The Fun Thing About Blue-Chip Dividend Stocks

You know what makes all of this finance writing about blue chips fun for me? The continuity of almost everything.

When I started writing for Seeking Alpha in 2011, I was saying the same things about Coca-Cola then that I am saying about it now. When you own 500 brands that generate $10 billion in annual profit across 200 countries, it’s not subject to a whole lot of change. You raise prices a dime here, cut costs a nickel there, buy buck a little stock, and voila, another 8% dividend increase. It’s just so. . . easy and obvious.

In some regards, it’s probably too easy. You hear people talking about buying Procter & Gamble and Johnson & Johnson all the time non stop, it can be tempting to search out for something new, “You’re like a broken radio, man. Don’t you have any other stocks up your sleeve?” The answer is no, no I don’t. I am interested in business models that do not change very much. I am interested in companies that can not only give shareholders more cash next year than this year, but more cash twenty years from now than this year. Those are very demanding requirements. To be eligible for that type of consideration, you either need one heck of an economy of scale (think Exxon Mobil, Wal-Mart, etc.) or a brand name that people respond well to—those letters C-O-C-A C-O-L-A on the can mean something. The word “Band Aid” is a type of brand owned by Johnson & Johnson, and yet we use the brand name to signify a particular type of bandage. When people talk about tissues, they use the word “Kleenex.” That is the specific brand owned by Kimberly-Clark. It is the responsiveness of people like you and me to those brand names over the generics that allow those companies to charge a premium to generics without losing market share. That premium profit is the dividend that ends up in our pockets, and is responsible for building our wealth.

Sometimes, I’m able to write my articles in advance so that I can still get things published even when I’m not around to write and “get something out there” (like this article for example, which is written on November 18th, 2013). This carries two advantages. If, God forbid, I get whacked by a bus and have to get put into the ground earlier than planned, you’ll still get a couple of months of posts coming your way from beyond the grave, perhaps giving new meaning to the term “thinking outside the box.” I’d be like a more benevolent version of Causabon from George Eliot’s Middlemarch,  giving financial instruction after I’m gone. The real advantage, however, is that it prevents this website from having 4-6 week blocks of time without any updates at all during my busy season around exam time.

Of course, there are some potential drawbacks. I regular perform my calculations using current dividend payments, so there might be minor inaccuracies referring to Coca-Cola’s $0.28 dividend in March if the Board of Directors hikes it to, say, $0.32 per share by then. I’ve got posts coming out late this summer that have quotes from value investors that are currently over 90 years old, and if, God forbid something happened to them, it might be weird reading all the uses of the present tense if I don’t catch it and fix it.

So yeah, there are some potential problems. But still, 99% of financial writers couldn’t do this. The stocks they cover change too much on a quarter by quarter basis. People will think very different things about Intel in the summer of 2014 than they do now. They will think different things about Intel next Christmas compared to this. Meanwhile, the only thing that will change in the analysis of Hershey stock between now and next Christmas will have to do with the valuation as its stock price changes. It’s very unlikely that the economics of chocolate bars will change much in the next twelve months.

It was an easy decision for me to make early on that I didn’t want to go through my life like a gawddamn ping poll ball, reacting and responding to every news events. Instead, I got out some charts of companies that grow profits almost every year, raise the dividends every year, and used a little bit of common sense to identify which compounds constitute the few vehicles for truly building long-term wealth.

This is what makes it all so much fun. In 2017, I’ll be here talking about Coca-Cola raising its dividends since the 1960s. I’ll be here talking about Procter & Gamble paying out dividends uninterrupted since the late 1800s. I’ll be talking about about Colgate-Palmolive paying out dividends longer than the sport of volleyball has been in existence. It’s all so. . .predictable. But that is what makes this fun—we can sleep well at night knowing that we acted intelligently with our capital in a way that all but increases that we’ll get richer with each passing year. The only way you can screw it up is if you see someone getting richer than you faster in a particular year, and you deviate from the strategy. Otherwise, it’s just a non-stop grind through higher richer. If a company can pay a dividend through the assassination of an American president, the fall of a communist empire, the rise of trillion dollar deficits, depression-era economics in certain European countries, and more technological advances in the past twenty years than the past three hundred years combined, why wouldn’t you want to tie your economic fortune to those enterprises as you go through life?


Originally posted 2013-12-16 08:09:32.

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5 thoughts on “The Fun Thing About Blue-Chip Dividend Stocks

  1. The thing is that very little changes in the underlying business for companies like Coca-cola, PepsiCo, Wal-Mart Stores etc for a period of 1 – 5 years. The one thing that would change is valuation on the companies. For example, in 1998 – 2000, Coca-Cola was overvalued. Since 2008, the stock has been undervalued to fairly valued.

    Of course, one also needs to monitor investments as well, because things can and do change over time. That is the nature of capitalism – to attack moats. A

  2. Patrick Moorea says:

    Jason Zweig of Wall street journal once said he kept saying the same simple truths again and again, just on different angles. It is very useful to me to hear those reminders with each time a little different new angle, because we can so easily be swept by Mr. market… Thank you Tim for your articles

  3. Joe Fields says:

    They claim to have done really detailed research for this article. Really? If you want to know what research means, together with all the scientific data, questionnaires, reports, verified reviews, etc. go to Any article on this website resembles a good expert speech designed for the people in order to help them and not confuse even more.

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