Dividend growth stocks get a bum rap among many investors.
I see it all the time… I start talking about dividends, and eyes glaze over. Especially among the younger crowd, who tend to view dividends as something “boring” that only retirees should care about.
That stigma isn’t baseless. Dividends really are a wonderful tool for retirees to maintain financial freedom.
When handled intelligently, they can help protect the purchasing power of passive income streams from being eroded by inflation – a great perk for retirees.
But dividend-paying companies are also useful for investors of any age who want to build their wealth and reach a safe retirement someday. Believe it or not, these “boring” companies can help investors build immense wealth for truly life-changing results.
This is a song I’m happy to sing from any mountaintop any day of the week. But I think it’s an especially important message today when the market is as volatile as it is… and with such dangerous levels of speculation.
Last Monday, I mentioned so-called “meme stocks” – damaged companies that gain sudden market popularity among retail investors. But I want to talk about them again today from a different perspective.
Take GameStop (GME), which traded for less than $20 at the end of 2020. Yet by late January 2021, shares had skyrocketed to $347.51.
The whole thing was irrational. Its business hadn’t shown any signs of real growth. But attracted by the stock’s extreme and rapid move higher, people piled in.
So, it was no surprise when those gains crashed and burned. And many traders who weren’t nimble enough saw their profits wiped away.
Today, GameStop trades around $30. And its business model remains largely unchanged.
That’s what happens when speculators spend money on emotions instead of facts. They open themselves up to unnecessary risk and unreliable companies.
Traders who get in on these meme trends early have the potential to do well… But most individuals buying into these momentum trades for instant gratification end up as bag holders.
Fortunately, there’s a much better way to make money in the markets.
That’s what my team and I always aim to show at Intelligent Income Daily.
We use our decades of experience to find the safest and most reliable income strategies and bring our research to you. These have the highest statistical likelihood of boosting your bottom line, year after year, regardless of market conditions.
We know firsthand that today’s “boring” income-producing investments can make you an exciting amount of money over time… Better yet, unlike meme stocks and other get-rich-quick schemes, you have an excellent chance of actually keeping it for decades to come.
Don’t take my word for it, though. Let me prove it to you today.
Not So Boring After All
My many years as an investor have taught me that get-rich-quick schemes don’t work. Even get-rich-somewhat-quick efforts can too easily crash and burn.
That’s certainly what happened in my early career as a commercial real estate developer. Which is why I turned to safer income plays… many of which you can buy right through your brokerage account.
The stock market can generate massive returns for investors. But it requires patience and discipline. And this is where dividend growth stocks come into play.
You may not know this, but many companies that pay reliably increasing dividends are among the world’s highest-quality businesses.
Instead of taking risk or rising on the coattails of internet trends, they focus on growing their businesses and rewarding shareholders regularly… and increasingly.
I’m talking about names like Apple (AAPL) – one of the most popular technology investments in the market today.
This far-from-boring company initiated its dividend in 2012. Since then, it’s paid out $128.2 billion in dividends to shareholders. And I expect to see its dividend continue rising.
Or look at Microsoft (MSFT), which is on a 20-year annual dividend increase streak. In the past 10 years, its dividend growth rate has been approximately 13%.
Think of it like this when it comes to boosting your bottom line… When was the last time you received a double-digit raise at work?
And that dividend growth is only possible through strong fundamental growth.
I cover an entire list of these types of companies. That’s how I know that during the last five years…
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Visa (V) is up north of 102%.
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Broadcom (AVGO) is up more than 126%.
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MasterCard (MA) is up 157.5%.
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Lowe’s (LOW) is up nearly 186%.
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Costco (COST) is up 270.5%.
Just to name a few.
As for Microsoft, it’s up nearly 283%. And Apple has risen more than 321%.
What do all those companies have in common – other than distinctly non-boring gains?
For one, they trounced the S&P 500’s 71.5% gains during that time. Plus, they’ve provided consistently rising dividends that bump up their total returns even more.
And second, they outperformed the Ark Innovation ETF (ARKK), which focuses on trendy tech plays over the same time frame.
The ETF rose to fame during the 2020/2021 speculative stock rally. The Wall Street Journal even dubbed the fund’s manager, Cathie Wood, “The Meme Stock Champion” for favoring volatile investments.
Yet it’s up by less than 42% during the past five years.
In other words, when compared to fundamentally strong companies… Speculation rarely pays off over longer periods of time.
There’s No Need to Gamble in the Markets
While some of the recent short squeezes have played out nicely for investors who’ve managed to time them perfectly, gambling in the stock market is not a great way to make money that lasts.
You’re much more likely to end up holding the proverbial bag – one full of broken-down companies that are going nowhere fast.
But as a dividend growth investor, I walk away with moneybags from the highest-quality companies on earth. And as I showed you above…
The size of those dividends continue to grow larger and larger as they compound over time.
I’ll take that kind of snoozefest over an “exciting” meme stock or speculative play any day.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily