Why I’m not investing in IAMGOLD
It is not that I don’t think IAMGOLD Corp (USA) (NYSE:IAG) is undervalued and that you could make decent capital gains from the stock. It’s just that it doesn’t meet my dividend growth criterion. I want companies with a wide economic moat.
IAMGOLD is a mid tier gold mining company without a large competitive advantage. Gold companies’ earnings are controlled by the price of gold. This is why IAMGOLD Corp (USA) (NYSE:IAG)’s EPS has been erratic from year to year. I want a company that has steadily increasing earnings. While IAMGOLD Corp (USA) (NYSE:IAG)’s dividend yield is appealing, it doesn’t have a very impressive dividend streak and I don’t expect strong dividend growth in the future. For a lot of companies in this industry the dividend is tied to the price of gold, which is a hard thing to control. I want an increasing stream of dividends every year, not something tied to the price of gold.
In the past I have strayed from investing approach and I have been burned. A good example was my investment in Blackberry. What I’ve learned is that I should stick to dividend growth stocks with strong competitive advantages. It can be hard waiting around for prices to drop below my target prices, and there will always be distractions like IAMGOLD Corp (USA) (NYSE:IAG) out there. Sticking to your investment plan is important, as changing strategies can be costly to investment returns. By focusing on my dividend growth strategy, I believe I will be able reach my financial freedom goals quicker.
Figure out what your investment goals are, come up with a plan to achieve them, and stick with it.
The article A Distraction From My Dividend Growth Investing Strategy originally appeared on Fool.com and is written by Michael Weber.
Michael Weber has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Michael is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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