The stock market stumbled in early September as concerns about a slowing economy weighed on investors.
With the S&P 500 down 4.2% for the month, many are looking for more stable investment options. One strategy gaining attention is focusing on dividend stocks, which offer consistent income along with potential for growth.
Dividend-paying companies, especially those with a track record of growing their payouts, tend to perform well during periods of economic uncertainty. This is because these companies often have strong balance sheets and reliable cash flow, making them less vulnerable to market downturns.
In contrast, the SPDR S&P Dividend ETF (SDY), which focuses on Dividend Aristocrats—companies that have raised their dividends for 20 years or more—has averaged around 9% annually over the same period. Though both funds are made up of high-quality stocks, Browne favors VIG for its more balanced approach.
Stock Picks for Dividend Growth
For investors seeking alternatives to ETFs, several high-quality dividend stocks stand out. Companies like McDonald's (MCD), UnitedHealth Group (UNH), AbbVie (ABBV), and Procter & Gamble (PG) offer both attractive dividend yields and strong growth potential.
These stocks have shown consistent dividend increases, with an average yield of 2.5%. Over the past year, they have each raised their dividends by at least 10%, providing reliable income in uncertain times. In addition to their dividend growth, these companies are projected to grow earnings at a double-digit pace over the next 12 months, making them a solid choice for investors seeking both stability and upside potential.
These four companies have proven track records of navigating economic cycles, with steady cash flow and strong market positions that support continued dividend growth. This makes them ideal candidates for those looking to build a portfolio focused on long-term income and capital appreciation.
Why Dividend Growth Beats High Yield
While high-yield dividend stocks may seem attractive, growth-focused dividend stocks could be a better bet. According to Jason Browne, president of Alexis Investment Partners, "Dividend growth is especially appealing when growth slows." He recommends focusing on companies that consistently increase their dividends rather than those offering the highest yields.
The Vanguard Dividend Appreciation Index Fund ETF (VIG), which tracks companies that have increased dividends for at least 10 years, is one of his top picks. It provides exposure to steady, reliable companies without the risk associated with chasing high yields. Over the past five years, the ETF has delivered an average annual return of 13%, outperforming other dividend-focused funds.
While high-yield dividend stocks may seem attractive, growth-focused dividend stocks could be a better bet. According to Jason Browne, president of Alexis Investment Partners, "Dividend growth is especially appealing when growth slows." He recommends focusing on companies that consistently increase their dividends rather than those offering the highest yields.
The Vanguard Dividend Appreciation Index Fund ETF (VIG), which tracks companies that have increased dividends for at least 10 years, is one of his top picks. It provides exposure to steady, reliable companies without the risk associated with chasing high yields. Over the past five years, the ETF has delivered an average annual return of 13%, outperforming other dividend-focused funds.
In contrast, the SPDR S&P Dividend ETF (SDY), which focuses on Dividend Aristocrats—companies that have raised their dividends for 20 years or more—has averaged around 9% annually over the same period. Though both funds are made up of high-quality stocks, Browne favors VIG for its more balanced approach.
Stock Picks for Dividend Growth
For investors seeking alternatives to ETFs, several high-quality dividend stocks stand out. Companies like McDonald's (MCD), UnitedHealth Group (UNH), AbbVie (ABBV), and Procter & Gamble (PG) offer both attractive dividend yields and strong growth potential.
These stocks have shown consistent dividend increases, with an average yield of 2.5%. Over the past year, they have each raised their dividends by at least 10%, providing reliable income in uncertain times. In addition to their dividend growth, these companies are projected to grow earnings at a double-digit pace over the next 12 months, making them a solid choice for investors seeking both stability and upside potential.
These four companies have proven track records of navigating economic cycles, with steady cash flow and strong market positions that support continued dividend growth. This makes them ideal candidates for those looking to build a portfolio focused on long-term income and capital appreciation.
Stability in Uncertain Times
As investors grapple with market volatility and economic uncertainty, dividend stocks offer a reliable way to weather the storm. Whether through diversified ETFs like VIG or individual stock picks with strong growth potential, dividends provide a steady stream of income and a measure of protection against market downturns.
While no investment is risk-free, focusing on companies with a solid track record of dividend growth can help investors stay the course in turbulent times.
As investors grapple with market volatility and economic uncertainty, dividend stocks offer a reliable way to weather the storm. Whether through diversified ETFs like VIG or individual stock picks with strong growth potential, dividends provide a steady stream of income and a measure of protection against market downturns.
While no investment is risk-free, focusing on companies with a solid track record of dividend growth can help investors stay the course in turbulent times.
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