Mr. Peters starts at the front by introducing his favorite investor, Marjorie Bradt.
No, you’ve never heard of it. She was a client of the brokerage he once worked for as an assistant. Mrs. Bradt’s father gave her $6,000 worth of AT&T stock in the late 1950s and early 1960s. I signed up for AT&T’s dividend reinvestment program, simply kept the shares and continued to reinvest the dividend. In 1984 a court ordered AT&T to separate into “Baby Bells” and since then they have spun off into different companies. Most of them pay dividends that have continued to be reinvested. By 1999, her purse was worth more than $1 million. Curiously, given the subject of this book, Mr. Peters does not tell us her annual dividend income.
I wish he was able to give us more insight into Mrs. Bradt. Did she even remember that she owns that stock? Have you ever felt the temptation to liquidate a stock? At some point she and her husband must have felt the need for more money. Why didn’t you add more money to the wallet?
Still, it’s a great story. It’s not easily reproducible, because $6,000 was a lot of money back in the day – a respectable middle-class annual income, believe it or not. And because the history of AT & T is unique. Not all stocks have done well, even over forty years.
Unfortunately, Mr. Peters does not show the same amount of patience. He mentions selling stocks that do not meet his expectations.
He is very interested in analyzing individual stocks. Early on, he rejected the value of mutual funds and exchange-traded funds, and later criticized the concept of diversification which, of course, is why investors put their money into mutual funds and exchange-traded funds.
I find this a little strange in a book by an employee of Morningstar, which was founded to give investors guidance on mutual funds. (Mr. Peters is the editor of Morningstar DividendInvestor, their newsletter about dividend investing.)
This is the weakness of the book in my opinion. The author is a financial analyst and clearly understands a lot about dividend paying companies in general and how to handle their numbers.
However, this makes the whole process seem very difficult for the average investor who is not a CFA. They may spend many hours of their free time trying to replicate what he does, and they won’t even get close to it. They don’t get paid to do this as a full time job, as is.
Most readers won’t even try. They will either forgo investing profits or subscribe to DividendInvestor to get Mr. Peters’ advice on a regular and continuous basis. And it’s hard to believe that someone at Morningstar, author or not, isn’t hoping for that outcome.
I applaud the author for making a point that only I thought I understood – that investment risks are not price fluctuations but real-world events that force companies to cut or stop paying dividends.
Overall, I recommend this book to everyone who is wondering if investing for profits is a good idea.