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Dividend Value Investing and the 12 Rules | Kanwal Sarai

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Today’s episode features Kanwal Sarai from Simply Investing.

Kanwal shares with us his unique investing style.

This style is a combination of value investing like Warren Buffet and a focus on dividend payouts.

Kanwal takes our questions in stride and makes some really great points.

Listen, learn, and let us know what you think about this awesome episode.

Episode Summary

Kanwal’s Background

  • Kanwal graduated with a computer science degree at age 24 in 1996
  • About three years in, he realized traditional work couldn’t be a forever path
  • This was before anyone was calling it “F.I.R.E”
  • His first side hustle attempt was purified water
  • Long story short…the side hustle was a flop
  • Neither of them knew anything about marketing/sales

Building His Own Investment Method

  • In 2003 Kanwal started developing his own investment strategy
  • His son was just born and was keeping him up all night
  • One of those sleepless nights he grabs an investing book and was hooked
  • At the time he was paying 2.5-3% fees for advisement
  • His main focus came down to strong dividend-paying companies
  • He calls it “Dividend Value Investing”
  • This is a combination of undervalued companies that also pay dividends

12 Part Checklist of Dividend Investing

  • 1. Do you understand the product or service
  • 2. Will people still be using the product/service in 20 years
  • 3. Do they have a low-cost lasting advantage (think Coke’s secret recipe)
  • 4. Would you use the product that people would use during a recession
  • 5. Do they have consistent earnings growth
  • 6. Do they have consistent dividend growth
  • 7. Do they have a low payout ratio (dividend vs earnings)
  • 8. Do they have low debt %
  • 9. Do they have a good credit rating
  • 10. Do they actively buy back their shares
  • 11. Is it under or overvalued
    • P/E 25 or less
    • The current dividend yield is higher than the 10-year average
    • Price to Book ratio <3
  • 12. Keep your emotions out of investing
  • Kanwal publishes 227 companies that meet these criteria as part of his Simply Investing Report
  • Even with all these rules, you still may find a dud
  • That’s why diversification is still so important
    • Kanwal recommends 25-50 funds

Why Dividend Investing Over Index Investing

  • Holding the total market (index funds) means that you’re going to own some poor quality stocks
  • Getting cashback in your pocket to diversify instead of simply seeing appreciation in one company
    • Kanwal reinvests dividends across all his dividend stocks and not right back into the company that originally paid it
  • The average annual yield Kanwal sees from his dividend stocks are 3.5-5%

 

Key Takeaways

  1. Take The Emotion Out: Kanwal’s 12 rules help create a systematic process without being clouded by human emotion
  2. Set Goals, Be Patient: Don’t get sucked in to get rich quick schemes, find quality companies and make continual progress.

Call to Action

Leave a review on iTunes, share it with us, and then we’ll select two lucky listeners for a prize. One listener will get a year subscription to the Simply Investing Report and the other will get full access to the Simply Investing Course. That’s $500+ of value!

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