015.

Being here fills me with incredible honor and pride, and expressing it is of utmost importance to me!


Q: Do you still remember the day that you discovered Dividend Investing? When was that and what inspired you to actually get started with it?

No, unfortunately not, but I do remember a specific day early in the process when the family did enjoy a wonderful vacation in Tuscany during the summer of 2017.

I enjoyed a quiet early morning by the pool and suddenly my phone notified me that a dividend just arrived.

The feeling of receiving dividends while being on vacation was (and still is) amazing.


Q: Honestly, your dividend investing strategy inspires me and it’s something I regularly think about. Can you share with us some more details about it?

Wow! I think it should be more the other way around.

I thank you and the entire community for the inspiration and support. You and the community are a huge motivator to me – thank you!

In the next question, I briefly mentioned that I have moved to my own developed scoring system. This was done in order to remove human emotions and create an automated process as the core of my dividend investing strategy.

Secondly, my strategy tells me that it’s easy to overlook the important and crucial hidden information on page ‘136’ in the annual report.

So that’s why I have turned it around so that I don’t need to read the reports (even if it’s fun to do so). 

Hence, I have decided on a data-driven approach and my focus is on historical annual data. I trust historical data over forward-looking data as I believe that no one can predict the future. Of course, it helps that I’m a data-driven person by nature.

Furthermore, I don’t work with evaluations or forecasts such as DCF models.

Having said that, I group my companies into 3 groups so it is easier to compare apples with apples and pears with pears.

Of course, there are many sorts of apples but it’s easier to compare an apple with another apple than with a watermelon. The 3 defined groups are:

  1. Dividend growth companies normally will have a yield between 2-4.0.%. The focus is of course on dividend growth and dividend stability.
  2. High-yield dividend stocks: banks, insurance, asset management, and energy type of companies. These companies should provide more than a 3.5% yield, but I actually prefer more than 5.0%. In this group, I expect and can accept a few dividend cuts over a 10-20 year period.
  3. Companies that don’t belong in Group 1 or 2. I call these “special cases” (for the lack of a better term) and examples of these are REITs, mRETs, and Business Development Companies.

Each group is scored based on a different set of criteria. The reason behind this is that I cannot use the same criteria when comparing and scoring Johnson and Johnson ($JNJ) and for instance Realty Income ($O).

Hence, I have created multiple and distinct data points for each of the 3 groups.

My objective is to ensure equal allocation among all companies within a group.

However, I recognize that some companies are better or more stable than others. To account for this, I rank every company in the group with either a “B” or “A” rating. A “B” rating denotes a ‘normal’ company, while an “A” rating signifies the “best of the best.”

Consequently, an “A” rated company receives a 75% higher allocation compared to a “B” rated company within the same group.

My scoring system ranges from 0 to 100, and an “A” rated company requires more points than a “B” rated company.

As mentioned earlier, my system solely relies on annual data. Each quarter, I update all my companies with new data since some companies do not follow the regular January to December calendar.

To minimize the impact of a dividend cut, I prefer a highly diversified portfolio. I acknowledge that this approach may limit the potential for a dividend increase in a specific company, and I am comfortable with that trade-off.

Additionally, I have established a minimum buy list per country and broker. Whenever sufficient capital is available in the broker and country, I place an order on the upcoming weekend. Any new capital added or dividends received are always invested on the upcoming weekend as well.

Regarding buying (increasing) in an existing company, the order follows a set of criteria that I adhere to regardless of the market situation.

I realize that all of this may sound complicated and I welcome any follow-up questions in the comment section.

However, this is my dividend investing strategy in a nutshell.


Q: Have you experienced an evolution in your dividend investing strategy?

Yes, I have shifted my dividend investing strategy from purely focusing on dividend growth to a more income-focused approach. Additionally, I have transitioned from stock picking to using data-driven and stock-scoring investing systems.

I believe that many dividend growth investors claim to prioritize dividends and income, but in reality, they often emphasize total return.

While dividend growth companies may have a higher rate of dividend growth compared to most of my holdings, my calculations indicate that it would take a considerable amount of time for such companies to catch up with a 5-6-7% dividend-paying company in terms of both dividends and total collected dividends.

Therefore, from my perspective, investing in low-yield companies requires either an extremely long-term perspective or a focus on total return, which is, of course, perfectly acceptable.

However, my primary focus is different as I am primarily seeking a steady income.


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Investing involves risk of loss.


Q: What are your top 10 holdings, and what percentage of your portfolio do they constitute?

Currently, I own 187 stocks. The weight changes of course every day due to currency fluctuations.

