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If you need income now, high yield stocks are the way to go.
But if you don’t need the income today, dividend growers can give you a lot more cash in the future.
Today we’re going to look at the earnings updates of 3 stocks with secular tailwinds that should be able to keep growing their dividends for a long time.
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First, let’s look at an example of why dividend growth can be so powerful.
If you invested $10,000 into Lowe’s ($LOW) and Verizon ($VZ) in August of 2016, here’s what that would have bought you:
Lowe’s (LOW): 122.37 shares (at $81.72)
Verizon (VZ): 186.39 shares (at $53.65)
The dividends would have looked like this:
Lowe’s (LOW): $1.26 (1.54% yield)
Yearly income: $154.19
Verizon (VZ): $2.27 (4.23% yield)
Yearly income: $423.10
Over the next 10 years, Lowe’s dividend grew 7.5x (!) faster than Verizon’s.
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So if you just bought and held, here’s how your income would have grown:
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By 2024, the Lowe’s investment was generating more income than the Verizon investment because of the strong dividend growth.
Even more impressive is the yield on cost:
Lowe’s:
Bought at: $81.72
Current DPS: $4.80
Yield on Cost: 5.87%
Verizon:
Bought at: $53.65
Current DPS: $2.83
Yield on Cost: 5.27%
The Power of Secular Tailwinds
A secular tailwind is a big, long-term shift that keeps an industry growing.
Think about the aging population, the global rise of the middle class, or the transition to digital payments.
These things are structural changes that will last decades.
And when a company has one behind it, growth is much easier.
Amazon is an amazing company.
Between 2014 and today, the stock has grown at 23% per year.
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