As we wrap up the Year of 2022, it’s time to reflect on our lives. We thank the heavens for having a loving family and friends that support us in our endeavors.
We can also thank the “powers that be” for giving us the gift of income. Our dividends have grown tremendously throughout the year and stand ready to outperform next year.
Investing is the long-term path to building generational wealth, happiness, and freedom. Therefore, we should reflect on the prior year each Christmas and prepare to improve for the upcoming season.
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Dividend growth versus income investing. I am a self-professed income investor—meaning I buy products purely for the money they pay me.
Investing in income is my favorite part of the day, and receiving dividends makes my heart jump. However, I am also quietly a dividend growth investor.
Dividend growth and income investing are two separate methods and require two distinct mindsets.
Income investing is akin to building a paycheck, while dividend growth investing (DGI) is akin to building a rental house.
The final goal of dividend growth investing is to build a massive portfolio of dividend-paying stocks that also pay you large dividends.
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Not only do you get capital appreciation via higher stock prices, but you get rising dividend payouts. It is similar to owning a rental home where the value increases along with the rent.
The basics of dividend growth investing. When Santa comes to your home this year, you must specify which stocks he should bring.
The heart of DGI is picking companies you trust with an excellent track record of raising their dividend payouts.
The best place to start is by reviewing the Dividend Aristocrats and Dividend Kings lists. These great companies have raised their dividends for 25 to 50 years.
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You should also pick companies from the list that you know and trust. I am partial to McDonald’s (MCD) because I used to work there in high school.
Pick a platform. After picking your favorite stocks, it’s time to choose a platform where you can invest. I recommend STASH (affiliate link) for dividend growth investing.
STASH gives you tons of options to invest the way you like. The best way to DGI is to dollar-cost average into your positions.
This means you spend a certain amount of money, weekly or monthly, on your favorite DGI positions.
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For example, I invest $2 per week into 20+ positions on STASH. These include McDonald’s (MCD), AT&T (T), Altria (MO), Phillip Morris (PM), Prudential (PRU), Verizon (VZ), Pfizer (PFE), T. ROWE (ROWE), and Procter & Gamble (PG).
Buy more when the market misprices your stocks. The stock market is an emotional beast, so the prices of your stocks will vary wildly.
For example, McDonald’s (MCD) is on an absolute tear right now, but by this time next year, the market will probably fall out of love with it.
The market is beating Verizon (VZ) down, while AT&T (T) is slowly recovering from spinning off the company Warner Bros Discovery (WBD).
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You can buy more if you see your stock’s dividend yield increasing (because the price is low). You will lock in great yields and the chance for greater capital appreciation.
The “sin stocks” like Altria (MO), Phillip Morris (PM), British Tobacco (BTI), and Vector Group (VGR) go through ups and downs more than other DGI stocks. These stocks sell cigarettes, making them more sensitive to emotional investing.
STASH is excellent because you can keep my dollar-cost averaging schedule and purchase more stocks outright. For example, If you see AT&T (T) having a bad day, you can quickly buy $400 of shares.
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Reinvesting dividends. Companies raising their dividends over time is part of the appeal of dividend growth investing. However, you won’t feel the effects of those increases (in your wallet) because you should be reinvesting dividends.
For DGI to be effective, you need four components: capital appreciation, dollar-cost averaging, increasing dividend payouts, and dividend reinvestment.
You are buying more shares by reinvesting the dividends, which increases your income. If you want your income today, start an income portfolio alongside your dividend growth.
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The long-term goal of dividend growth investing. The purpose of DGI is not only to build an all-weather retirement plan but also to change the fortune of future generations.
Think if your grandparents bought a few Apple (APPL) shares in the 1980s and began buying more monthly. You wouldn’t have to worry about paying for college or saving for retirement.
The goal is to build a portfolio where you can use the income during retirement while keeping the shares intact for future generations.
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I’m watching my DGI portfolio grow slowly and pay increasing dividends. Mcdonald’s (MCD) had a massive dividend payout increase of 10% this year, and Mastercard (MA) raised their dividend by 16%.
Over the years, these increases will help you combat inflation during retirement and other cost-of-living adjustments.
Conclusion. Do you want to depend on the government to increase your social security during retirement or have 20-30 companies raising dividends to grow your wealth?
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Although I am a hardcore income investor, I still invest at least $1,000/month into dividend growth stocks.
If you want to make Christmas better each year, dividend growth investing is the way to go. These great companies will give you the income to buy whatever stocking stuffers you choose.
Santa has the right idea by bringing dividend growth stocks. However, it is our job to keep growing our income by dollar-cost averaging and reinvesting dividends forever.
Ultimately, we can provide for our families through dividend growth investing. It truly is a magical way to spend the holiday season. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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