Dividend Stocks

Investing in stocks can be like buying a lottery ticket. You can have a very good reason to believe that a stock is going to rise. But ultimately, it amounts to speculation.

Investing in dividend stocks is more than speculation. It’s a good way to build long-term wealth.

Dividend stocks aren’t solely dependent on their share price rising or falling. When you buy a dividend stock, you know for sure that you’ll receive a steady stream of income—generally on a quarterly basis. If the market crashes and the share price begins to fall, you at least have a nice 3% or 4% yield (or higher) to soften the blow.

More often than not, you can trust a company that pays a dividend. Dividends are a measure of a company’s success and its commitment to shareholders. The companies that consistently grow their dividends are the ones whose sales and earnings are also growing. Companies that lose money or fail to grow are unable to consistently pay a dividend.

When a company pays a dividend—and especially if it makes an effort to increase that dividend every year—it shows that it cares about rewarding shareholders. Paying a dividend is also a savvy way to attract investors, which is why their share prices typically appreciate over time.

Dividend stocks aren’t going to make you rich overnight. But they can significantly build up your nest egg if you buy and hold them for years, or even decades.

Not all dividend payers build wealth. You need to search for investments with timelessness and longevity—companies that are sure to not only be around 20 or 30 years from now, but still thriving. Dividend stocks become more powerful, and usually make up a larger part of your annual return, the longer you hold on to them.

For example, if you had bought Wal-Mart (WMT) in April 1990, your current yield on cost would be about 19%. That means you’d be collecting 19% of the value of your original investment every year from dividends alone. If you’d invested $10,000, you’d now be collecting $1,921 in dividend payments every year.

With investments like these, it’s best to let your money work for you as long as possible.

That can mean riding out some tough times. Wal-Mart declined 23% during the 2000 bear market, for example. Selling would have saved you some money in the short term, but you also would have forfeited that 19% annual yield.

When buying dividend payers, you have two options. You can either collect the quarterly income or reinvest it to buy more shares. The latter is called a dividend reinvestment, and is an easy way to increase the value of your position without having to do much. You can always start collecting the dividends down the road when you need the income.

To help you find the best dividend stocks, we offer Cabot Dividend Investor, a service that has generated a back-tested 328% total return and a 14.1% yield since 2009.

Featured Stock Picks

Each write-up features commentary on the picks from one or more of our expert stock market analysts, as well as company details and a stock chart.


Three Dividend Aristocrats Behaving Like Growth Stocks

Dividend Aristocrats are known for their safety and decades of dividend growth, not market-beating share price appreciation. That's changed lately -- and these three dividend stalwarts are growing the fastest. »

Three Dividend Stocks that are Bucking the Market Collapse

The market is off to a rough start in 2016. But a small group of dividend stocks have performed well, and three of them are Cabot Dividend Investor picks. »

Five Reliable Dividend Growers that Yield More than the U.S. Treasury

Thanks to the Fed, U.S. Treasury bonds only yield 2% right now. Here are five reliable dividend growers that offer much better yields. »

Buy This, Not That: Johnson & Johnson (JNJ) vs. Church & Dwight (CHD)

Dividend aristocrat Johnson & Johnson (JNJ) is finally rallying this week. Is this a great opportunity to buy a dividend aristocrat on the cheap?»

Should You Buy Caterpillar (CAT) Today?

Caterpillar (CAT) stock has fallen 7% in two days after the company issued an earnings warning and announced over 10,000 job cuts last Thursday. Now at five-year lows, this could represent a once-in-a-decade buying opportunity in the blue-chip heavy machinery stock. »

Stock Picks

Loews Corp.

This undervalued stock has strong future earnings growth expectations.

Biogen

Biogen is the market-share leader in treating multiple sclerosis.

Weibo

One of Paul Godwin’s favorite stocks in his Cabot Emerging Markets Investor portfolio.

Cabot Wealth Advisory

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As Stock Market Trends Change, Invest in these New Leaders

By Michael Cintolo on September 22, 2016

History tells us that all stock market trends change, and if you don’t recognize the leaders of that change early, you risk missing out on the next big winners.Read More >

AMZN Stock vs. FB Stock: Which Is the Better Value Buy?

By J. Royden Ward on September 20, 2016

For the past five years, AMZN stock and FB stock have been two of the market's great growth stories. But could you make the case that either stock is still undervalued? Let’s break it down.Read More >