I just flew back from a speaking gig at the Las Vegas MoneyShow.
When I wasn’t hustling free cocktails, swatting away hordes of prostitutes, and wining and dining with stinking-rich CEOs, I gave a presentation on dividend stocks and minimizing risk.
Now, when I first started giving these talks, I was keenly aware that every mom and pop investor knew about dividends, and likely owned plenty of your run-of-the-mill blue chips. But I naively assumed that most folks knew the safest and most effective way to maximize returns on them: buying “dividend aristocrats” and plugging them into a dividend reinvestment program.
Boy, I was wrong…
In my travels, I found that most investors are really not familiar with this dual strategy at all. In fact, in the packed crowd of around 100 investors, only one guy in the back raised his hand when I asked if anyone knew what a dividend aristocrat was.
Anyway, since I was in Sin City, I started the speech by making a confession.
I hate gambling.
Absolutely hate it.
I know that’s a pretty blasphemous thing to say in Las Vegas, but it’s the honest truth. I just don’t have the stomach for it.
You see, the first time I was in Vegas, I lost 300 bucks in the blink of an eye playing blackjack. I was totally dejected and genuinely angry at the casino for stacking the odds against me — and myself for blindly pumping money into a rigged game.
Being young and stupid, I wandered off to find an ATM so I could make that money back.
But after suffering through the cacophony of slot machines and getting lost no less than three times (casinos purposefully make it difficult for you to escape), I found myself outside on the Vegas strip. It was there that I saw something that made me put my wallet back into my pocket.
I witnessed a grown man weeping over a trash can. He was disheveled, wailing, and literally beating himself up. It put my minor losses into perspective.
That was also the very moment I checked out of gambling for good…
My investment philosophy mirrors my attitude for gambling.
You’ll never see a dividend aristocrat investor flat broke and weeping over a trash can. That’s because the returns on this index of 53 stocks have an absolutely stellar track record. The S&P 500 Dividend Aristocrats tracks stocks that have raised their dividend each and every year for the past 25 years.
As far as risk is concerned, if a company can afford to keep rewarding its shareholders with ever-increasing dividend yields, it’s a damn good bet that they’ll be in business for the long haul. Once you see the returns I’m sure you’ll agree…
This index itself has returned 183% over the last decade — almost double the S&P 500 over the same time frame. Now, that’s quite impressive on its own. However, if you go back a little further, the results are even more remarkable:
Have you made 1,494% over the past 20 years with practically no risk? I seriously doubt it…
While I’m at it, allow me to pile on a bit more…
- Only four dividend aristocrats had a lower total return than the S&P over the past 25 years
- More than 90% of dividend aristocrats beat the S&P 500 total returns
- The average total return multiple (which includes interest, capital gains, dividends, and distributions) was 24.5, which is over three times that of the S&P
As you can see, these stocks are the royalty of dividend stocks. But, like any index, not every position is a no-brainer, and you can’t just throw darts at the list and expect to do well.
Here’s how to choose which aristocrats you should keep in your portfolio for the next decade…
If you check out the list of dividend aristocrats, you’ll see some obvious stocks like Coca-Cola (NYSE: KO), Exxon-Mobile (NYSE: XOM), and Wal-Mart (WMT).
But you’ll also find some under-the-radar money makers like industrial supply company W.W. Grainger, Inc. (NYSE: GWW), which has quietly returned 142% in the last five years, and Illinois Tool Works (NYSE: ITW), which has doubled in that time frame.
So when you look at the entire list, you may pass over some of the best companies simply because they aren’t household names. There are about 54 of these companies in all — or just a tiny 11% of the S&P 500. But I’ve whittled it down even further to the very top 1% of all dividend payers…
I’ve identified eight of the most ironclad, diversified, income-boosting aristocrats in my robust new report: “Your Guide to Living Like a Dividend Aristocrat.“
You can access it by subscribing to my publication, The Crow’s Nest.
