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Is there anything predictable about the stock market? If so, how much power or truth does it hold? Do sophisticated models and strategies have a predictive edge? Even if you’re an investor with limited experience, the odds are at least one of these questions has piqued your interest at some point in your investing career.

In episode 43, Greg discusses predictability in ETF income and dividend growth. He examines various ETFs tracking the S&P 500, such as SPY, IVV, and VOO, highlighting discrepancies in their dividend growth rates from year to year. Greg emphasizes the importance of not making investment decisions based solely on headline numbers, as these may not tell the full story. The episode also explores the limitations of discounted cash flow models, touching on the challenges of long-term forecasts and the uncertainties of market competition. Ultimately, he advises investors to focus on understanding what they own and cautions against overly sophisticated financial models that may introduce more risk and uncertainty.

00:00 Introduction to The Dividend Mailbox
00:46 Understanding ETF Predictability
01:46 Analyzing S&P 500 Dividend Growth
04:09 Comparing Different S&P 500 ETFs
10:49 Exploring the S&P 100 and Other Indexes
16:57 The Complexity of Enhanced Income ETFs
24:27 The Power and Pitfalls of Predictability
25:46 Diving into Discounted Cash Flow Models
31:13 The Terminal Value Trap
38:53 Conclusion and Final Thoughts

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Notes & Resources:

DCM Investment Reports & Models

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You, the investor, must choose between investing in two companies based on their financial results over two years. One has steady revenue and earnings growth, alongside decent dividend growth. The other experiences moderate financial decline, but boasts strong dividend growth. Given this information beforehand, which would be the better investment?

In our final episode of the year, Greg revives the classic game show Let's Make a Deal to illustrate that even if you know the future, some aspects of investing will always be unknowable. Later, Greg continues this theme by discussing broader market valuation, and predictions from various analysts for 2025 and beyond. To tie everything together, Greg concludes the episode by reflecting on a TED Talk that emphasizes the importance of a long-term strategy and the pitfalls of short-term thinking.

Happy Holidays from The Dividend Mailbox Team

00:00 Introduction to The Dividend Mailbox
00:46 Let's Make a Deal: Investment Choices
02:47 Behind Door Number One: A Declining Company
04:54 Behind Door Number Two: A Growing Company
05:45 Comparing the Two Companies
08:05 Revealing the Companies and Market Insights
12:34 When to Sell: Strategies and Considerations
19:16 Market Predictions and Analyst Opinions
27:43 Long-Term vs Short-Term Investing
33:38 Conclusion and Final Thoughts

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If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at ethan@growmydollar.com.

Notes & Resources:

DCM Investment Reports & Models

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The last time the S&P 500 dividend yield was sitting at 1.17% was in February of 2001. Many investors remember the stretched valuations 23 years ago, and even more so, how the following year proved to correct that exuberance. While stock prices are currently hovering around all-time highs, us dividend growth investors targeting a yield of 2.5-3% may find challenges in this environment.

Given this, and the uncertainty surrounding the recent presidential election, Greg spends episode 41 reviewing the foundational pillars behind our investment strategy. Even with low yields, the next 10 years of performance can be boiled down to relatively simple math. As GDP expands, corporate earnings grow, which in turn gives investors increasing dividend checks. Through several illustrations of what that looks like in your portfolio, Greg concludes that the dividend growth strategy is alive and well. Later, he reviews some recent actions we have taken, highlighting decisions on selling part of Emerson ($EMR), adding to Hershey ($HSY), and starting a position in Union Pacific ($UNP).

00:00 Introduction to The Dividend Mailbox
00:46 Current Market Overview
001:54 The Drivers Behind The Dividend Growth Strategy
005:10 Historical Performance Analysis
007:52 Future Predictions and Assumptions
010:28 Dividend Growth vs. Buybacks
12:15 Portfolio Growth & Return Illustration
20:16 Market Yields, Challenges, and Opportunities
27:46 Our Recent Portfolio Actions
35:16 Conclusion and Final Thoughts

Send us a text

If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at ethan@growmydollar.com.

Notes & Resources:

DCM Investment Reports & Models

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The corporate life cycle is an important yet often overlooked factor in investing. Like all things, companies age over time, with each phase having its own pros and cons.

In this episode, Greg explores the corporate life cycle's impact on dividend growth investing. Using research from Morgan Stanley and Aswath Damodaran, he covers various stages of a company's life, including startup, young growth, high growth, mature growth, mature stable, and decline— with examples from companies like Rivian, Nvidia, Microsoft, PepsiCo, GE, IBM, Intel, AT&T, and Tesla. Highlights include the prolonged profitability in maturity phases, industry-specific aging rates, and risks associated with corporate debt and large acquisitions. Greg emphasizes understanding a company's phase for strategic investment decisions and the critical role of suitable CEOs.

00:00 Introduction
01:12 The Importance of Understanding the Corporate Life Cycle
02:10 Morgan Stanley's Five Stages of the Corporate Life Cycle
02:58 Key Metrics in the Corporate Life Cycle
05:39 Profitability and Debt in Different Stages
08:37 Cost of Equity and Capital in Mature Companies
11:10 Aswath Damodaran's Six Stages of the Corporate Life Cycle
14:08 Examples of Companies in Different Life Cycle Stages
20:15 Dividend Investing: High Growth to Mature Growth
21:48 Mature Stable Phase: Dividend Income and Growth
22:56 Challenges in Mature Stable Phase
24:24 Decline Phase: Managing Declining Cashflow
25:44 Narrative vs. Numbers in Company Growth
29:08 Pricing and Valuation Across Growth Phases
31:59 CEO Roles in Different Growth Phases
35:59 Conclusion: Investing Across Lifecycle Stages

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If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at ethan@growmydollar.com.

