Dividend paying stocks are real assets. When you own a share of a dividend stock, you own a small fraction of that business. One share of The Coca-Cola Co (NYSE:KO) entitles you to about one four billionth of the company.
As real assets that produce growing income streams, dividend growth stocks are a good choice for fighting the effects of inflation. A company like Coca-Cola has pricing power; they can raise the price of their beverages to offset the effects of inflation.
“Dividends may not be the only path for an individual investor’s success, but if there’s a better one, I have yet to find it”
– Josh Peters
Josh Peters is the author of The Ultimate Dividend Playbook. I completely agree with the quote above. Dividend investing is perfectly suited to individual investors.
When you purchase shares of a high quality dividend growth stock, you don’t have to do anything else. A truly high quality business will compound your investment over time – increasing in value while simultaneously paying ever-growing dividends.
Other investment methods can work as well. Value investing is a robust strategy, but requires vast amounts of time to uncover undervalued securities. Once (if) they reach fair value, you must find new undervalued securities to take their place.
Another fruitful investing style is momentum investing. This entails purchasing stocks that have done well in recent history. While this strategy can be effective, it produces high portfolio turnover and transaction costs which erode much of the outsized gains of the strategy for individual investors without access to hedge-fund-level rapid trading and ultra-low transaction costs.
“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
– John D. Rockefeller
John D. Rockefeller was one of the richest men of all time. He owned Standard Oil and profited immensely from the transition to fossil fuels in the United States.
Standard Oil was split into several different companies. Today, Exxon Mobil Corporation (NYSE:XOM) is the largest publicly traded oil corporation in the world – and the successor to Rockefeller’s standard oil. Given the pleasure Rockefeller received from his dividends, it’s only fitting that today ExxonMobil is one of only 52 Dividend Aristocrats – stocks with 25+ years of dividend payments without a reduction.
Final Thoughts
Dividend investing is popular with individual investors because it produces solid returns without taking up all of an individual investor’s time.
This article outlined 5 quotes from famous investors or dividend investing practitioners. Hopefully, more individual investors will come to see the efficacy of dividend investing in the future as this method of investing is uniquely suited to the individual investor.
Disclosure: None
