Most people error in stock picking because instead of hitting singles they are trying to hit a home run.
Who doesn’t want to buy the next Google,
Microsoft, or Amazon when the share price is $25?
There are those that believe you have to spend hours thumbing through quarterly and annual financial statements in order to find good companies.
For many people, finding good companies and good stocks is quite elusive.
To be honest, unless you have a crystal ball, finding the next Google (trading at $1,277 on the date of this
post) by simply looking at financial statements is next to impossible.
This is why some people, including Warren Buffett, like investing in index funds. It makes life simple.
Sometimes, finding good companies can be pretty easy – if you know what to look for.
What if showed you 57 really good, easy to identify companies that have outperformed the S&P 500 over the last decade – with low price volatility?
If you want to find a good company that has low volatility (less risky), look for companies that pay dividends.
Dividends?
Well, a company that pays dividends should not be dismissed.
Is investing in dividend stocks a good idea?
A company pays a dividend when it has excess earnings. The company’s board of directors believes that the best use of its earnings is to return some of the profitability to its shareholders as opposed to reinvesting the money back into the company. The company makes a decision to forgo investing the company’s earnings into future profitable projects.
Dividend-paying stocks tend to be issued by resilient companies. They have survived the complete economic cycle experiencing the good times and the downturns. These companies are leaders in
their industries and have strong cash flows.
A dividend paying company is the type of investment you should look during for during times of market
volatility. Their status as established businesses, in addition to the cash flow from dividends they provide, make them safer investments than younger, fast-growing companies that pay no dividends.
Because many dividend-paying stocks are lower risk, they make an attractive investment for both younger investors looking for a way to generate wealth over the long haul and older adults who want to build a steady income flow during their golden years.
The Power of Compounding
Dividends can also provide investors with the opportunity to take advantage of the power of compounding. Compounding happens when you generate earnings and reinvest them, eventually generating earnings from the earnings. Dividend compounding occurs when dividends are reinvested to purchase additional shares of stock, resulting in greater dividends.
To take advantage of the power of compounding as a dividend investor, you need four things:
- An initial investment
- Earnings– a.k.a. dividends
- To reinvest those earnings
- Time
With dividend investing, the more often you receive and reinvest your dividends, the higher your eventual rate of return. To illustrate a more realistic example of compounding, assume you buy 1,000 shares of Pepsi at $50 per share, for a total investment of $50,000. The first year you own the stock, it pays an annual dividend of $1.50, earning you $1,500 in dividend income. If the dividend increases by 5% each year (5% of the previous dividend; not 5% of the stock’s value), your $50,000 investment would be valued
at $99,598 after 20 years, assuming no change in the stock price and that you reinvested all dividends.
Dividend Aristocrats
If purchasing a dividend stocks sounds good to you allow me to introduce you to Dividend Aristocrats.
Dividend Aristocrats are an elite group of 57 stocks that are in the S&P 500, meet certain minimum size and liquidity requirements and have 25+ years of consecutive dividend increases.
Let me say this again.
These stocks have increased their dividend for 25+ years! That should get you excited.
The only way for a stock to increase its dividend for 25 or more years is 1) the company has good management, 2) the company has a strong and lasting competitive advantage, 3) their high barriers
to entry for competitors.
While not all 57 Dividend Aristocrat stocks are buys at the current time, some are definitely poised to generate solid returns.
Here are the top dividend stocks to buy for 2019.
Consumer Staples Dividend Aristocrats
Archer-Daniels-Midland (ADM)
Brown-Forman (BF.B)
The Colgate-Palmolive Company
(CL)
The Clorox Company (CLX)
The Coca-Cola Company (KO)
Hormel Foods Corporation (HRL)
Kimberly-Clark Corporation (KMB)
McCormick & Company (MKC)
PepsiCo (PEP)
Procter & Gamble (PG)
Sysco (SYY)
Wal-Mart (WMT)
Walgreens Boots Alliance (WBA)
Industrial Dividend Aristocrats
A.O. Smith (AOS)
Caterpillar (CAT)
Cintas (CTAS)
Dover (DOV)
Emerson Electric (EMR)
General Dynamics (GD)
W.W. Grainger (GWW)
Illinois Tool Works (ITW)
3M (MMM)
Pentair (PNR)
Roper Technologies (ROP)
Stanley Black & Decker (SWK)
United Technologies (UTX)
Health Care Dividend Aristocrats
Abbott Laboratories (ABT)
AbbVie (ABBV)
Becton, Dickinson & Company
(BDX)
Cardinal Health (CAH)
Johnson & Johnson (JNJ)
Medtronic (MDT)
Consumer Discretionary Dividend Aristocrats
Genuine Parts Company (GPC)
Leggett & Platt (LEG)
Lowe’s (LOW)
McDonald’s (MCD)
Target (TGT)
V.F. Corporation (VFC)
Financial Dividend Aristocrats
Aflac (AFL)
Cincinnati Financial (CINF)
Franklin Resources (BEN)
S&P Global (SPGI)
T. Rowe Price Group (TROW)
Chubb (CB)
People’s United Financial (PBCT)
Material Dividend Aristocrats
Air Products and Chemicals (APD)
Ecolab (ECL)
PPG Industries (PPG)
Sherwin-Williams (SHW)
Nucor (NUE)
Linde plc (LIN)
Energy Dividend Aristocrats
Chevron (CVX)
Exxon Mobil (XOM)
Information Technology Dividend Aristocrats
Automatic Data Processing
Real Estate Dividend Aristocrats
Federal Realty Investment Trust
(FRT)
Telecommunication Services Dividend Aristocrats
AT&T Inc. (T)
Utilities Dividend Aristocrats
Consolidated Edison (ED)
Conclusion
To make investing in either one of these 57 dividend paying stocks easier, just click here to download this 287-page guide to learn more about Dividend Aristocrats.