My current top 10 holdings are as follows:

  • Decisive Dividend Corp 2.24%
  • Novartis AG 1.92%
  • Iron Mountain Inc 1.86%
  • Unilever PLC 1.84%
  • Investor A 1.83%
  • Betsson B 1.80%
  • Brookfield Renewable Corp 1.61%
  • TotalEnergies SE 1.58%
  • Omega Healthcare Investors Inc 1.55%
  • Johnson & Johnson 1.54%

Q: As a European, how do you look at owning European Dividend stocks?

My main issue with European stocks is that the majority of them offer annual or semi-annual dividend payments. Besides that, they often have a dividend distribution policy that I dislike.

In contrast, I find that companies in the USA and Canada have a stronger commitment to steadily increasing dividends. Apart from this, I have no other issues with European stocks as part of my dividend investing strategy.

The current country weight in my portfolio is as follows:

  • USA: 46%
  • Canada: 15%
  • Rest: 39%

Q: Where are you right now on the investing journey?

It all depends on what you categorize as the journey and your goal. My goal is Financial Independence (FI) and currently, we are at 95% FI.

I estimate to reach 100% FI somewhere between January and March 2024.

Every New Year’s Day, I consistently raise my financial independence (FI) target by 2%.

Although I am aware that the current inflation rate exceeds 2%, I believe that this approach will balance out over time.


Q: How is your family engaged in your journey to financial independence? What do they think about it?

My wife isn’t directly involved in the investments, but she wholeheartedly supports the strategy and its underlying concept.

She has already started to reduce her work hours, and I, too, have stopped working overtime, even though working more could accelerate the financial independence (FI) process.


Q: We all learn from mistakes. What is the biggest investment mistake you made?

My most significant mistake, both in terms of value and percentage, was taking a bet based on a recommendation from a Facebook group that had an aggressive focus on a small oil company. The investment’s value plummeted from a very high level to nothing.

This experience has been a valuable lesson, and I now realize the importance of trusting my own judgment rather than blindly following advice from a Facebook group.


Q: What are your favorite investing resources (i.e., books, websites)?


Q: Do you have any advice for beginning investors?

Test and find your own path; avoid merely copying others.

Embrace the possibility of making mistakes because they are inevitable, and everyone makes them. The key is to analyze and understand your mistakes, as that’s where valuable learning occurs.

Furthermore, steer clear of short videos on platforms like TikTok, Instagram, or similar ones.

Similarly, be cautious of blogs or YouTube channels that prioritize profits by showcasing high growth or massive dividends.


Q: We’re almost to the end, so I have to ask this question: what is your favorite all-time dividend growth stock, and why?

My best stock is a small Canadian company called Decisive Dividend Corp. It holds a prominent position as a big dividend payer in my portfolio, with a current yield on cost (YoC) of 27%. I’ve held this stock for 4.5 years.

In general, I feel that too many investors solely focus on the USA and overlook the numerous great Canadian companies.

Additionally, I have noticed that many concentrate primarily on Large or Mega caps. However, there are plenty of dividend growth opportunities to be found in lower-cap companies.


Q: Is there anything else that you would like to share with our readers?

Believe in yourself, and stay committed to your strategy and plan. While your strategy may evolve over time, avoid changing it solely due to the current market situation.

Equally important, don’t hesitate to seek honest input or feedback from friends or the incredible community. We all learn something new every single day.

Once more, thank you to both you and the entire community. You are truly making a significant impact on me and so many others, helping us achieve our financial goals.

Lastly, thank you for taking the time to read about my journey 🙏


Key takeaway from Alan’s dividend investing strategy

And that’s it, the end of this interview.

My takeaway from his story is that Allan’s possible edge over other retail investors lies in singling out emotions with a rigid, highly automated system. That, in my opinion, is the true power of his dividend investing strategy.

Following him for a while, I’m amazed, but not surprised, by how he achieved his 95% FI level so swiftly.

Having said that, we sincerely hope that you found it insightful, and if you did, please do let us know in the comment section below. You can also follow Allan on Twitter, where he hangs around with like-minded investors.

Furthermore, if you are interested in reading more interviews like this, kindly inform me. Also, if you believe you have valuable insights to share, I’m open to considering sharing them via this blog with the broader community.

Ultimately, this blog serves both you and me, and your feedback and contributions are highly valued.

Yours Truly,

Dividend Growth Investor


PS: the coffee can is empty 😃

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European DGI

I am European DGI and it's my desire to retire early via Dividend Growth Investing as a passive income stream. This is not easy and especially when living in Europe. That's why I started this blog because I truly believe we can learn a lot from each other by sharing our journeys!

Disclaimer

I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.

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