Successful long-term investing might seem complicated. But here’s the truth. It isn’t. It’s actually a lot more simple than it’s made out to be.
In all of the feedback I get from investors, one of the most common misperceptions I come across is that you have to look far and wide for great long-term investment ideas.
That you have to reinvent the wheel or find some secret gem out there that nobody knows about. Or that a well-known stock with 20 or 30 years of dividend growth under its belt has already seen its best days.
Well, that’s just not true. Dividend Aristocrats are obvious examples of why that’s not true.
These are stocks that have increased their dividends for 25 or more consecutive years. Some of them have been increasing their dividends for more than 50 straight years.
And even 20 or 30 years ago, when they’d already been growing their dividends for decades, many were still great long-term investments.
Today, I’m going to tell you about a Dividend Aristocrat that would have turned a single $5,000 investment into $3.2 million.
Ready? Let’s dig in.
The stock I’m going to tell you about would have turned only $5,000 into $3.2 million. That’s right. One single $5,000 investment. Then you never do anything again. And you end up with $3.2 million.
Sound too good to be true? It’s not.
You might be thinking that this stock must have been some under-the-radar name that nobody knew about. Or you had to invest in it 50 years ago, way before it was a Dividend Aristocrat.
Well, you would be wrong to think any of that.
The stock in question is Lowe’s (LOW). This stock is a king among Aristocrats – it’s been increasing its dividend for 59 consecutive years. That time frame spans wars, recessions, terrorist attacks, and even a recent pandemic. But Lowe’s kept on pumping out their growing dividend. That’s the kind of resiliency you want in your investments.
Yep. Again, even decades into growth, a company can have decades upon decades more to come. The world isn’t coming to an end, guys. Just think of where the world will be in 2100. More people buying more products and/or services at much higher prices than today. The best days for a lot of companies aren’t behind them. They’re ahead of them.
Want some details on how this happened? Here we go.
So if you had invested only $5,000 into Lowe’s in 1991 – that’s 30 years ago – that $5,000 would have compounded at an annual rate of 24.1% and turned that single $5,000 investment into more than $3 million.
Nope. Not true. Lowe’s had already hit 25 consecutive years of dividend raises in 1987. This stock already had almost 30 consecutive years of dividend raises in 1991. For example, General Dynamics (GD) has 30 consecutive years of dividend raises right now. And General Dynamics is a well-known Dividend Aristocrat today.
Lowe’s was already a pretty large business back in 1991.
They had over 300 stores at that time. For another comparison, Costco Wholesale (COST) has less than 600 warehouses in the USA right now. And it’s not like anyone’s never heard of Costco.
You don’t need to search far and wide for great long-term investment ideas.
Many are right under your nose. Could be the products and/or services you use every day. Think about the stores you shop at, the food you eat, the energy you use, and the electronics you’re using to watch this very video.
You can’t rack up a multi-decade track record of paying out ever-larger dividends by running a poor business. That’s not how it works. You have to run a wonderful business that’s providing the products and/or services the world demands in order to produce the reliable, rising profits necessary to fund reliable, rising dividends.
Could Lowe’s do amazing yet again over the next 30 years?
Why not? As we pointed out in a recent video, Lowe’s just increased their dividend by more than 33%. Almost 60 years into dividend growth, they pull that off. If that doesn’t scream “we’re still doing amazing all of these years later”, I’m not sure what will. Maybe you can find a hidden gem by looking under 1,000 rocks. But just know that you don’t necessarily have to do that. A lot of high-quality dividend growth stocks staring you in the face can, and often do, make for excellent long-term investments.
— Jason Fieber
P.S. If you’d like access to my entire six-figure dividend growth stock portfolio, as well as stock trades I make with my own money, I’ve made all of that available exclusively through Patreon.
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