A Dividend Growth Investor’s Perspective On Non-Dividend Stocks

Since this is my first piece here at Sure Dividend and I’ll be focusing on a topic that can be somewhat controversial within the dividend growth community, I’d like to take a moment to introduce myself.

My name is Nicholas Ward. I’ve been writing about dividend growth investing for so long that sometimes, I feel like an old man. However, in reality, I’m anything but. I turn 28 years old later this month, meaning that I’m one of the younger members of the DGI brethren.

I’ve chosen to pursue financial freedom with a dividend growth strategy because I’m a firm believer in the long-term compounding ability of re-invested dividend paid out by very high-quality companies. Sometimes, this isn’t the most thrilling investment strategy. On the contrary, compared to the more speculative, growth-oriented assets that many of my peers from the millennial generation have chosen to own, the DGI names that I’ve chosen to partner with as an investor can be downright boring.

However, for the most part, boring is exactly what I’m going for in the investment world. Sure, sometimes when I see cryptocurrencies posting 88% gains in a single trading session or small-cap bio-techs popping 40% on positive results from a phase two trial, I begin to question whether or not I’m truly on the correct path.

Thankfully, those moments of doubt are fleeting. I’ve conditioned myself to realize that greed is a dangerous character flaw (especially when regarding decision-making capital markets) and once the initial excitement wears off it’s easy for me to re-focus on my income stream and the underlying fundamentals that justify my holdings.

Now, it wasn’t always easy to acknowledge greed and overcomes its grip. It takes time to condition one’s self against the illusions of fame and grandeur (or an early retirement) that greed can spawn. Data is always helpful though, and while I acknowledge that one has to take outsized risks to receive outsized rewards, I’ve also come to know that so long as one has a long time horizon in the markets, large risks are not likely necessary to achieve a respectable nest egg heading into retirement.

When it comes to data that supports the power of compounding and dividends, the paper titled, “Why Dividends Matter” written by Dr. Ian Mortimer and Mathew Page, CFA, fund co-managers at Guinness Atkinson Funds in 2012, is the holy grail.

If you haven’t taken the time to read this paper do yourself a favor and do so. It’s not incredibly long and offers dividend growth investors numerous graphs that will help to put their minds at ease during moments of weakness.

And what’s more, I’ve seen other posts/comments made by prominent individuals in the financial world. Here’s a link to a CNBC piece written in 2010 highlighting the fact that two Blackrock managers, Richard Turnill and Stuart Reeve, who later went on to co-manage Blackrock’s Global Equity Income Fund, believed dividends played an absolute paramount role in the market’s long-term performance.

Here’s a quote from the article attributed to Turnill and Reeve:

“Some may be surprised to learn that 90 percent of U.S. equity returns over the last century have been delivered by dividends and dividend growth.” 

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Disclosure:I’m not a professional in the financial industry; I studied English at the University level and unfortunately didn’t discover my passion for the stock market until after ...

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