Are You a Dividend Growth Investor or an Income Investor?

How do you like to see your money? This is at the heart of the question, “Are you a Dividend Growth Investor or an Income Investor?”

If you like to see your investments always (most of the time) in the green, then you’ll probably lean towards Dividend Growth Investing (DGI).

If you want to see your bottom line (the amount of dividend income) grow every month, you are definitely an Income Investor.

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Today I want to help you explore your tendencies and expectations with money. Ultimately, you’ll need to pick the method you can stick with through thick and thin.

The path I choose. I started my passive income journey as a pure dividend growth investor. I stumbled upon dividends, passive income, and financial freedom in July 2019.

I started with stocks such as Papa John’s (PAPA), Intel (INTC), McDonald’s (MCD), and Abbvie (ABBV). However, I slowly started to look into high-yield products.

I didn’t understand much about income investing before the pandemic hit in 2020. It caught me off-guard as all of my securities tanked.

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Instead of buying more income products, I purchased more securities like Exxon Mobil (XOM) and Prudential (PRU).

Now, I love when the market takes a turn for the worse. Red is my new best friend as I can buy high-yield products at a discount. However, I still dollar-cost average into DGI stocks every week.

What kind of investor are you? So I am an Income Investor 100%, but I still balance my portfolio with DGI stocks and index funds. I use these investing techniques to build generational wealth to leave my kids.

But now, let’s shift the focus to you. How much time do you have to read and follow your stock picks? If you want to “set it and forget it” investing style, DGI is for you.

Don’t Gamble with Retirement 7

To become an excellent DGI investor, you simply pick 10-20 DGI stocks (I recommend at least 20) and invest in them weekly or monthly.

I choose 20 stocks because it gives you more of a chance for amazing things to happen. At random moments, stocks will merge, spin off into other companies, or pay special dividends. 

We never know when these things happen, but it only takes one or two good events to change your life.

For example, Tesla and Apple’s stock split in 2020 and immediately rose in value. I owned one Apple (APPL) stock before the split; now, I own four. 

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In 2022, AT&T (T) spun off Warner Bros Discovery (WBD) into another corporation. While the Warner Bros shares are struggling, they will be very valuable over 5-10 years.

How to get rich with DGI. You get rich with DGI by slowly adding shares and reinvesting dividends. In turn, the stock price gradually increases, and the company raises the dividends.

Here is a look at the last ten dividend hikes for McDonald’s starting with 2022 ($1.52), 2021 ($1.38), 2020 ($1.29), 2019 ($1.25), 2018 ($1.16), 2017 ($1.01), 2016 ($0.94), 2015 ($0.89), 2014 ($0.85), 2013 ($0.81), and 2012 ($0.77).

If you bought ten shares of McDonald’s in 2012, you would have received $7.70 in quarterly dividends. Those same shares would pay you $15.20 in 2022. If you reinvest your dividends over ten years, you will make even more in dividends.

Preferred Shares vs. Treasury Bonds

Income to the moon. I recently wrote an article titled “Income to the Moon,” which discusses income investing. Income investing is about getting paid today.

Instead of investing in Mcdonald’s and waiting ten years to see massive growth, you get large dividends today. However, you must reinvest a portion of your income to keep pace with inflation. 

For example, let’s say I buy 250 shares of Pimco Dynamic Income Fund (PDI), which pays me $0.22/share. That is $55/month for as long as I own the shares.

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Every year I buy ten more shares for my portfolio. After ten years, I will own 350 and earn $77/month. 

However, with each reinvestment, you would want to buy the best yield available at the time. Researching and staying up to date with business development companies, high-yield blue chip stocks, preferred shares, and closed-end funds takes time. 

I love income investing. I love income investing because it is so complex it becomes simple. Most income products derive their price (not value) from interest rates.

If you learn how to follow bonds, interest rates, and simple economics, you can buy high-yield securities at great times and excellent prices. 

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I love income investing because I know what I am buying exactly. Think of income investing as buying an ATM that spits out money at a specific time.

Think of dividend growth investing as buying a gold bar that pays dividends from time to time. You buy the gold bar hoping it will increase in value, as well as spit out some dividends. You’re purchasing the chicken that produces the golden eggs.

Do you want to follow companies or the economy? Would you rather follow Microsoft (MFST), Mastercard (MA), Visa (V), Johnson & Johnson (JNJ), and Starbucks (SBUX), or interest rates and mortgage prices?

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With DGI, there isn’t too much earth-shattering news for your 20 stocks. Every once in a while, you will get a major dip in prices (when you buy more), but it is quiet for the most part.

With income investing, there is always a financial crisis brewing. You can always find new preferred shares, dividend ETFs, or mortgage REITs to place your money.

With DGI, you can always invest in a good company; there are good times and better times. However, with income investing, there are straight-up bad times to buy income-producing securities.

Conclusion. If you want to be heavily involved with building a paycheck, become an income investor. If you want to create a financial fortress, consider DGI.

I love income investing, but even I cannot deny the allure of dividend growth investing. Owning companies like Public Storage (PSA) and Costco (COST) ensures my fortune will keep rising. 

Do a little of both, with DGI serving as your nest egg and income investing as your paycheck.

Choose Your Passive Income Ever 3

Hopefully, you’ll get to the point where you only have to use income from your income portfolio. This allows your DGI portfolio to grow untouched forever. 

You will do well at either of these tremendous investing methods. However, prepare for the next bull market when people swear by the latest and greatest speculative investing style. 

People have tried and tested DGI and Income Investing methods, and you will be hard-pressed to find something better long-term. Steady your nerves and jump in—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