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From the Bookshelf

Investing in dividend stocks that will generate 11% yields and 12% average annual returns in 10 years is the strategy touted by Marc Lichtenfeld. In his book “Get Rich with Dividends: A Proven System for Earning Double-Digit Returns” (John Wiley & Sons, 2012), the author says it’s possible to achieve this performance by buying and holding dividend-paying stocks.

The claims seem aggressive, but the numbers are based on reasonable assumptions. Lichtenfeld uses the 50-year average stock market return of 7.48% to project market returns over the next 10 years. He also advises readers to reinvest their dividends, thereby acquiring more shares and even larger dividend payments. Over time, the combination of reinvested dividends and compounding lead to portfolio growth and higher yields.

Lichtenfeld’s book is good overall, though we found his dividend selection criteria to be overly restrictive. The author suggests looking for long-term dividend growth of 10% or more, a payout ratio no higher than 75% and a yield of 4.7%. A search on Stock Investor Pro based on these criteria identified only 36 stocks.

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