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I thought picking my top 3 dividend investing books was going to be something that was easy to do. I was wrong – there are a lot of good dividend investing books available. However, picking the best 5 out of all of these books turned out to be a challenge. As a result, I came up with a list of three criteria that each book had to have to make it to my top 3 list. Here is the criteria I uses:
The Book Must Offer More than Just “Selling” Dividend Investing as Good
In other words, the book must not simply be focused on the power of dividends, but must provide some sort of strategy on how to use dividends in your own portfolio.
The Book Must Be Considered a Classic in the Investing World
Just as “One Up on Wall Street” is considered classic investment text, the book on the dividend list must also be considered a sort of classic.
The Book Must Be Easy to Follow and Understand
I have read a lot of books that simply are just too complicated or try to make things more difficult than they need to be. The books on this list must be easy to follow.
With these three pieces of criteria in mind, here are my picks for the top 5 dividend investing books.
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#1 – The Single Best Investment – Lowell Miller explains his strategy as a simple formula: High quality + High yield + Growth of yield = High total returns. This is further explained on page 166 as, “Remember, we are not trying to beat the market here, nor are we even seeking what others might call the best stocks. We’re trying to create a compounding machine that will be robust and durable for at least an entire investing life, one that will provide equity-like returns with some measure of reliability and predictability over time, one whose income will rise. And because its income rises, the investment will also rise in market value.” That overall explains what dividend investors are all about! My main criticism with the book is that it goes into a lot of details on utilities, as these are typically more common high yield investments. I think an investor’s emphasis should be on growth of yield as opposed to high yield.
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#2 – The Ultimate Dividend Playbook – Morningstar’s dividend focused book is a new book, however I strongly believe it does a very good job of explaining the concept of dividend investing and how to select quality dividend stocks. Called The Dividend Drill, it helps investors to evaluate a dividend stock on three critical elements; is the dividend safe, can the dividend grow, and what’s the return? My main criticism of this book is that it often tries to sell Morningstar’s dividend focused newsletter. I have never tried this newsletter but plan to take a look at it and report back to my readers here. Overall however, I am not a big proponent of newsletter services.
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#3 – The Intelligent Asset Allocator – Bernstein’s book is not about dividends. You are probably mad because this is a list of dividend books. However, with the above two books you will have a good understanding of dividend investing and the power of dividend growth stocks. This book provides you with concrete knowledge of the importance of asset allocation. Keep in mind that Bernstein advocates a strict indexing approach to investing so you will need to make that call on your own if you decide to invest in individual securities. The result is a book that suggests a balanced approach to investing, and provides a method of constructing a portfolio that is full of the best understanding we have of how the market works. This book should be required reading for anyone building their own portfolio. In the end, the point of the Intelligent Asset Allocator is to enjoy strong gains without taking on too much risk of losing your entire principal and having to start over from scratch.
As we go into the summer and summer vacations, I would recommend the above three books travel along with you to read on the beach, plane, boat, car, etc. What other dividend books do you recommend?
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