Dividend Paying Companies

Last Wednesday, I talked about a stock I had invested in that was a dividend paying stock that did not make it on such lists as Dividend Achievers. I got this stock from Mike Higgs’ list of dividend paying growth stocks. It is a different approach than the Dividend Achievers list. See Mike Higgs’ site at http://www.dividendgrowth.org/Report.htm.

What is the relative advantage of this stock? A great dividend stocks gives an average long term return of 10%. By long term, I mean 10 years at a minimum. Emera gives a long term dividend return of 4%. The other portion of the return would be capital gain. Capital gain or loss increases or decreases the value of your portfolio. In this case, you would expect an average capital gain of 6% on this stock. However, capital gain is very volatile whereby some years you would earn a lot more capital gain and some years a lot less capital gain. Some capital gain would involve a negative capital gain (or a capital loss).

For the Dividend Achievers, their dividend returns is usually about 2%. So for these stocks you would get 2% dividend return and 8% capital gain. Here again the capital gain would be volatile. So what is better? How do you feel about these scenarios?

What I am suggesting is that investing using Dividend Achievers’ list is not the only way to go. It is a good idea, but it is not the only good idea in investing in Dividend Paying stocks. Maybe a mix of these stocks might be a better approach. You might be well advised to look at Mike’s list.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on my web site.