The wealth destruction this year experienced by investors who held the hot stocks of 2021 has been brutal. A recent Wall Street Journal email noted how investors have now changed strategies in response – better late than never.
But if you really want to see long-term success in the rising-interest rate, high inflation, expensive-commodity era that’s coming…
You need to look at this dividend-focused investment strategy.
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Shares of companies paying big dividends to investors have trounced practically everything else this year.
The iShares Core High Dividend exchange-traded fund, which tracks 75 such stocks, is up 6.4% this year. That puts the fund far ahead of the S&P 500, which is down 9.8% in 2022.
The fund includes stocks like Exxon Mobil, which has a dividend yield of 3.8%; Johnson & Johnson, which has a yield of 2.5%; and Coca-Cola with a yield of 2.7%. All three are beating the market for the year.
The Journal didn’t include the fact that the fund (ticker: HDV) has been a long-term winner for investors. In 2021, the fund returned a not-to-shabby 20.0%. The fund has averaged a 10.3% average annual total return for the past decade. With the compound growth and dividends reinvested, an account would have grown by 180% over the decade.
You have to love the power of compounding and dividend reinvestment!
But as a dividend-focused investor, you can easily outperform an index fund, even one as successful as HDV. The fund has a current yield of 3.28%. The Stable Dividends category from my Dividend Hunter service has an average yield of 7.5%, and generates dividend growth similar to what the ETF will produce.
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