Michael Weber, 27
Certified general accountant
Includes shares in Bank of Nova Scotia, Enbridge Inc., Fortis Inc., Intel Corp., Johnson & Johnson, Medtronic Inc., SNC Lavalin Group Inc., Suncor Energy Inc., Telus Corp. and TransCanada Corp.
Michael Weber is saving a large portion of his salary and investing in stocks with growing dividends. He has crunched the numbers and estimates he can build up enough dividend income to become financially independent by his late 40s.
How he invests
Mr. Weber screens for stocks that have had their dividends raised for at least five consecutive years. The companies making the grade are subjected to a thorough analysis. They are purchased if they meet several selection criteria, including:
- The company is able to grow per-share earnings at 8 per cent or more a year (thus capable of increasing the dividend by at least 8 per cent a year);
- No more than 60 per cent of company earnings required to finance the dividend;
- A sustainable competitive advantage as indicated by the return on equity being consistently above 12 per cent (or the industry average).
Dividend investors are sometimes accused of looking just at dividends. For Mr. Weber, it’s also important to buy dividend stocks at good prices. He uses valuation yardsticks (price-to-earnings, price-to-book, etc.) to conservatively estimate a fair price – and waits patiently for it to come around. “I’m usually waiting for a few months before I buy something,” Mr. Weber discloses.
“I bought Suncor Energy on June 10 after its recent large dividend increase. Large increases like this are a sign from management that they expect good things in the future.”
“I bought Intel in February, 2013. At the time, the price was discounted because of worries that they would be unable to enter the mobile industry successfully.”
“My best investment so far has come from Medtronic. I bought it at $31 and it is about 70 per cent higher.”
“I bought [Research In Motion] at $28.67 [now trading around $10]. I still keep [the shares] in my account as a reminder not to stray from my investing strategy.”
Mr. Weber provides plenty of advice on his blog, Dividend Growth Investing & Retirement.
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