Are Dividend Hunter’s Stock Recommendations Good?[2024]

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So, are Tim Plaehn’s Dividend Hunter stock recommendations good?

Can you really follow these stock recommendations and have a comfortable retirement?

First of all, dividend investing is nothing new.

Is dividend investing risky?

All investing comes with risk.

Just because it pays dividends doesn’t mean it’s risk-free.

There are two things you need to keep in mind:

• Not ALL dividend stocks are good
• There is NO guarantee that they will continue to pay a dividend
• Some so-called high-yield dividend stocks are also risky (i.e. you can lose your capital)

Dividend Hunter recommends the following:

• A diversified portfolio of 20+ high-yield stocks
• A mix of monthly and quarterly paying stocks
• The average yield of over 8% across the portfolio

Are these high-yield dividend stocks safe in the long term?

Is it really suitable for your investment portfolio?

Let’s go through some of Dividend Hunter’s past stock recommendations and see how they performed over the years.

Tim Plaehn started Dividend Hunters in 2014.

Below are the closed positions for some of Tim Plaehn’s recommended dividend stocks as of June 2016.

As you can see, the largest loss was -83.1% while the largest gain was 57.69%.

In fact, there were three stock recommendations that had a loss of more than 70%.

The reason for such a massive drop in share price is that all three companies went bankrupt.

In 2017, the energy stocks such as KMI and WMB that were recommended in 2015 went down by a lot and never really recovered.

It was recommended to sell KMI in July 2017 to take a loss of about 50%.

InfraCap REIT Preferred ETF which was recommended in 2017 is still under water today.

However, it’s not all losing recommendations.

The recommended REITs in 2017 (e.g. STORE Capital, Arbor Realty Trust) generated positive returns.

In 2018, Dividend Hunter recommended a few new stocks.

Here are two of them:

• PermRock Royalty Trust with an entry price of $16 (the current price as of July 2022 is $8.94)
• TPG RE Finance Trust Inc with an entry price of $20 (the current price as of July 2022 is $10.23)

So, both PermRock Royalty Trust and TPG RE Finance Trust Inc are still 50% down from the time they were first recommended.

In 2019, Dividend Hunter also recommended a few new stocks.

One of the stocks is PAGP with an entry price of $23.25.

As of today, its share price is $11.09 which is down more than 50% from the time of the recommendation.

Also, its dividend has been cut by half in 2020.

In 2020 and 2021, Tim Plaehn recommended a lot of preferred shares in Dividend Hunter.

In case you are wondering what is the difference between preferred and common stock.

“The main difference is that preferred stock gives no voting rights to shareholders while common stock does. Preferred shareholders have priority over a company’s income, meaning they are paid dividends before common shareholders.”

However, there’s a big risk of buying preferred stocks.

Shares are often sensitive to changes in interest rates.

Because preferred stocks often pay dividends at average fixed rates in the 5% to 6% range, share prices typically fall as prevailing interest rates increase.

With the Fed increasing interest rates aggressively to tame inflation, the share price of preferred stocks has been going down.

After going through Tim Plaehn’s past stock recommendations, here are a few takeaways:

• The number of losing stocks with a loss of about 50% or more is quite high
• The turnover of the stocks in the portfolio is also considerably high

Personally, If I am a retiree or an investor who is trying to build a solid investment portfolio for retirement, I would not be comfortable seeing such huge volatility (and also drawdown) in my portfolio.

There is a reason that the stock is paying a high dividend because the risks associated with investing in the stock demand such a high dividend.

If you look at the dividend yield of the high-quality dividend stocks called “Dividend Aristocrats”, the dividend yield is much lower.

“A dividend aristocrat is a company in the S&P 500 index that not only consistently pays a dividend to shareholders but annually increases the size of its payout. A company will be considered a dividend aristocrat if it raises its dividends consistently for at least the past 25 years.”

The risk of investing in such high-quality dividend stocks is much lower.

Also, the shares of these Dividend Aristocrats have a high probability of going up over the long term.

Below is an example of a Dividend Aristocrat.

For dividend investors, it’s very important to invest in fundamentally strong companies as well.

Because a high yield of 8% or more is just not worth the risks if the company could potentially go bust in the end.

So, it’s very important to do your own research and not rely on other people to make your investment decisions for you.

Getting ideas from different sources is okay.

Personally, I use platforms such as Seeking Alpha and Motley Fool to get stock ideas.

But, at the end of the day, I do my own research on those ideas and make the decision based on my own analysis.

I also stumbled upon a past subscriber’s review of Dividend Hunter.