I like dividends.
I like the money coming in and buying me more shares “for free”. I don’t just buy dividend stocks though, I index and buy growth too.
I do like to read about the people who focus just on dividend stocks. Most of them are dividend growth investors. Quite a few only buy Dividend Aristocrats, companies who have raised their dividends for at least the last 25 years. There are just over 50 companies on that list currently.
I found that the approximate average yield and dividend growth rate for these companies is 3% and 5% respectively.
I also see high yielding dividend companies with a coverable yield of 10% or so. (often REITs)
Running a calculator, I see that the average Aristocrat will reach a yield on cost (no dividend re-investment) of 10% in 25 years. Meanwhile, the 10% yielder with zero growth would have been giving a large dividend that whole time.
Yes, the Aristocrat will also see stock price gains while the other company might not.
But say $1,000 is invested and dividends are re-invested for 25 years, the Aristocrat investor would end up with an annual dividend of $410. The high yield investor would be at $1,111.
Besides the difference in risk, is there anything else that I am not comparing?