McDonald’s Corporation (MCD), Johnson & Johnson (JNJ): The Simplicity Of Investing: What Wall Street Does Not Want You To Know

Johnson and Johnson’s dividend has gone up during market crashes as well as good times. The increases are highly likely to continue, based on future earnings projections and its free cash flow growth of over 7 percent per year. Its modest payout ratio is approximately 62 percent, which gives investors insight into the high likelihood of future dividend hikes.

Johnson and Johnson went from a high of $71.55 to a March 2009 low of $47.97, or a 32.9 percent drop in price. Investors who were able to muster up the courage to buy more near these lows were able to capture over a 5 percent dividend from this strong dividend provider. It is extremely likely that a young investor who has a 40-year time horizon will see their original investment become their annual dividend. Investors who were able to capture these accidental high yielders are in terrific shape, as companies such as Johson & Jonhson and McDonald’s Corporation (NYSE:MCD) continue to increase dividends for shareholders.

Johnson & Johnson (NYSE:JNJ) Dividend Hike History

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Investors must have a different mindset when buying dividend growth stocks. The capital appreciation is not the main focus when buying these companies, as it often is on Wall Street. Dividend growth investors should be ecstatic when the market provides pullbacks and opportunities for new entry points–it just means they can buy more shares for cheap.

Finding multi-baggers is a rarity, and searching for them poses a great deal of risk when investors are aspiring to hit home runs all the time. Stick to a dividend reinvestment plan that includes strong, fundamentally sound companies like the ones highlighted above. This will give you a peace of mind, as well as enormous financial freedom.

The article The Simplicity Of Investing: What Wall Street Does Not Want You To Know originally appeared on Fool.com and is written by David Schneider.

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