These Stocks Give You Twice The Yield Of The Dividend Aristocrats

ith the near term potential of an economic recession at the front of investor’s minds, I see more and more recommendations to invest in “Dividend Aristocrat” types of stocks.

These are companies that have paid growing dividends for years and give investors faith that their stock market investments will emerge relatively unscathed after the stock market passes through the next big market downturn. For buy-and-hold investors, a dividend growth-focused strategy is a proven winner. 

The challenge with the widely recognized and held dividend aristocrat type stocks is just that. They are popular, and with the market near all-time highs, carry low current dividend yields. These stocks typically carry yields ranging from the high one percent range up to around 3%. We live in a low-interest rate world, so it’s easy to understand how investors who follow the usual financial news outlets would believe that 2% to 2.5% yields on their “safe” income stocks are acceptable.

I blame a lot on the mainstream financial news. One bad trait is that the focus is always on a small number of well know, or recent IPO stocks. There are hundreds if not thousands of stocks that get little or no attention from the financial news outlets. My colleague Eddy Elfenbein just launched a newsletter focused on them.

One other point to consider is that historically, across major stock market indexes, between 30% and 95% of the long-term total return from stocks can be attributed to dividend income and reinvested dividends. The range of dividend portion of total returns depends on the period you pick. It’s important that dividend income plays a big role in the overall return you will earn during a lifetime of stock market investing.

With that as our background, I would like to suggest that investing in stocks with a higher yield than the 2% to 2.5% average of the well-known blue-chips will likely produce superior returns compared to a portfolio of dividend aristocrats. For some examples, here are three dividend growth stocks with current yields well above the yields we have discussed so far. I am looking for yields that are double the blue-chip average.

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Disclaimer: The information contained in this article is neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its ...

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