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For six full decades, Tom Cameron survived as an investment advisor not through sleight of hand or trickery, but through a simple, easy-to-understand strategy.
His company, Dividend Assets Capital, manages capital for hundreds of income-seeking clients. Dividend Assets’ strategy? It only invests in companies that have increased their dividends for at least 10 years. The results speak for themselves. Dividend Assets’ fund has posted an average annual return of 28% for the past decade.
After 60 years in the business, Cameron retired last month. Nevertheless, he shared his income-investing wisdom at the Contrary Opinion Forum in Vermont last Friday.
“What we do is simple to understand,” Cameron told the room of roughly 100 patrons. “Our average growth over the past 25-30 years has been wonderful.”
Dividend Assets looks not only for companies that consistently increase their dividends every year, but increase them at a substantial clip. They especially like companies that increase their dividends by at least 20% a year.
Cameron and company outline what income stocks they like best in their annual Handbook of Dividend Achievers.
The comprehensive manual divides the best dividend stocks into categories: longest records of dividend achievement; top 20 by current dividend yields; and top 20 by 10-year compounded annual dividend growth rate (CAGR).
The latter category is where Dividend Assets sets its sights first. It gets first billing in the Handbook of Dividend Achievers.
Topping that list is Waste Management (NYSE: WM), America’s biggest garbage hauler.
Waste Management has grown its dividend for 10 straight years by an average of 64.6% a year. Since 2003, WMT’s quarterly payout has increased from a penny to 37.5 cents. The result is a 3.2% yield. Not bad for a company that collects trash.
Other companies that cracked Dividend Assets’ list of top 20 dividend growers:
- Aaron’s (NYSE: AAN): 47.5% average growth over 10 years
- Williams Cos. (NYSE: WMB): 43% over 10 years
- Cracker Barrel Old Country Store (Nasdaq: CBRL): 36.7% over 11 years
- Hasbro (Nasdaq: HAS): 29.2% over 10 years
- Lowe’s Cos. (NYSE: LOW): 29.2% over 52 years
By identifying dividend growers such as these, Dividend Assets’ portfolio has an average dividend growth rate of 20.3% over the past 10 years. Using the Rule of 72, that means that the average dividend in the company’s portfolio takes just 3.5 years to double.
What is the Rule of 72? It’s a formula Dividend Assets uses to calculate how long it will take a company’s dividend to double. Divide any dividend growth percentage into 72, and you get how long it will take for a given company’s dividend to grow.
For instance, a dividend that has been growing at 1% a year will take 72 years to double. A 10% dividend growth rate will take 7.2 years to double. A 20% growth rate takes just 3.6 years to double. And so on.
It’s a simple way to invest. But for Tom Cameron and Dividend Assets, it has worked.
As Cameron put it last Friday, “The way we invest has no argument from anyone. And it pays you income.”
In Cameron’s case, for 60 straight years.
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