- Research shows investing in dividend-paying shares out-performed a portfolio of non-dividend paying stocks.
- But you can "super-charge" this investment strategy by sticking to consistent dividend growers only, a researcher says.
- He has compiled a list of stocks which are the most reliable dividend payers in SA.
There is only one investment strategy that beats investing in strong dividend payers: only investing in strong, reliable dividend payers.
We already know that dividend-paying shares are more likely to out-perform non-dividend paying shares in the long run.
Research shows that a portfolio of dividend paying stocks out-performed the portfolio of non-dividend paying stocks by a factor of over 3.3 times, which translates into a 1.48% total return advantage each year, says Dwayne van Vuuren, a researcher at Sharenet Analytics. And returns are generated with meaningfully less risk as measured by the standard deviation of monthly returns, especially during periods of economic recession.
But Van Vuuren says there is a "super-charged" version of this strategy: Investing in consistent dividend growers only. These companies never skip or withhold a dividend and their dividends need to be ever increasing, year after year.
If one re-invests these dividends back into the share, compounding snowballs the growth of your investment. Also, given that a company will pay a dividend if they think their profit will increase, a permanently growing dividend ensures that the company continues to grow.
Van Vuuren compiled a list of the South African companies which have been the most reliable dividend payers. These were the top ten on the list:
Shoprite and Sanlam: consistent dividend growth for 18 years
Naspers: consistent dividend growth for 16 years
EOH: consistent dividend growth for 15 years
AVI: consistent dividend growth for 11 years
Capitec: consistent dividend growth for 11 years
Richemont: consistent dividend growth for 8 years
FirstRand: consistent dividend growth for 8 years
Mondi: consistent dividend growth for 8 years
Santam: consistent dividend growth for 8 years
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