Is 50 Too Old To Start Investing?

By this point in your life, you may have had some decent raises or job changes that resulted in nice salary jumps, or you may be in a position that gives you an annual bonus. You may have extra cash that can be directed towards investing. As you are well aware, my personal favorite is dividend growth stocks.

Today, the cost of buying dividend growth stocks has been reduced to almost zero with no commissions. I remember paying $21.95 per trade in commissions when I first started buying stocks. But at $0 for commissions, you can buy smaller blocks of stocks much more easily without raising the cost basis.

So, for arguments sake, let’s say that you are buying $300 of stock per month starting at age 50. The stock share price is $50 with a dividend yield of 3%, the dividend grows by 4% per year, and the share price appreciates 5% annually. Your dividend tax rate is 15% and you reinvest the dividends that you receive.

At age 65, you have a little over $103,000. The annualized rate of return is 6.14%; not great, but we were very conservative in our assumptions. But the best part is that you are getting over $5,700 in dividends each year. I used the dividend calculator at MarketBeat for this.

Final Thoughts On Is 50 Years Too Old to Start Investing

Overall, I think the general path many people follow is to start saving for an emergency fund, then save for retirement, and then investing. There are advantages and a few risks of dividend growth investing that I have outlined previously. But the nice part is clear from the given examples. After 65 years, you are getting $5,700 in dividends, which is more than 4% of $103,000, if you follow the 4% rule.

Getting to the first $100,00 is the hardest, but it snowballs after that as the power of compounding takes effect. So, the answer is no, 50 years old is not too old to start investing.

Chart or Table of the Week

Stocks have bounced back and then some since the near-term low in early-March 2021. Many stocks that were punished from 2019 to 2020 are doing well. Tech stocks have declined, but coming down from a P/E ratio of ~100 to ~70 does not make them undervalued. However, there are still stocks to find.

In this text, I will highlight 3M Company (MMM), which I am long on and have written about extensively in the past. The company is one of the largest industrial conglomerates in the U.S. with a market capitalization of over $111 billion and sales of over $32 billion in 2020. 3M has well-known brands including Post-it, Filtrete, Command, Scotch, Nexcare, Ace, Scotch-Brite, and others.

The stock is yielding about 3.1% and the payout ratio is decent at about 62%. 3M is well known as a Dividend King with 62 years of consecutive annual dividend growth.

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Source: Stock Rover

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Disclosure: Divided Power has partnered with Sure Dividend, which is one of the best newsletters for dividend investing. The newsletter comes out monthly and highlights their top 10 ...

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