The Perfect Dividend Stock For Your Retirement Portfolio

In today’s Trackstar five, you’ll find the dividend growth stocks investors are searching for most across our 100+ financial media partners. 

Remember the distinction between mere dividend-paying stocks and dividend growth stocks:

While important when evaluating dividend stocks, growth here doesn’t refer to sales or profit growth. Instead, we’re dealing with growth in the dividend. 

Does a company increase its dividend annually?

The five names on Trackstar today have nice streaks going for themselves.

• Apple (AAPL): 12 years
• Microsoft (MSFT): 22 years 
• Walmart (WMT): 52 years 
• Visa (V): 16 years 
• Costco (COST): 20 years 

Nvidia (NVDA) pays a dividend. It’s also the most searched ticker, by a mile, in Trackstar. However, it is not growing its dividend. So, it’s not on today’s list. 

Meta Platforms (META), Facebook’s parent company, just started paying a dividend. We covered it, as did our sister newsletter, The Spill, early in February. The Spill gave META a nice 7 out of ten rating. And we agree. We’re bullish over here in the next cubicle at The Juice. 

As we focus on retirement in 2024, we’re all about giving you retirement-focused portfolio ideas. We love index ETF investing. We love dividend ETFs. And, while we’re never going to suggest you only invest in dividend stocks, we love dividend growth stocks.  

At the moment, META is NOT a dividend growth stock. However, it’s likely on its way. We would be stunned if META doesn’t increase its dividend annually, and for a long time. 

Consider some numbers, courtesy of fund company Wisdom Tree, which recently added META to its dividend index. 

• With a $0.50 quarterly dividend, equating to around $5 billion, META is now a top 30 dividend payer domestically and top 50 globally. 
•  META’s dividend accounts for just 12% of earnings, well below the S&P 500 average of 29%. So it has room to grow. 
• Dividend growth among IT companies has been faster than any other sector over the last 15 years. 
• New dividend payers tend to increase their payments faster than the market. Apple has done it since 2012. We expect META to do it, and do it ever more aggressively. 

All of this sort of goes back to a theme we hit often — diversification. And how we need a more diverse view of diversification. 

An ideal portfolio diversifies within specific parts of specific sectors and types of stocks. 

This is why we love ETFs. You can buy SPY, QQQ and a couple different dividend ETFs and be exposed to a wide-ranging assortment of high-flying names that don’t pay dividends, some that do and longer standing, slower-growing dividend aristocrats, which are stocks, like WMT, that have increased their dividend payment for at least 25 consecutive years. 

Adding a name like META to the mix really provides the best of multiple worlds. We love Wisdom Tree’s case for the company:

What are Meta’s quality and growth attributes that exhibit why it is a great business and make us confident it should be a dividend growth leader over the coming years?

Efficiency: Meta was able to lower headcount by more than 20% while also growing revenue by more than 20% in the last 12 months—this is a sign of its scale and investments in technology paying off. Paying the first dividend is a commitment to shareholders that they will harvest their R&D investments over the years into cash flows for shareholders.

Quality: Meta’s trailing three-year return on equity (ROE) and return on assets (ROA) exceed the market.

In other words, META is making smart moves operationally and effectively balancing R&D and other investments with cash flow to be able to pay a sustainable and, most likely, growing dividend. 

52 years ago, WMT was one of those stocks you bought for your newborn baby and forgot about. If it wasn’t already there prior to the dividend, META looks to be now. 

The Bottom Line: As we continue to talk everything retirement throughout the year, we’ll further detail what we mean by diversification. It has become a broad term people love to throw around. But, very few consider the nuance inherent in it or if they’re really creating a diversified portfolio. 

In fact, we’ll piece together a new model for diversification that considers the main groups and subgroups you should focus on to create a portfolio that will stand the test of time and get you where you need to be in the long-term without the pain of huge, sometimes scary losses. Which, in its simplest sense, is really the overarching reason why investors strive for diversification in the first place.

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