There are many (and some crazy) options for investing your money. Only dividend stocks pay you while your money is invested, reducing volatility and increasing returns!
Most people who call themselves investors are really speculators. They hand over their cash and buy shares in stocks with the hope that the price will go up and they can sell their shares in the future for more than they paid. While invested in the company, they get nothing in return, they hope that an employee of the company doesn’t “blow the whistle,” or that the CEO doesn’t have a “me too” incident, that earnings rise, costs fall, the planets align–all in the hope of getting their original investment back someday, and maybe a little extra when from price appreciation when they finally sell. Does that sound like investing to you? It’s pure speculation.
Simply put, if a company doesn’t pay dividends, in my view, it’s not investment grade. It doesn’t make sense to give a company your money for free when other options exist that pay you for the use of your money. Why would anyone in their right mind put their retirement nest egg into a stock without the possibility of getting immediate income from that trust? That’s how the stock market works for most: hand over your hard earned cash and get nothing for it in the meantime? If you knew the many facts that prove Dividend Investing is the only reliable way to increase your wealth, then you’d put every spare penny in your portfolio!
Facts about Dividend Stocks
- Over the long haul, stocks that pay dividends have higher total return than stocks that pay no dividends
- Stocks that pay dividends tend to have lower volatility, as measured by β (beta)
- Lower volatility stocks tend to deliver higher returns than riskier, high-volatility stocks. Dividend Stocks tend to be lower in volatility
- Along with low volatility, stocks that pay dividends tend to be more predictable over time
- Dividend paying stocks drop less than the market during downturns
- Dividends can make up roughly 45% of your total return if you re-invest dividends
- In 2018, non-paying dividend stocks lost 18%
- The University of Kentucky, found that dividend-paying firms are far less likely to suffer stock price crashes than those that pay low or no dividends
- Lower risk investments (Dividend Stocks) have outperformed higher risk investments over time. Higher risk truly does mean means lower returns!
- Don’t look for highest yield! Companies with the highest dividend yields historically under-performed the market on a total return basis
- Companies with the lowest dividend yields historically outperformed the market
- Dividends account for 29% of total return, whereas the growth of dividends represented nearly 65% of total return over 20 years
- Stocks that continually grow their dividend have historically outperformed all other categories of stocks (over a span of 40+ years)
- Companies with little to no dividend growth actually under-performed the market (on a total return basis)
- In 2018, non-dividend payers lost 18%