Dividend growth investing is an excellent strategy for those looking to combine growth with regular income. However, it’s crucial to select top-quality dividend growth stocks that can sustain their dividend increases long into the future. So, how do you effectively invest in Dividend Kings at the right price?
Focusing on High-Quality Dividend Stocks:
To succeed in dividend growth investing, it’s essential to focus on high-quality stocks, often referred to as “best of breed.” If you invest in lower-quality stocks, you risk losing both dividend income (due to potential cuts) and growth potential (as a result of falling stock prices due to declining earnings).
At Millionaire Mob, we aim to build a dividend growth portfolio that will enable us to achieve financial independence through dividends. This will take considerable time and won’t be our sole income source. We also utilize passive income and freelance work to diversify our income streams, which we then reinvest into our dividend portfolio.
Building wealth requires patience and a disciplined approach to investing, saving, and acquiring income-producing assets. It’s essential to get rid of depreciating assets and items that incur extra costs. You can explore our list of Dividend Kings as potential additions to your dividend growth portfolio.
Why Opt for Dividend Growth?
Dividend growth investing offers the chance to invest in companies that not only provide income but also have significant long-term growth potential. These stocks are generally seen as high-quality investments, especially Dividend Kings, which have consistently increased their dividends for decades.
One of the appealing aspects of dividend growth investing is that, over time, your income rises as these stocks increase their payouts. While high yield isn’t my immediate focus, there’s the potential for significant growth in yield over the long term.
High-Quality Dividend Growth Stocks:
High-quality dividend growth stocks, like Dividend Kings, have a stellar reputation, consistently rewarding shareholders by increasing dividends for over 50 years. While past performance isn’t a definitive guide to the future, these stocks signify reliability and commitment to shareholders.
These stocks emphasize operational excellence, maintaining a strong management team, and having disciplined financial controls. They reflect traits that are valuable not just for corporations but also for personal financial growth.
Combining Dividend Growth with Value Investing:
Imagine investing in top-tier dividend growth stocks at below-market prices. These opportunities align with our “Dividend Growth at a Reasonable Price” or dGARP strategy, merging dividend growth with value investing. Investing in stocks that are undervalued compared to similar dividend growth stocks maximizes both dividend income and potential capital appreciation.
To spot these opportunities, we use a formula to help identify undervalued dividend growth stocks. Here are two Dividend Kings currently offering good value:
Lowe’s Companies (TICKER: LOW):
Lowe’s is a Fortune 500 company and the second-largest hardware chain in North America. With 56 consecutive years of dividend increases, it’s currently a smart buy, especially after a recent price dip due to an earnings miss. The housing market’s potential growth also bodes well for Lowe’s.
Dover Corporation (TICKER: DOV):
Dover Corporation is an American conglomerate with a strong track record of 62 years of dividend growth. While its recent dividend growth rate is modest, its payout ratio and anticipated earnings increase provide room for future growth. Its reasonable pricing makes it a solid long-term investment.
Conclusion on Investing in Dividend Kings:
Spotting value in Dividend Kings requires swift action and often pairing them with promising, emerging dividend growth stocks. This approach could potentially help achieve financial freedom through dividends.
Applying dividend discount models can guide you to evaluate whether a stock’s price reflects its expected dividend growth rate. I’m dedicated to finding the potential next Dividend Kings and would love to hear your thoughts on which stocks might achieve such a status in the future.