Granted, not every stock delivered a positive return in both 2020 and 2021. However, it’s clear the winners outperformed the losers.
Even more important is that by owning these dividend-paying stocks…
- You would’ve easily crushed inflation…
- You would’ve beaten the All Share Index’s total return...
- And you would’ve beaten 99% of SA income funds!
Dividend Dominators = Quality businesses
Quality companies that pay consistent dividends can grow your wealth in times of challenges like a weak economy, inflation, high interest rates and depleting retirement savings.
In addition, dividends signal a good business!
Regular and increasing dividend pay-outs are a real mark of quality... quality of management, quality of business operations and quality of earnings.
Companies that increase their dividend payments are also telling you their earnings and profits are rising. They’re saying they’re healthy. If this is the case, you’ll also see capital growth from the share price (just like I’ve shown above).
So, you win both ways!
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Three simple checks to uncover Dividend Dominators
Over time, I’ve identified three MAIN reliable benchmarks for pinpointing
Dividend Dominators. They must have…
#1: A proven history of paying a dividend: The longer a company’s paid dividends, the better. But, usually I want to see at least three to five consecutive years of dividend pay-outs.
#2: High cash flow growth: When it comes to companies paying dividends, cash flow is king!
Because this is where the money for dividends – and increasing dividends – comes from. So I like to see a company generate tons of cash from its operations.
#3: A low pay-out ratio: There should be room to grow the amount of money going toward dividends in the future. So here, I want to see a current pay-out ratio between 30% and 50%. That gives us plenty of room to ramp it up over time.
Bonus – Dividend yield: A company’s yield can also be a useful metric – especially for value investors. You can also use it to compare the income you’d receive with bonds, other companies, money-market accounts etc. But for me a company with high yield is just a bonus. Sometimes even the best and most reliable dividend-payers sit on low yields.
See you next week,
Josh Benton, Editor
Real Wealth
P.S. Grab these 5 Dividend Dominators now to build your own perfect retirement income accelerator portfolio in 2022.
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