The standard playbook of simply allocating savings to fixed income upon reaching retirement could be more risky than in the past. So, how can investors build wealth over time and consistently grow income in a relatively low-risk equity strategy? We believe a disciplined dividend strategy that focuses on rising dividends produced by high-quality companies with growing free cash flow is a necessary component to accomplishing this goal, and should be a core part of any investors' asset allocation.
For long-term investors, dividends provide a source of repayment on their initial investment. The more they get up-front, the less they have to rely on less predictable capital appreciation for the cash return on their investment. As Exhibit 1 demonstrates, the standard deviation, or variability, of returns from capital appreciation is significantly higher than those from dividends.
Source: Seeking Alpha
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- What's Your Retirement Vision?
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- What's More Powerful Than Compound Interest?
- Dividends vs. Stock Buybacks
- 5 Lessons Learned About Investing In Dividend Growth Stocks
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