Portfolio Haircuts and Dividend Investing in the Age of Social Distancing

The world continues to be frightening and feel insane. I, like many of you, am working from home for the next couple of weeks. It’s difficult to focus on work because I keep refreshing news sites and Google Finance, only to discover that San Francisco has a “shelter in place” order in effect, the market had one of the worst days in its history, and Idris Elba has joined Tom Hanks on the (one presumes growing) list of coronaviral celebrities. Things are, uh, not great. This reminds me a lot of 2008, both in terms of the overall decline in the market and the sense of panic, bewilderment, and helplessness that accompanies it. I am beginning to wonder if this was how 1929 felt. That’s not to say that we’re heading for another Great Depression; only that the currently vertiginous nature of the Dow’s chart is, if not unprecedented, pretty damn rarely precedented.

I suspect that market watchers in 1929 had a very clear (if unsettling) sense of living in a historical moment. The past, by definition, becomes history, but it’s only rarely that we feel it happening; it’s a bit like how the Earth’s crust is always moving, but you only notice earthquakes. In my lifetime, there has been only one other time I’ve felt this way, and it was in the days after 9/11. Then as now there was a sense of solidarity with strangers, a sense that we were all in this together, and even though everyone was scared we were going to get through it. Then as now we engaged in little gestures of solidarity to let one another know that we have each other’s backs. American flags on the front porch in 2001; social media posts encouraging social distancing in 2020. This time the enemy is a microbe and we offer support by keeping one another company online, playing Words With Friends, delivering home cooked meals to an elderly relative who wasn’t able to grocery shop, etc. In terrifying times (and it’s becoming pretty clear that this is one of those), humans have always relied on one another to get through, and as I see how many people are staying home to avoid spreading the disease, disrupting their lives and their businesses to do so, it’s deeply reassuring to know that we are still capable of coming together and rising to great occasions.

Just as you can derive some comfort by focusing on the more positive aspects of the current mess we’re all in, you can also derive some comfort by focusing on the right aspects of your investment portfolio. Today was another record-breakingly bad day for the market (and REITs in particular), but for dividend investors, that means we are seeing some truly unique opportunities to buy good companies at yields higher than we’ve seen since 2008-09. It’s not easy to keep buying in the face of a plummeting market, but it gets easier when you regard your stocks not as capital gains dice rolls but as dividend factories, with each share churning out payment after payment, quarter after quarter. Dividend cuts may be coming, but if you keep a spreadsheet showing your projected dividend income (and you should), my guess is that right now your sheet shows the same number as it did 3 weeks ago. And if you just keep buying more shares, you’ll keep adding to that dividend income. The share price is going to fluctuate (and probably fluctuate like crazy in the next few weeks) but in most cases those dividends will just keep coming. I bought a few shares of Starbucks (SBUX) and Wells Fargo (WFC) today and plan to hold onto them for the next 20+ years. Anything could happen, but my guess is those dividends will trickle in right on schedule and I’ll look back in a few years and be glad that I got the deal I just got. And next week if the Dow is at 15,000, I’ll be buying more shares and saying the same thing. It takes a strong stomach to be greedy when others are fearful, and a stronger stomach to be greedy when you’re fearful yourself, but focusing on those dividends coming in year after year with every share you buy helps the medicine go down a little smoother.

Good luck everyone. It’s weird out there.

Published by reitdude

I am an attorney and dividend investor from California with a particular interest in REITs. My fantasy football opinions may well be better than my investing opinions.

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