Tuesday, November 20, 2018

The Tangibility of Dividends

As a dividend growth investor, one of the least talked about strengths of the strategy is the tangibility of dividends. When you receive dividends from quality dividend growth stocks, you are receiving cash that you can use for whatever purpose you assign to it. Whether that's to save, spend, or reinvest, the choice is yours. Not only do you receive dividends that you can determine the purpose of, but you can often see the products and services of the companies that you own shares in.

When you're a dividend growth investor, you have the benefit of being able to transition from the knee jerk trader mindset to the investor mindset. As a dividend growth investor, you take the long term view rather than the short-term view that has so many "investors" buying and selling over every quarterly report or non-event, which is one of the main reasons many retail investors significantly under-perform the market. I believe the primary reason for this is that when you drive past companies that you own shares in or when you see their products in stores, this only reinforces the concept. Many of the best companies that you can own are also the largest companies that hold strong competitive advantages in their industry, with strong balance sheets, and a strong track record of paying growing dividends year after year despite financial market volatility, partisan politics, economic downturns, and wars.

For instance, as I drive through my hometown, I encounter the following businesses that I own a stake in:

AT&T store (T)
Genuine Parts Company (which owns NAPA stores) (GPC)
Royal Dutch Shell gas stations (RDS.B)
BP gas stations (BP)
CVS Health (CVS)
Exxon Mobil gas stations (XOM)
Verizon store (VZ)
Home Depot store (HD)
Lowe's store (LOW)
Prudential Financial (PRU)

Moreover, these companies sell health products, beverages, snack foods, etc that are produced by other companies that I own:

Pepsico (PEP)
General Mills (GIS)
Procter & Gamble (PG)
Hormel (HRL)
GlaxoSmithKline (GSK)
Pfizer (PFE)
Johnson & Johnson (JNJ)
Hershey (HSY)
JM Smucker (SJM)
Altria Group (MO)

From the time I was in middle school, I was always that kid who checked labels on household products to see which companies owned which products that my household used. I came to the realization that if I owned enough shares in the companies that are so well represented in my household, such as Procter & Gamble, Johnson & Johnson, JM Smucker, General Mills, and Hershey, I could have a stream of entirely passive income in the form of dividends. I'm interesting, I know.

This mindset is one that I have had for the past several years now, but since I began investing in September 2017, the mindset has only been reinforced. With every additional dividend that I receive from the above companies and other great companies, my belief in quality dividend paying companies as my path to financial independence only grows.

Full Disclosure:

I am long all the above stocks. As always, please do your own research before buying positions in any of these companies.


Do you check household products to see who they're owned by? When you drive past companies that you own shares in or see the products of companies that you own shares in on store shelves, do you light up like I do?


  1. Great article.I wish I was as smart as you when I was your age. Keep it up.

  2. Thanks for the comment! I'm glad you found value in the article.