How To Be David To Wall Street’s Goliath

Take Prudential Financial (NYSE: PRU), for example. It’s not exactly a high-flying stock. No one is going to mistake Prudential for Tesla (Nasdaq: TSLA).

But Prudential has raised its dividend for 13 straight years. While today it yields 5%, if you’d bought the stock 10 years ago, you’d be sitting on a yield of 7.5% – which is almost the annual return of the S&P 500 each year.

So just by sitting and collecting the dividend, you’re pretty much matching the market’s performance.

While institutional traders are slugging it out with each other, trying to get every dollar advantage they can to try to beat their indexes, long-term owners of Perpetual Dividend Raisers often match or beat the S&P with their dividends alone.

Then, when the stocks increase in price, their performance really shines…

The S&P 500 Dividend Aristocrats Index, which is made up of S&P 500 companies that have raised their dividends for 25 years in a row, beats the pants off the S&P 500.

Over the past 20 years, the average 10-year rolling return for the Dividend Aristocrats is 183%. For the S&P 500, it’s 109%.

In other words, over 10-year periods, if you invested in the S&P, you did just a little better than doubling your money. If you invested in Dividend Aristocrats, you nearly tripled it.

10-Year Rolling Returns

That means Dividend Aristocrats outperformed the S&P 500 by a compound annual growth rate of 5.6% per year. If a fund manager beat the S&P by 5.6% per year for 10 years, they’d be considered a rock star in the industry.

Yet as an individual investor, all you have to do is invest in these types of companies, and you can easily be the rock star.

Most professional investors actively trade stocks, constantly looking for “alpha,” which is excess return on investment. It’s how their performance is measured and what their bonuses are based on.

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