A better approach to dividend investing would be to invest in companies that have a record of increasing their dividends year after year after year. There are quite a few top-notch companies (like JNJ, PG, GE, G, KO, PEP and so on) that have increased their dividends for 25, 30, 40 years or even longer.
A useful resource in this regard would be the "Handbook of Dividend Achievers", published every year around June or July. (Btw, Peter Lynch refers to this book as his favorite bedtime reading material).
Another useful book is "The Dividend-rich investor" by Tigue and Lisanti. They have lot of useful numbers and information about "free stocks" (i.e. stocks whose cumulative dividends have exceeded what you paid for them -- in some cases, it has happened within a decade's time!), and also about "yield on cost" (e.g. if you were to buy a stock that is yielding 2.0% today, and the company increases its dividend every year by 15%, your "yield on cost" after 15 years will be about 8.0% and after 20 years, it will be 16%).
Obviously, your results will be best when the starting yields are high. So, as the stock market declines, you could fearlessly continue to buy more of these stocks for the long-term, and over a period of a couple of decades, you could be a very happy camper. Again, as Peter Lynch says, one can hardly go wrong by building an entire portfolio of stocks from the Handbook of Dividend Achievers. |
