Dividend Growth Investing 'Is' Total Return Investing

Dec. 30, 2013 2:52 AM ETKO266 Comments
Larry Smith profile picture
Larry Smith

I recently wrote an article (here) where I discussed my portfolio's returns for 2013. In the article I detailed my returns and expounded on my investing thesis, which is a belief in the merits of dividend growth investing. Over time, I believe dividend growth investing will outperform other investing strategies. I do believe you can make money in the market using various other strategies, but dividend growth investing is the safest, simplest and best for most individual investors.

In response to my article, one commenter made the following statement,

"For a pre-retirement portfolio it is completely nonsensical to have any objective other than total return."

That comment drew this response from another commenter.

"rising dividends and total return tend to go hand in hand. You could look it up."

To which the original commenter responded

"They don't, and I don't want to go into this one more time, but even if they do total return by whatever means should be the objective. I am sure that the DG aficionados are misleading some pre-retirees about their objectives by insisting that total return does not matter. That is very shameful."

That lively exchange continued with a few more comments, but that sample sums up the debate. One person felt dividend growth investing did not lead to total return and dividend growth investors are misleading pre-retirees, while the other commenter stated dividend growth did lead to solid total returns.

Yesterday I had some time and decided I would run some numbers and see if dividend growth investing actually did lead to better total returns. The scenario I have put together involves two portfolios, both valued at $100,000. One portfolio consists of growth stocks that pay no dividends and the other consists of dividend growth stocks.

Portfolio One

The growth portfolio has a value

This article was written by

Larry Smith profile picture
Husband, father of three, grandfather of four and long time investor. Bought my first stock at 16 years old, it was called Unishops and it went bankrupt. I kept on investing and now have a decent size portfolio. Best investing book I ever read was "The Future for Investors" by Jeremy Siegel. I believe in companies that pay dividends, have strong cash flow and have some type of moat.

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