Why I'm a 100% dividend growth fan (no bonds or funds)? Over longer periods, dividend yield and dividend growth provide most of the return. Over five years, for instance, since 1871 in the U.S. market, almost 80% of return was generated by yield and dividend growth. Eighty percent. GMO Aug 2010 James Montier's 'A Man from a Different Time'. http://www.retailinvestor.org/pdf/MontierGMO.pdf

The only thing that matters in investing, really, are the peaks and the troughs ¹. TC: Dwell on that thought and its significance. Right now we are near a peak. The market is abnormally high. ¹ Jeremy Grantham

What do you do when the market way over valued as it is now? We do not sell our good dividend growers, of course, as we bought them years and years ago to produce our increasing retirement income flow. However, we do look around for any dividend stocks in our portfolio that no longer produce an increasing dividend and whose price has risen in the last few months. I've been selling these financials and detail this activity inside this site. My one purchase, a non-financial, was mentioned in the October Connolly Report.

• With the market so overvalued I'm so very glad I'm not in an index or mutual fund. The prices of our great dividend growers will fall too when the crunch arrives, but the dividend income they produce will continue to rise in aggrevate. Dividend growth investors think long term and control their behaviour (don't buy expensive stocks). The key is to focus on the income produced by these assets.

DRIVE YOUR OWN BUS: You do not need to start the dividend growth strategy all at once with a big switch. You just start with one dividend-growing common purchased at a reasonable* price and hold it. Maybe you already own on or two. After a few years, you'll see how the dividend growth drives the price growth. Then buy more. The problem is, as I write this in December 2013, there are few good dividend growers to buy just now. The market is very expensive. Now is a good time, though to cash out mutual funds. At the very least tell (even better, order) your adviser to stop reinvesting the cash flow/stop the flow into funds so you can build up some cash to move when the time comes. I've been in the business of convincing folks to get out of funds they were sold since the 1960s. Those who switched even back in the 1980s are now wealthy belong their dreams, they tell me. A few thousand dollars becomes tens of thousands. Here's an example. If you bought BMO common stock in 1983, you would be obtaining 43% on your money now. Forty three percent when ten-year Canada bonds are 2.53%. Thirty years is a long time, but 43% is a high return. The yield builds slowly over time with dividend growth. Are you patient. After ten years, since 2003, TD back stock now yields 7.5% on its original cost. ♣ * Over the last thirty years, with the suggestions and assistance of subscribers, I've developed three metrics to test if a stock is reasonably priced. The tests can be done in just a few minutes. I list these three value indicators beside each stock in every Connolly Report. Most stocks are rejected as being too expensive, however, in the current abnormally elevated market. For example, RCI.B has been a very great dividend grower (double digit) over the last decade and it's yield is a nice 3.7%, but RCI.B fails the Graham test² miserably with a -60 (the average of my list is -27). If you buy expensive (think popular) stocks, down the line, your future returns will be poor (think negative). It's baked in the cake. ² from Ben Graham's book The Intelligent Investor, 1949, Chapter 14. Read the great older books on investing (The Theory of Investment Value by John Burr Williams 1938 is on of my favourites.) to learn how things used to be done before great number of poor-quality stocks were stuffed into mutual funds and ETFs and peddled to the public. Good luck. If you think it might help, order a copy of my last (October) report or the next (December) Connolly Report for a $10 bill. Sorry, I charge, as free advise is, I believe, worth what you pay for it…nothing. Act in 2014 or 2015 as the Connolly Report will be 35 years old after that and, most likely, I'll pack it in to spend more time at our cottages.