Why the heck aren’t more people dividend-growth investors?

Why in the wide world of Warren Buffett aren’t more people investing?

I saw a stat the other day pointing out that less than half of us have anything invested in the stock market. If you opened an account today and deposited $5, which you can do with brokerages like Robinhood, you’d literally have more money invested than half of Americans. More than half. If I weren’t already mildly obsessed with investing, and didn’t already have an account, I’d open one and deposit $5 just to brag about having a bigger portfolio than the bulk of the population.

As a relatively new investor, one that dove into the markets head first with next to no idea what I was doing sometime last summer, I’m shocked. I really am. There’s a learning curve, sure, but if you want to take the time to figure things out, you will.

Really … what are people so scared of? A crash? Losing money? News flash: you’re going to lose money from time to time.

You’re also going to grow your money … especially if you go with the dividend-growth approach. It’s the one I took … and it’s the bee’s knees.

One of my favorite things about dividend-growth investing is this: every purchase helps you grow your portfolio today, but, even more importantly, it helps you grow your portfolio tomorrow. Other methods accomplish the same thing, provided you pick quality stocks, but the dividend is the game changer.

When you buy a stock, your portfolio will grow immediately based on the value of said stock. You probably didn’t need me to tell you that. From there, it will gain or lose value every single day for as long as you hold it. You probably knew that, too. Good companies will inevitably gain value over the course of time while crappy ones will slip faster than a second grader taking his first skating lessons. You ever ice skate? It ain’t easy.

When you buy a dividend-paying stock, though, you get all that and the icing on the cake: the dividend. Buy a good company that’s been paying dividends for a long time and, well, you can pretty much bank on getting a little boost anywhere from once a month to once a year.

It’s awesome, and you know that if you’ve been dividend-growth investing for any significant amount of time.

I’ve heard people say you shouldn’t invest in companies that pay dividends for all kinds of reasons … some of which actually make a little bit of sense, but only a little. I say if you’re investing at all you’re doing better than most, but some say companies that shell out dividends would be better off using that money to grow their business. You can’t get Amazon-like returns with dividend payers, they say. Maybe, but name a stock, dividend paying or not, that will produce Amazon-like returns. Have one for me? If they were easy to find, we’d all be rich.

Dividend stocks may not make you a gazillionaire overnight, but they sure could make you one over the long haul.

Capital gains, dividends (which you reinvest to buy more dividend-paying stocks) and dividend raises all make the magic of compounding even more magical. Don’t park your money in a savings account that struggles to keep up with inflation. Live a little, man.

Still worried about a crash? As long as you don’t invest money you can’t afford to lose, don’t sweat it. The DOW, NASDAQ and S&P 500 have dealt with crashes since their inceptions … and look where they are now. They’ll plummet again, sometime, but they’ll bounce back. Always have.

Dividend-growth investing is great because, no matter what the stock price does, good companies continue paying (and growing) their dividend payments. I’m 33, started investing when I was 32, and my current focus is to continue to build a passive-income stream … one that will fully support me and my family in 20 or 30 years. In one year, I’ve built up almost $400 of forward annual dividend payments through my investments … and that’s without much compounding to speak of. Every cent I make in dividend income goes toward buying more dividend-paying stocks. It’s not a glamorous system, but it’s a proven one.

The best money is money you don’t have to work for, right?

I’ve seen articles saying you could turn $50 into a million if you have 100 years to wait, and we all know about that guy who turned a small position in Walgreens into a $2,000,000 portfolio. It happens … and anyone with a little patience and discipline can make it happen.

All that said, all I really wanted to say is this: if you aren’t investing, you should start … now. I just figured people wouldn’t be all that interested in a six-word post, so I fleshed it out a bit.

If you’d like to read more about why DGI works, check out this post from modestmoney.com.

Thanks for reading!

2 Responses to “Why the heck aren’t more people dividend-growth investors?

  • Retiring On My Terms
    2 years ago

    I love dividend stocks too, and over the course of my investing lifetime have tended to focus more on dividend and value stocks, rather than growth stocks.

    Shortly after I got out of college I invested a little bit of money into the DRIPs (Dividend Reinvestment Plans) of ExxonMobil and our local bank. Through the reinvestment of my dividends over the course of more than two decades, plus many optional cash purchases (most of which were only $50 or $100 at a time), both of those positions have become meaningful to my net worth, and it has really been almost effortless. The hardest part, as you know, is just getting started, and I hope your post encourages others to do the same!

    • Motivational stuff. It is, like you said, pretty effortless if you just make the simple decision to do it. Buy high-quality dividend stocks, like Exxon, add to your positions over time and keep reinvesting the dividends. That’s it! Thanks for sharing your story. I hope to be in your shoes someday!

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