Value Investing News

To succeed as a dividend growth investor you must identify and purchase stocks with sustainable dividend growth. Inertia is powerful force. Once a company has established a track record of growing its dividend over the decades and developed a shareholder base that expects higher dividends each year, it becomes increasing difficult for management to cut or fail to raise their dividend.

According to Ned Davis Research, $100 invested in all dividend payers of the S&P 500 index in 1972, would have grown to $2,266 by the end of 2009. The same $100 invested in non-dividend paying stocks in the S&P 500 returned a negative 39% over the same period. The performance of dividend payers and initiators was even better, returning $2,945 on the initial investment in 1972.

In a down-market when many people are rushing to buy gold, I take comfort that I already have mine. No, not that kind, but something much better! A growing stream of dividend income from solid companies. While everyone else is panicked about their portfolio’s decline, I see a downturn as an incredible buying opportunity.

Eventually, cooler heads prevailed. Rational shareholders who took Hamlet’s advice and actually thought about it came to realize what FedEx said was good news, not bad.