Which Stocks Are Your Lifetime Investments?

Key Takeaways:

• When devising an investment strategy, consider your personality. 
• Some people aren’t psychologically cut out for aggressive investing.
• This makes dividend growth investing attractive for a large number of investors.

Of all the things investors get passionate about, I have a tough time understanding people who diss dividend stocks. 

If you pick the right dividend stocks, you get the best of both worlds. 

Price appreciation and cash flow you can reinvest or collect. 

My two biggest beefs with the anti-dividend stock crowd:

• They fail to appreciate investor psychology. 
• They act like dividend investors throw darts and pick any stock that pays out. 

Investing Shouldn’t Cause Stress

Your Facebook friend who had no idea how to buy a stock prior to the pandemic bragging about how they made so much money on GameStop. 

Annoying as …!

Not far behind. Your experienced investor friends who, to their credit, took the risk and held stocks such as Amazon, Netflix, and Tesla over the years to out-sized gains. 

Some of us speculate more than others. 

That’s because we’re not all cut out – psychologically – for the same style of investing. 

It’s easy to look in the rearview mirror and feel like you missed out. However, on the ground, in your head, and evidenced by your actions, it’s more complicated than that. 

Consider the 5-year charts on Netflix (NFLX) and Tesla (TSLA). 

There’s more volatility there than many investors can stomach. 

So some investors write off these types of stocks altogether. Others buy, but don’t have the nerves of steel often required to hold.

And you needed more than nerves of steel to ride some of that volatility out. 

Like NFLX tanking from $374 to $256 between September and December, 2018. Or TSLA’s bottom falling out from $1,222 in November, 2021, to $795 just last month. 

Examples of crazy volatility – like the worst turbulence you’ve ever experienced on an airplane – are endless. 

So, for every person you hear about who rode an apparent straight line up to tech stock wealth, more than a few probably freaked out when these stocks crashed, banking only modest profits or, worse, buying high and selling low. 

We tend not to post about the bad stuff on social media. 

Enter Dividend Stocks

For those of us super or even moderately averse to risk, dividend stocks suit our investing personality. But not any old dividend stocks. 

Leaders with long histories of dividend growth. 

They’re called dividend aristocrats. 

Dividend aristocrats are companies that have increased their dividend for at least 25 consecutive years. At the moment, 66 companies have this status. 

I bookmark this page from Sure Dividend because it keeps a list of the aristocrats along with in-depth performance information. 

Speaking of their performance, it ain’t too shabby. 

Source: S&P Fact Sheet, via Sure Dividend

Some dividend aristocrats – Procter & Gamble (PG), 3M (MMM), Coca-Cola (KO), and Colgate-Palmolive (CL) – have increased their dividends for more than 60 years. 

These are lifetime stocks. 

Not mere long-term holdings, but positions you’ll hold and pass down to your dog. This holds especially true for the 2022 list. These companies raised their dividends during the pandemic. 

The Beauty Of Dividend Growth Investing

Of course, you can collect your dividends in cash. However, you’ll probably reinvest them to buy new shares of stock and build your position – and increase your income – over time. 

Enjoy the wonder of compounding. 

One hundred shares of a stock with a $2.00 annual dividend pays $0.50 quarterly so every three months you receive $50 to take in cash or revinest. 

Do the latter and you increase your position size with each dividend reinvestment. Your larger position size generates a bigger dividend payment. Dividend increases from the company do likewise. 

When you invest in these best of breed companies you can sleep at night. You don’t need nerves – or balls – of steel to see consistent share price appreciation and reinvest regular dividend income. 

The Bottom Line: Investors have myriad options for building wealth. 

The speculation on meme stocks and cryptocurrency alongside the market’s largely bull run before and throughout the pandemic made quite a few people rich. Though not everyone. 

Some people aren’t cut out for such aggressive investing. If this is you, dividend growth investing could form the foundation of your portfolio strategy. 

That said, there’s a place for blue chip companies with strong and growing dividends in every investor’s portfolio, even the most aggressive investors.