Why, At 28, I'm Going With Dividends

Jan. 11, 2012 4:17 PM ETMSFT, MMM, NFLX, TGT, JNJ, AEO, DOV244 Comments
Pey Shadzi profile picture
Pey Shadzi

Recently, at my ten-year high school reunion, I sat down with a few beers and a group of my high school buddies. After reminiscing for about an hour or two about the "good 'ol days" and how much trouble we often found ourselves in, the conversation inevitably drifted towards investing. Seeing we all grew up in the era of The Great Recession, it never hurts to plan for the future, right?

"What are your strategies? Which companies are looking good? Which ones are you buying? Have you checked out this one?"

I'll admit it: despite only being 28, I often loathe talking with younger investors about strategies because, after hearing I'm a value investor who seeks high quality, dividend-paying companies, they often begin instantly grilling me questions:

"Buy why dividends? You're too young to be an income investor! Don't you know growth stocks are better suited for young people?"

I'm here to tell you, fellas, that dividends aren't just for Warren Buffett and retirees. Dividends have the power to support your goals of becoming independently wealthy.

Here are three reasons why:

  1. Companies that pay dividends usually have more money than they know what to do with. Ironically, when a company dishes out billions of dollars to investors annually in the form of dividends, you might consider they're making too much money. In other words, their profits are so juicy that they're free to distribute excess cash to one of their most prized possessions: you, the shareholder. Target (TGT) has been paying dividends every single year since 1965. They've been raising their dividend annually for nearly 45 years. Now that's commitment.
  2. Companies that pay dividends are often here to stay. Sure, there are a few exceptions, but for the most part companies with long, sustainable histories of paying dividends, such as 3M

This article was written by

Pey Shadzi profile picture
I'm an investor in his late thirties who knows how to have a good time and not live life too seriously. I'm an avid value investor, along with dollar cost averaging my retirement, though I occasionally jump off the beaten path and "gamble" on less certain assets.

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