Kanwal Sarai of “Simply Investing” explains his 12 rules for dividend investing and how this strategy could be used in retirement planning.

When most people think of investing, they picture charts, constant news updates, and the stress of trying to time the market. But as my guest Kanwal Sarai shared on the Retire Today podcast, successful investing doesn’t have to be complicated—or stressful. In fact, Kanwal says it’s so simple that even his nine-year-old kids could do it.

Kanwal is a software professional turned dividend value investor who founded SimplyInvesting.com. He’s also the host of The Simply Investing Dividend Podcast and designer of the “12 Rules of Simply Investing.” His story is a powerful reminder that investing isn’t just about growing wealth—it’s about building long-term financial independence through education and discipline.

From Software Engineer to Dividend Investor

Kanwal didn’t start out as an investor. He spent 30 years in the software industry, working for startups and Fortune 500 companies alike. But his interest in investing began in a surprising way—during late nights walking his newborn son to sleep.

“I saw a book I’d bought years ago, and I decided to read it while pacing back and forth,” Kanwal said. That book introduced him to Warren Buffett and Benjamin Graham, two icons of value investing, and started him down a lifelong path toward financial literacy and independence.

At first, he made the same mistake many beginners make—chasing hot tech stocks in the late 1990s. “I bought Nortel just because everyone was talking about it,” he recalled. “When it went bankrupt, I lost my entire investment.” That experience convinced him that investing based on hype or emotion isn’t a plan—it’s gambling.

What Is Dividend Value Investing?

Kanwal’s philosophy combines two approaches: dividend investing and value investing.

• Dividend investing means buying companies that regularly pay out cash to shareholders.
• Value investing means buying those companies when their prices are low compared to their true worth.

By focusing on companies that are profitable, stable, and consistently pay (and raise) dividends, Kanwal has built an investment strategy that rewards patience and discipline over speculation.

He looks for what he calls “hidden gems” that are undervalued today but have a long track record of profitability—companies like Coca-Cola, Johnson & Johnson, and Procter & Gamble, which have raised their dividends for 60+ years.

“These are mature businesses,” Kanwal explained. “They’ve been around for decades, they’re profitable, and they pay you regularly. That’s the kind of predictability investors near retirement should want.”

Avoiding the Dividend Trap

Kanwal shared an important lesson from his early investing years: don’t fall into what he calls the “dividend trap.”

The trap happens when investors chase high dividend yields without looking at the company’s fundamentals. If a stock’s price drops sharply, its dividend yield may look attractive—but often it’s a warning sign.

“One of my big mistakes was buying Washington Mutual,” he said. “The yield looked amazing—9%! But I ignored my own rules. The company went bankrupt.”

Kanwal’s Rule #7 from his 12 Rules of Simply Investing addresses this exact issue: only invest in companies with a payout ratio of 75% or less. That means the company should be paying out no more than 75% of its earnings in dividends. Anything higher is unsustainable and could signal financial trouble.

The Power of Compounding and Consistency

For Kanwal, the beauty of dividend investing lies in its simplicity and long-term payoff. When a company increases its dividend year after year, your income grows without any extra effort.

“It’s like giving yourself a raise every year—without working more hours,” he said. Companies like Coca-Cola and Johnson & Johnson have been increasing dividends for over 60 years. That kind of consistency, especially through multiple market downturns, gives investors confidence and stability.

And it’s not just theory—Kanwal practices what he preaches. His own children began investing as teenagers, using money from birthday gifts to buy dividend-paying stocks. “Their first dividend was only $10,” he laughed, “but that $10 showed them what financial independence feels like.”

The 12 Rules of Simply Investing

Kanwal’s 12 Rules form the foundation of his investing philosophy. Here are a few highlights:

Understand what the company does. If you can’t explain how a company makes money to a 12-year-old, skip it. Ask whether people will still use the company’s products 20 years from now. Look for a strong competitive advantage, or what Warren Buffett calls a “moat.” Stick with recession-proof companies that can continue paying dividends even during economic downturns.

These simple rules, combined with patience and discipline, may help investors avoid emotional mistakes and focus on long-term wealth building.

As Kanwal explains, dividend investing isn’t about getting rich overnight—it’s about creating steady, predictable income for life. Whether you’re still working or already retired, dividend investing is one of the many options on the table to explore with your investment portfolio. Investing in dividends includes risk of loss (as we talked about in this podcast) and possible loss of principle, so be sure to consult your advisor and understand how this strategy might impact your retirement.

Links

• Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
• SimplyInvesting.com  – Kanwal’s course, blog, and podcast episodes.
• The Simply Investing Dividend Podcast – Learn more about Kanwal’s 12 Rules and dividend investing principles.
• The 12 Rules of Simply Investing – Kanwal Sarai, Simply Investing
• FiveStepRetirementPlan.com – My free video course to help you create your retirement master plan.

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About the Author:

Jeremy Keil, CFP®, CFA® is a financial advisor in Milwaukee, WI, author of the bestseller Retire Today: Create Your Retirement Master Plan in 5 Simple Steps and host of both the Retire Today Podcast and Mr. Retirement YouTube channel

Connect With Jeremy Keil:

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