How does an investor achieve spectacular results over the long term? Well, I’d argue there are two main factors to consider. What you buy. And when you buy it. It’s all about investing in great businesses at opportune moments.

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When thinking about great businesses, my mind immediately races toward high-quality dividend growth stocks. These stocks represent equity in world-class enterprises paying reliable, rising dividends. They’re able to pay reliable, rising dividends because they’re producing the reliable, rising profits necessary to sustain those payments. Of course, the reliable, rising profits only come about when a company is doing all the right things. There are hundreds of these stocks listed on the Dividend Champions, Contenders, and Challengers list. That list contains invaluable data on US-listed stocks that have raised dividends each year for at least the last five consecutive years. Simply put, these are some of the best stocks in the world because they’re shares in some of the best businesses in the world.

I’ve personally invested in these stocks myself, building the FIRE Fund in the process. That’s my real-money dividend growth stock portfolio. And it generates enough five-figure passive dividend income for me to live off of.

So that’s the what, but the when is the other important factor. This comes down to valuation at the time of investment. Price is only what you pay. It’s value that you actually get. An undervalued dividend growth stock should provide a higher yield, greater long-term total return potential, and reduced risk. This is relative to what the same stock might otherwise provide if it were fairly valued or overvalued. Price and yield are inversely correlated. All else equal, a lower price will result in a higher yield. That higher yield correlates to greater long-term total return potential. This is because total return is simply the total income earned from an investment – capital gain plus investment income – over a period of time. Prospective investment income is boosted by the higher yield. But capital gain is also given a possible boost via the “upside” between a lower price paid and higher estimated intrinsic value. And that’s on top of whatever capital gain would ordinarily come about as a quality company naturally becomes worth more over time.

These dynamics should reduce risk. Undervaluation introduces a margin of safety. This is a “buffer” that protects the investor against unforeseen issues that could detrimentally lessen a company’s fair value. It’s protection against the possible downside. Buying high-quality dividend growth stocks when they’re undervalued positions investors to achieve spectacular results over the long term. With all of this in mind, let’s take a look at a high-quality dividend growth stock that appears to be undervalued right now. Check out the video for all of the details.