The Strategic Dividend Investor

Daniel Peris manages dividend-focused portfolios and holds a doctorate in history, and this book argues that the dividend rather than capital appreciation should be understood as the primary source of equity return.

His historical argument is that for most of the history of equity investing, investors bought shares for the income they produced, and the expectation that returns would come principally from price appreciation is a recent development dating from the postwar period. He documents the long-run decomposition of American equity returns into dividend income, dividend growth and change in valuation, and shows that the first two account for the great majority over long horizons while the third has contributed most of the variation.

His practical argument follows. An investor buying for income can assess the sustainability and growth of a company's cash distribution, which is a tractable analytical problem, whereas an investor buying for appreciation must forecast what someone else will pay, which is not. He sets out how to analyse dividend sustainability, coverage and growth, what payout ratios indicate in different industries, and how to build a portfolio on this basis. He is critical of the treatment of buybacks as equivalent to dividends, arguing that they are discretionary and frequently poorly timed. The book is more historically grounded than most dividend investing advocacy. Its principal weakness is that it does not seriously address the tax disadvantage of dividends for taxable investors in many jurisdictions.