Income investing

The Dividend Guy: Ignoring Yield Below 1% Is Your Biggest Investment Mistake

With growth stocks out of favor with the market, many investors are turning to dividend stocks. They tend to be less volatile. And their cash payouts tend to provide a great cushion against uncertainty.

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  • While most investors know the value in owning dividend stocks, the challenge comes from the tradeoff between earning a high current yield, or investing in a stock with a history of raising its dividend over time.

    On The Dividend Guy blog podcast, the case is made that investors shouldn’t ignore dividend yields below 1 percent to start.

    One reason is that low-yielding stocks represent companies that are seeing slowing growth… but are still growing!

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    The top example is that of Apple (AAPL). The consumer tech company started paying a dividend. And while the yield is low, the stock has continue to outperform the market substantially. Many other great tech stocks pay low yields but can continue to grow.

    Many large and stable companies with low dividends can also grow their share price and dividend gradually over time.

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  • Costco (COST) is another great business with a fantastic long-term return. But it often has a sub-1-percent dividend yield at times, although they also pay special dividends from time to time.

    Dividends remain important. But they’re just part of the story. Looking at companies with low but growing dividends, or low dividends that still have some growth in shares ahead, could get some great returns in the years ahead.

    To hear the full podcast and a more comprehensive list of stocks, listen here.