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The Simple Beauty Of Dividend Growth Investing


Dividend income is real money paid to shareholders for simply owning shares of stock.

To me, the value of a company is determined by the shareholders' return on their investment.

There are only two things a DGI'er needs to do: Seek to increase the amount and cash the checks.

I don't want to create a firestorm of battling commentary, but I believe it is a good idea to explain as well, and as simply as possible, why I believe that dividend growth investing is the best way (for me) to have a secure financial future and retirement.

I have personally invested in growth stocks and always had that gnawing feeling that the price could tank at any time and I would be left with less than before. I followed the crowd, chased momentum, looked for the next great idea, and found myself jumping from one stock to another, and since I was not great at this approach, I always seemed to wind up with less.

Yes, I got lucky every now and then and was able to ride the wave of a hot stock and sell before it tanked. I would get IPO offers and tips from my broker, detailed research on bunches of companies that had the promise to be the next Johnson & Johnson (NYSE:JNJ), only to be disappointed and quite frankly really ticked off that I was not one of the "lucky ones." I wish I had the money I lost from all those investments in the next big thing.

Dividend Growth Investing Really Works For Me

I take plenty of flack about my model portfolios that I use to hopefully educate and illustrate how a simple approach of dividend growth investing can help regular folks have a more secure financial future.

In this article, I would like to get back to the basics of why DGI has worked for me and why I believe it can work for just about everyone. Without getting too carried away, let me outline some undeniable facts about dividend income.

  • Dividends paid by companies are real cash money, not hopes or dreams.
  • Dividends can be saved, spent on expenses, or reinvested into either the same dividend stock or another one of your choice.
  • If I can earn at least 3-4% on the money I invest, from companies that have an elite history of paying and increasing their dividends year after year for a minimum of 25 consecutive years, then not only can I do better than what any government issued note would pay me, with the potential to almost automatically earn more each and every year, but also I will truly sleep better at night with the knowledge that my money is working for me, just as the companies that are paying me are working for all of their stakeholders.
  • The daily fluctuations of any particular share price mean absolutely nothing to me.
  • Corrections and bear markets become my friends rather than the "big bad bogey man" that the media portrays.
  • By taking advantage of those corrections and bear markets, by adding even more shares at bargain prices, I will exponentially increase my income by having more shares of great companies and simply sit back and wait for all of those dividends be increased by the very companies I have more shares in.
  • I never will need to liquidate the underlying asset unless the facts change or I face unknown dire financial needs.
  • Not only will I be able to continually enhance my lifestyle, but also I will be building a legacy of investments that could do the same for my heirs if I so choose.
  • By living within my means and constantly raising my dividend income, I will build a more secure financial future, live a better lifestyle in retirement, and more than likely never have to worry about money ever again.

Some might say I am painting an overly rosy picture and just because dividend aristocrats have an elite history now does not mean that the next 5, 10 or 20 years will give me the same results. Those naysayers would be 100% correct. Anything can happen, and Exxon Mobil (NYSE:XOM) could go out of business tomorrow. The world we live in may someday no longer need healthcare products, or food, or any means of communication any longer.

Of course, if any of this were to actually occur, I think that the world might be faced with greater issues than just paying the bills. It is something I do not...