Guest Edition: Dividend Growth Investing

Guest edition from the author of EngineerMyFreedom.com and co-host of the Dividend Talk podcast

This weeks edition is a guest post from Derek of EngineerMyFreedom.com. I was delighted to be asked to write a guest post for his blog previously where I wrote a piece on Moving Averages. I am equally honoured to have him feature as my very first guest writer. EMF was one of the only Irish accounts I could find in this area for a long time having initially connected with him on Twitter @EMF_01. While I am not a pure dividend growth investor, I do invest 40% of my portfolio in value stocks and as a result I find EMFs content very relevant to me as an investor. Without further ado I will pass you over to the man himself.


Howdy, my name is Derek and I am the author of Engineer My Freedom and the co-host of the Dividend Talk podcast. I am delighted to be given the opportunity to write a small piece for The Wolf of Harcourt Street. Ireland is geographically a small country, but the retail investment and FIRE communities are growing so I am honoured to contribute to this blog.

A reoccurring question I receive all the time is why I chose dividend Investing. If I am being honest, I found it hard to find a strategy that suited me in the beginning. Being from Ireland, the two Investment vehicles that are most touted are Pension Funds and Property Investment. On paper these seem to make the most sense. Today, I want to share with you my story and hopefully it will resonate with readers from Ireland, Europe and further afield.

Why I don’t like Pensions

Pensions offer tax breaks that makes it sensible to put as much money as you can into them. I have a couple of issues with them though.

  1. The first is the lack of access to this money.

While the money is growing and you receive nice tax breaks, you must wait until you are retired to access this money. Do I really want to wait until my late 60s to access money that I have been saving all of my working life. The answer is nope because I like to have some element of control.

  1. The second is through an event that happened in my hometown of Waterford.

I served my electrical apprenticeship in an old famous glass making factory in Waterford which employed over 1000 people. This went out of business in 2008 and a lot of people were out of work during the worst possible time. A vast majority of these people were due to receive a pension including some family members close to me. The factory closed in 2009 and even as late as 2016, there were many who did not receive a pension and some people passed away without ever receiving it. My father-in-law spent 47 years working here and had to fight tooth and nail to get the pension he was owed. It took him 4 years.

Any faith I would ever have in a pension was gone so I am laser focused on having more control and access over my money. While I agree, it worth having a pension where you are matched by your employer, I would not make it the cornerstone of my investments.

Why Property is out of my reach

Those who are old enough to remember the Celtic Tiger in Ireland may also remember that property was a sure thing. House prices were growing at an incredible rate and lots of people were making a ton of money during this time.

Everybody was buying houses and I bought my home in early 2008 at the worst possible time. I knew my job was in jeopardy, but I figured that my house would be worth more in 10 years and I could sell for a profit.

That was until the property crash came along in early 2009.

The price of my home had never recovered, and I have been in negative equity ever since. It has been 11 years and I may just about to be able to clear the mortgage if I was to sell now but I will never get the amount of money I paid for it.

I was young buying my house and some of the choices I have made in those 11 years have hampered my ability to acquire an investment property without a lot of cash. For example, before I went back to college to upskill in 2014, we got a PIP agreement where we put a split mortgage in place. Not only does this affect my credit rating but also disintegrates any chance I have of getting credit to get another house.

My long-term goal involves real estate investing but now I want to reduce my mortgage to under €50k as quickly as possible. I could reduce this even faster if I used the cash that I invest in dividend stocks and pay down the mortgage.

So Why Dividend Investing

I was made redundant before I went back to college to upskill. I was in a call centre at the time and was not earning a lot of money. Even so, I overpaid as much as possible on the mortgage. The total amount overpaid would have been enough for at least 6 months of payments. If the bank gave us 6 months break or if we would have saved this instead of paying off extra, we could have used this, and chances are we would never have needed the split mortgage.

Because of this, I am hesitant to pay everything into the mortgage especially when the interest rates are so low, and I can potentially beat the 4% I pay on the mortgage. I might change my attitude if interest rates climb to double digits again.

For me, Dividend Growth Stocks suit my risk tolerance. While growth and even value stocks can far exceed market gains such as we have seen in the tech sector, I would struggle with the psychology of when I should buy or sell a growth stock. I have tried FX and even cryptocurrency and always struggled with this which caused me to make irrational decisions.

Companies that I typically invest in are large-cap companies who have shown resilience during past recessions. We all know the market can fluctuate but from a psychology point of view I am happy to realize some gains each quarter in the form of dividends. Even in recessions, companies pay dividends, and this gives me peace of mind.

While there is the threat of a dividend cut, I believe this is unlikely to happen to all of the dividend companies in my portfolio at the same time.

I also want to invest for cash flow. I am not interested in networth figures; I don’t care if my paper balance is €1 million. I only care about what I can spend. With Dividend Investing my goal is to earn enough in one year to exceed my expenses. I have worked out that I can achieve this in under 15 years by investing €1000 a month and reinvesting dividends.

While I could accelerate this with property investing, I would need a lot more cash up front until I can sort out my mortgage predicament.

Lastly, it turns out I have a bit of a passion for DG stocks. I enjoy the analysis process, reading annual reports and keeping up to date with each company I own. I also enjoy seeing those dividend checks hit my account each month.

Should you Invest in Dividend Growth Stocks?

I realise that my investment strategy will not suit everybody. You will more than likely be starting from a different financial place than where I am. You may also have different financial goals.

A lot will depend on how much money you have now and how much risk you are willing to take.

I also advise new investors to write down the specific goals.

  1. Do you want to increase cashflow or net worth

  2. What time frame do you want to invest for

  3. What is your end goal? (is it lifestyle or money that motivates you)

  4. How would you feel if you lost 50% of your investment over night

The most important thing to understand is what you want to achieve and why. Once you are clear on your goals, speak with a professional and explore every option you have of reaching them.


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Disclaimer: I am not a financial adviser and I am not here to give specific financial advice. The opinions expressed are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The information is based on personal opinion and experience, it should not be considered professional financial investment advice. There is no substitute for doing your own due diligence and building your own conviction when it comes to investing.