The Little Book of Big Dividends Review

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The Little Book of Big Dividends by Charles B. CarlsonIf you’ve been interested in dividend investing and unsure where to begin, I recommend reading The Little Book of Big Dividends by Charles B. Carlson. I’ve had a healthy interest in the subject for the last six months, ever since the credit crisis offered a great opportunity to start picking up fantastic companies on the cheap, and this book covers just about every major topic in dividend investing.

One of the most important lessons in the book was the importance of establishing your investing goals. All too often we do things without really considering our goals and that’s dangerous in dividend investing. When it comes to dividend investing, there are two camps of investors – those looking for income today, such as retirees, and those looking for longer term returns, like myself.

The criteria you use to analyze a potential dividend stock will differ based on your goals and those goals defined which camp you’re in. If you’re looking for income, then you want a stable company that has solid coverage of their dividend payout, a yield that meets your income needs, and a payout that fits your payout schedule. If you’re looking for longer term growth, then it’s more important that you find a company that has a history of healthy dividend increases, as well as stability and solid coverage. The book gives you the tools, in its two analysis methodologies, to help you determine if and how a stock fits your needs.

The Little Book goes onto discuss other important topics in dividend investing such as the differences between stocks that pay out dividends (REITs, MLPs, etc.), when you want to reinvest dividends, whether to go direct with dividend reinvestment programs, as well as the methodology you must use to determine if a dividend stock is worth buying. That was not a comprehensive list of what’s included, just the topics I believe are paramount and clearly discussed in the book.

If you’re a seasoned dividend investor, this book will only server as a refresher (I finished it in less than two hours). If you are brand new and/or want to know if you are missing any key ideas in the strategy, then I would put this book on your future reading list.

{ 11 comments, please add your thoughts now! }

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11 Responses to “The Little Book of Big Dividends Review”

  1. DIY Investor says:

    This is an especially timely topic given that yields are so low. Many older investors need income to live off of and need growth to counter inflation.
    I find all of the “The Little Book …” series worthwhile because they are so succinct and packed with info. I look forward to reading this one.

  2. zapeta says:

    I will put this on my reading list, I’d definitely like to know more about dividend investing.

  3. eric says:

    I ran across this book before but haven’t had the chance to read it.

  4. N Chang says:

    one thing I never see on financial blogs is trade-based investing. I see a lot of “max your 401K” or make sure you contribute to your “Roth IRA”, but I don’t see very much on what could be a potentially lucrative strategy of trading in and out of stocks. For example stock xyz has a very typical trading pattern, between $10 and $11. So you buy shares at $10, wait for them to appreciate to $11, sell, watch it drop to $10, and do the same again. Not strictly day trading, because you’re not necessarily buying and selling on the same day. I know there’s risk involved, but even someone with little investment advice (myself), I’ve been able to make pretty good returns, and you can easily make 4-5% returns within a few hours or days as opposed to a 2% yearly return

    • pmulroy says:

      And then one day stock xyz will drop to $5 and you just lost all your gains plus some more.

      If you don’t understand how a company makes money, its financials, its future outlook etc, and you are just trading a stock based on an arbitrary price range, you aren’t investing.

      You are a classic case of someone speculating on stocks and deluding themselves into thinking they are investing.

      • N Chang says:

        let’s not call it “investing” then. it’s simply trading. Ridiculous of whether I’ve deluded myself or not, I still think it’s a good way to make in the market.

        And if stock xyz is kraft or johnson and johnson or pfizer, the odds of your scenario of it dropping by 50% is pretty darn low

  5. debra says:

    Yes, it’s called trading. If you have the nerves to sell in and out of the market and are investing in solid companies you will do fine !!

  6. DIY Investor says:

    Just be careful. To you the market is a casino and many who have gone down this road have become addicted and lost everything in the end. Emotions end up gaining the upper hand. Once you get under water you try to make up your losses and the problems mount. Remember – the market drops a lot faster than it goes up!
    I counsel my clients to play (if they must) with a maximum of 20% of their investable funds. Invest the remaining 80% in a well structured long-term investment program. You’ll be happy you did one day.

    • froggielover says:

      I have 14 good years left to retire and 3 401ks I need to roll over from my past employers.
      Should I invest them together or separately?

  7. thunderthighs says:

    This book looks very interesting. I’m definitely interested in seeing more book reviews from you in the future, let us know if it’s worth our time!

  8. froggielover says:

    Great advice~I’m a newbie, kind of. Invested years ago and getting ready to back into it. Since times have changed I’m reinvesting my interest in reading what I can to be on my game with my money.
    Starting by checking to see if my local library carries this book.
    Thanks for the article.

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