Getting paid to own your investments is always a good thing. In fact, dividends can be thought of as the key difference between a pure speculation and a true investment. Speculations rely only upon supply and demand. Investments, on the other hand, provide you with a dividend or rental check. Hold the investment long enough, and all of your initial deposit may be returned to you. The growth of the asset itself turns into a pleasant bonus. The compounding of the dividends and the growing shares of acquired stock can build wealth.
Investments in dividends offer a continuous return to the owner, with the potential for compounding through reinvestment. Owning dividend paying stocks (preferably growing their dividends every year) and reinvesting those dividends, gives the investor a way to benefit from both up and down markets.
Not just “Dividend Payers”, Dividend GROWERS.
For reference, explore the information compiled by Ned Davis Research comparing Dividend Paying stocks, Dividend Growers, Non-Dividend paying stocks, and Dividend Cutters. A Dividend Grower is a stock with not only consistently growing dividends, but a record for CONSECUTIVE dividend growth, year after year.
In the period from January 31 1987 through January 31 2016:
-Dividend Growers averaged a return of 13.8%
-Dividend Non-Changers (no consecutive increase in dividends) averaged a 10.1% return
-Dividend Non-Payers averaged a 7.4% return
-Dividend Cutters averaged a 6.6% return
-S & P 500 Annualized (with no dividends) average: 7.072%
-S & P 500 Annualized (with dividends reinvested) average: 9.45%
-Source: Ned Davis Research, Proshares
Investors today are faced with one of the more challenging investment environments in decades:
Why It Pays To Diversify and Why It Pays To Keep Building Your Future With Dividends:
Markets are overvalued by traditional measures, the current bull market is “long in the tooth” compared to other bulls, economies are quite uncertain, and interest rates are at historically low levels. The result is that the investor may have fewer clear options for growing and preserving their retirement capital.
With this challenging set of realities, it’s not easy for investors to make their own quality financial decisions. Successful long-term investment planning has grown quite complex, specialized, and challenging–even more challenging for the do-it-yourselfer or day-trader.
In comparing investment strategies of the past twenty to fifty years, research often leads an investor back to holding quality dividend stocks–and reinvesting those dividends for compounded growth over time.
In our bucketing methodology for financial planning, we believe that dividends belong in bucket 3–the Growth Bucket. While a basket of quality dividend stocks won’t beat the S & P every year, the background and statistics are compelling for dividend stocks.
Both the IQ Wealth Black Diamond Dividend Strategy and the IQ Wealth Blue Diamond Income & Growth Portfolios build around the concept of getting paid to own your assets.
The Black Diamond is completely focused on Dividend Growers. The Blue Diamond Income and Growth Portfolio adds the component of Growth ETFs in selected sectors:
-U.S. Aerospace & Defense stocks (Boeing, Northrup, Lockheed Martin, and more )
-U.S. Semi-Conductor, Micro Processor, and Chip Makers needed for Artificial Intelligence (Micron Technologies, Cree, Nvidia, ON, and more)
-Healthcare / Pharma / Biotech / Consumer Cyclical (Biogen, Amgen, Pfizer, Visa +)
-Internet Technology and Commerce (Amazon, Facebook, Netflix, Alphabet, twitter, & more–FANGS +)
-Medical Devices and Medical Technology (Medtronic, Abbott, Thermo Fisher Scientific +)
-North American Tech Software Companies (Oracle, Microsoft, Adobe, Activision Blizzard, +)
-Emerging Market Internet & E-commerce (Alibaba, Ten Cent, JD +)
Click here for more details on our portfolios.
Past performance is no guarantee of future results. Invest wisely with a diversified approach.
For a complete review of your current investments and a look at our retirement allocation strategies, please feel free to contact us today.
Steve Jurich is licensed financial advisor, a Kiplinger contributor, and the host of Mastering Money on Money Radio in Phoenix