If 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.