Oil titan John D. Rockefeller once quipped, “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” Decades later, significant appeal resides in dividend stocks as a way to generate truly passive income for daily living or continued reinvestment.
When it comes to generating income from investment assets, a lot of people tend to think first about bonds or other assets like real estate to meet their needs. Sadly, the fixed income payments from bonds are subject to the risk of inflation, which erodes our purchasing power. And while income from renting real property can be attractive, it is not without costs (insurance, maintenance, property taxes, etc.).
Enter stocks, where one can truly find passive income without even leaving their house. Of course, inflation affects all assets to some extent, but dividends are backed by corporate profits that have tended to keep step with (if not outpace) inflation over time.
Stability and Defensive Attributes:
Dividend-paying companies are often well-established and financially stable. In addition to the income we receive, a company’s dividend track record might also say a thing or two about its stewardship of capital, durability and regard for shareholders. Indeed, a steadily rising dividend over the long haul often reflects a business that has endured varying business cycles, competitive threats and likely multiple leaders at its helm.
While dividend payments from common stock ownership are not contractually obligated like the coupons from bonds, dividends from stocks can not only be a source of income to pay the bills but can also be reinvested to compound investment returns over time.
Sticking only to stocks that pay a dividend, or even those with the highest payouts relative to their prices is not a panacea, we tend to agree with Peter Lynch that “Gentlemen who prefer bonds don’t know what they’re missing.”
For those who find Value in adding dividend stocks to their portfolio, we present 5 stocks with long-term dividend track records for consideration.