5 Reasons To Be A Dividend Growth Investor

5) Being a Dividend Growth Investor can Help You Earn a Return No Matter What Stock Prices are Doing

When you adopt a long-term, value-oriented dividend growth mindset, it becomes so much easier to grow your wealth and income over time. Take some of Warren Buffett’s advice:

“Owners of stocks, however, too often let the capricious and often irrational behavior of their fellow owners cause them to behave irrationally as well. Because there is so much chatter about markets, the economy, interest rates, price behavior of stocks, etc., some investors believe it is important to listen to pundits – and, worse yet, important to consider acting upon their comments.

 

Those people who can sit quietly for decades when they own a farm or apartment house too often become frenetic when they are exposed to a stream of stock quotations and accompanying commentators delivering an implied message of “Don’t just sit there, do something.” For these investors, liquidity is transformed from the unqualified benefit it should be to a curse.” – Warren Buffett

And that’s not just from an overall portfolio perspective either. Take one of the Real Estate Investment Trusts, or REITs (2), in our Conservative Retirees dividend portfolio: Omega Healthcare Investors Inc (NYSE:OHI). This is a seemingly undervalued skilled nursing facility (SNF) REIT which, due to market concerns over the ever present risk of changes in government healthcare policy, was recently yielding 8.5%.

When you dig into the company’s fundamentals, you find what appears to be an industry blue chip, with a conservative management team, strong balance sheet, and one of the most impressive dividend growth streaks across all REITs.

But despite the company’s opportunities, there is a chance that Wall Street will never value Omega Healthcare Investors Inc (NYSE:OHI) at close to its intrinsic value. However, as long as management continues to execute well and the dividend remains safe, a dividend growth investor can hope to make a reasonable, if not solid, return.

That’s because, if Omega’s shares remain cheap, then I can always reinvest the dividends back into ever more undervalued shares, each of which is paying a growing dividend.

In other words, through the power of hyper-compounding, whether Omega ever appreciates in value isn’t necessarily a concern, because either way, capital gains or an exponentially growing income stream, Omega Healthcare Investors Inc (NYSE:OHI) is likely to be a long-term wealth builder thanks to the power of compounding.

This example applies to virtually all dividend growth stocks, which, because they increase their payout to owners over time, help to separate long-term total returns from the vagaries of the market.

Remember that as long as the company’s underlying investment thesis remains intact (i.e. it’s able to grow its dividend sustainably and securely over time), it’s pretty hard to lose in the long-term…unless you allow your own emotions to get in the way of an exponentially growing income stream by selling for an emotional short-term reason.

Conclusion

At the end of the day, building wealth through the stock market is incredibly easy to do…in theory. The trouble is that human nature, impatience, unrealistic expectations, and taking advice from the wrong people (with different goals and time frames then you) can result in massive overtrading, high costs, and terrible underperformance over time.

But investing in dividend growth stocks can help you to avoid all of these pitfalls because they can help you to see your portfolio as not just a collection of digital symbols and randomly changing numbers on a computer screen, but real pieces of quality businesses.

In other words, being a dividend growth investor can potentially change your mindset from a short-term trader / speculator / gambler, and into a true investor; a business person whose portfolio represents a tangible cut of global corporate profits.

And in this way, dividend growth stocks can help you to avoid the silly, meaningless, and potentially harmful day-to-day movements of the market, which no one truly understands no matter how many PhDs they may have or how nice their Manhattan corporate office may be, and instead focus on investing for the long-term.

That is how regular people can get a piece of the American dream and achieve the kind of exponential increases in both income and wealth that can make you financially independent and help you live the life you and your family deserve. Whether you invest in dividend ETFs or individual dividend growth stocks (3), the key is to get started and stay disciplined to maximize the benefits of being a dividend growth investor.

Disclosure: None

Additional Links:

(1) http://www.simplysafedividends.com/living-off-dividends-retirement/

(2) http://www.simplysafedividends.com/real-estate-investment-trusts-reits/

(3) http://www.simplysafedividends.com/dividend-etfs/