Notes & Resources:

DCM Investment Reports & Models

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When a company’s stock price has struggled for years, a change in management may be just what it needs to get back on track. Even still, new management can’t fix everything.

Historically, Starbucks has been an impressive growth story, generating phenomenal wealth for investors. Despite its profitability and strong cash flows, recent challenges have raised questions about whether those days are long gone. In this episode, Greg analyzes the Starbucks story as a potential dividend growth candidate and what the future may hold. He discusses the implications of Starbucks' new CEO (who previously turned around Chipotle), and the company's strategy to address operational inefficiencies.

Later, Greg transitions to an update on Chevron which has been part of the model portfolio since 2010. Although higher dividend yields can signal problems for a company, Chevron’s resilience makes it worth considering adding to the position.

00:00 Introduction to Dividend Mailbox
00:47 Starbucks: A Familiar Name with a Compelling Story
03:33 Starbucks' Financial Performance and Challenges
05:22 Evaluating Starbucks as a Dividend Growth Investment
11:33 Starbucks' Debt and Cash Flow Analysis
27:10 Conclusion on Starbucks and Transition to Chevron
28:04 Chevron: A Reliable Dividend Growth Story
29:41 Chevron's Financial Health and Future Prospects
35:41 Final Thoughts and Wrap-Up

Send us a text

If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at ethan@growmydollar.com.

Notes & Resources:

DCM Investment Reports & Models

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In our August episode, Greg interviews longtime friend and fellow financial advisor Kent Hughes. Kent has worked in the industry for over 40 years, focusing his investment strategy on quality and market indices. During his career as an advisor, Kent's expertise has earned him placement on both the Forbes and Barron's Top Wealth Advisor lists.

Greg and Kent begin the episode by discussing the evolution of the investment industry over the past four decades, the impact of technological advances on market information, and investor behavior. The duo also delves into market expectations, secular bull markets, and the potential effects of AI on investing.

Following their conversation, Greg mentions that he was able to speak with the investor relations department at Snap-on, and concludes the episode by providing answers to the questions we had about the company from the previous episode.


Timestamps:

00:00 Introduction to The Dividend Mailbox
00:45 Interview with Kent Hughes: A Journey Through the Financial Industry
03:33 Changes in the Financial Industry Over 40 Years
05:35 Lessons Learned and Biggest Mistakes
08:13 Impact of AI and Investor Expectations
12:29 Economic Outlook and Market Predictions
17:21 Commercial Real Estate Concerns
19:25 Forecasting Future Returns
25:50 Investment Strategies and Dividend Growth
32:36 The Importance of Dividend Growth
34:07 Historical Performance and Market Trends
36:27 Understanding Compounding and Market Sentiment
39:37 Favorite Investment Books and Influential Figures
43:40 International Investing Considerations
49:20 The Competitive Advantage of Patience
55:43 Snap-on: A Potential Investment Opportunity
01:00:53 Closing Thoughts and Key Takeaways

Send us a text

If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at ethan@growmydollar.com.

Notes & Resources:

DCM Investment Reports & Models

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In this episode of The Dividend Mailbox, Greg takes an in-depth look at Snap-on (SNA), a company with a rich history of tool innovation and consistent dividend payments since 1939. He discusses the company's evolution from automotive tools to specialized equipment for various industries, its unique franchise model, and its financing arm. By examining Snap-on's business model, financial performance, valuation, management discipline, and potential risks, he makes the case that this seemingly "boring" business checks almost all the boxes and is a compelling investment idea for dividend growth investors.

Send us a text

If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at ethan@growmydollar.com.

Notes & Resources:

DCM Investment Reports & Models

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To start our fourth year of The Dividend Mailbox, Greg is joined by Daniel Peris, author of The Ownership Dividend: The Coming Paradigm Shift in the U.S. Stock Market and Head of the Income and Value Group at Federated Hermes. Daniel's deep historical perspective and expertise offer valuable insights into the future of dividend growth strategies and the importance of sustainable dividend investing.

Their conversation covers a range of topics including:

• Historical context and the evolving dynamics of dividend growth investing.
• Challenges and opportunities in the dividend space, including the impact of interest rates and market cycles.
• The role of stock buybacks and their effectiveness in shareholder returns.
• Strategies for managing dividend cuts and maintaining a high and rising income stream.
• The foundational importance of cash flow for all investors.

Follow Daniel on X/Twitter @HistoryInvestor

Send us a text

If you submit a question to us and we use it in an episode, we will send you an official The Dividend Mailbox Yeti® Tumbler -> Email us at ethan@growmydollar.com.

Notes & Resources:

DCM Investment Reports & Models

Visit our website to learn more about our investment strategy and wealth management services.

Follow us on:
Instagram - Facebook - LinkedIn - Twitter

If you enjoy the show, we'd greatly appreciate it if you subscribe and leave a review