Dividend Growth Investing Strategy : The Secret Dividend Strategy of the Ultra Wealthy

Tue, Mar 4, 2014

Is Dividend Growth Is The Best Investment Strategy

dividend growth investing Everyone loves dividends.

Novice investors like them because of the consistency. The first stock I ever purchased was because of its 6.7% dividend yield.

Experienced contrarian and wealthy investors like them because of how much they add to total returns.

The common element for all investors when it comes to dividend investing is starting with a top dividend investment strategy.

The best dividend investment strategy actually involves taking lower dividends today in exchange for more dividends tomorrow.

Boom Times Ahead for Dividend Investors

The best dividend investment strategy is called dividend growth investing.

Rest assured, dividend growth investing will make you rich over time.

Best of all, today is one of the best times to be dividend investors because companies have been steadily returning more of their extra cash to shareholders in the form of dividends.

Last year dividends on the S&P 500 increased 11%. The record average increase in annual dividend payments for the Index is 15%.

That means we’re in a sweet spot. Dividends are growing. That’s good. But dividends still have more room to grow. That’s great.

Top Dividend Growth Investments

As a result of all this, the best dividend growth investments tend to pay a relatively small yield compared to high-yield investments.

However, over time, the dividend growth puts dividends much higher and tends to drive up share prices along the way.

Three top dividend growth stocks to buy now according to this top dividend investment strategy are:

Wells Fargo (WFC) – The major bank is in position to strongly grow dividends in the future.

Interest rates only have one way to go from current levels – up.

dividend growth investor strategy

Rising rates are good for banks. And they’re great for Wells Fargo.

But the real potential in Wells Fargo will go a long way to paying big (and bigger) dividends to their shareholders.

The company is already well on the path.

After the financial crisis of 2008, Wells Fargo paid out a measly five cents per share in quarterly dividends to shareholders. That was a big drop from the 34 cents it was able to pay before the financial crisis.

Since then though Wells Fargo’s dividends have been growing at an astonishing rate. Five years later the company is now paying regular quarterly dividends of 30 cents per share.

That’s a total increase of 500%. It’s an average annualized dividend increase of 43%.

Although that growth rate will slow, we expect it to continue higher as long as interest rates slowly keep going higher.

We’re not alone in this thinking. Warren Buffett owns $20 billion worth of Wells Fargo.

Philip Morris (PMI) – Is one of the most consistent dividend growers in the history of the stock market.

The cigarette manufacturer has consistently increased its dividends every year for the past five years. Even during the height of the financial crisis in 2008, Philip Morris was in a strong enough position to increase its dividend once again.

In June 2008 Philip Morris paid out 46 cents per share in quarterly dividends.

Five years later the company increased its quarterly dividend from 85 cents per share to 94 cents per share.

That’s a one year increase of 10.6%. And an annual average growth rate of 15.4% per year over the five year period.

The dividend growth is why Philip Morris has beaten the S&P 500 over that time and paid out dividends at twice the rate as the Index.

Realty Income (O) – Is a real estate investment trust (REIT) which owns commercial properties around the United States.

Its customer list is a who’s who of the business world. In other words, it’s deep-pocketed, high cash flow companies that can make their payments on time. Its customers include FedEx, Walgreens, BJ’s Wholesale Club, LA Fitness, and AMC Theatres.

The company has staked its reputation on paying regular monthly dividends and increasing them every year.

The chart below shows Realty Income’s dividend history over the past 20 years and includes their excellent track record of 65 consecutive dividend increases.

 

Dividend investment online

 

Dividend growth is the best investment strategy for income-focused investors.

It’s going to be a great few years for dividend growth investors. That’s not much of a stretch. It usually is every year.

If you want high dividend income and great capital appreciation potential, this is the dividend investment strategy for you.

Whether you’re a beginning or an ultra-wealthy, highly experienced one, you can bet this dividend investment strategy will prove its worth whether the bull market continues or has already ended.

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