The “Death of Dividends” Camp Needs to Die
Oh, brother! Here we go again…
On MarketWatch.com, Jeff Reeves is asking if the death of dividend stocks is nigh.
“It’s about time investors stopped worshipping at the altar of dividend stocks, and start thinking seriously about the relative risk of dividend stocks,” he says.
Thanks to increasing popularity – and, in turn, rising valuations – he concludes, “We could be witnessing the end of low-risk dividend investing.”
Complete and utter nonsense!
Different Day, Same Tired Argument
Reeves’ fearmongering is just the latest example of the same argument we’ve been hearing for over a year. Namely, that we’re in the midst of a dividend bubble.
It follows the same template, too: Provide evidence that appears to be overwhelming, and presto! Everyone’s running scared.
Reeves’ war chest of scare stats includes middling payout ratios, the runaway popularity of the Retirement Income Certified Professional designation and higher-than-average volatility. Not to mention the fact that defensive stocks are trading at a double-digit premium, not a double-digit discount, to the market.
He’s taking a snapshot of current conditions and trying to extrapolate them out over the long term to say that it’s going to be different from here on out.
It’s never different, my friend.
Stock prices fluctuate over time. As do payout ratios, valuations, yields, economic conditions and interest rates.
Now, all of that would be problematic if we were trading dividend stocks. But we’re not.
We’re not speculators. We’re long-term investors – or dividend worshippers, if you prefer, Mr. Reeves. We actually buy and hold. (No, that strategy isn’t dead, either.)
What’s more, we understand the ebbs and flows of the market and we account for them by devising a system to find suitable dividend investments in all market conditions.
The cornerstone of that seven-step system here at Dividends & Income Daily – and our Dividends Accelerator premium research service – is dividend growth. It trumps current dividend yield all day, every day.
We also understand the rewards of such a focus.
Dividend growers always outperform high-dividend payers. Not just in the United States, but in any market in the world.
I’ve ushered in countless evidence of this reality before. Here’s the latest proof, courtesy of JP Morgan (JPM)…
A portfolio of all the high-yielding stocks in the MSCI World Index would have increased 10-fold from 1988 to today. But a portfolio of high-yielding stocks that also increased their dividends at a rapid rate led to a 20-fold increase in value.
Bottom line: Has the hunt for attractive-yielding, low-risk dividend stocks gotten a little harder? Absolutely. I’ll give you that, Mr. Reeves.
Impossible, though? Not even close!
While Reeves and his lot want to start a funeral procession, we’ll stick to our discipline and prove that low-risk dividend investing is alive and well by uncovering opportunities for you – each and every week.
Count on it!