We firmly believe that investors looking to generate superior returns over the long-term, without taking excessive risks, should focus on high-quality dividend growth stocks.
This is why we focus on the Dividend Aristocrats. The Dividend Aristocrats are a select group of 65 S&P 500 stocks with 25+ years of consecutive dividend increases.
The requirements to be a Dividend Aristocrat are:
– Be in the S&P 500 – Have 25+ consecutive years of dividend increases – Meet certain minimum size & liquidity requirements
There is a significant body of empirical research to suggest that buying stocks with low valuation multiples leads to better returns than buying stocks with high valuation multiples.
This was especially true from 1975-2010, when stocks with low price-to-earnings ratios significantly outperformed stocks with higher price-to-earnings ratios.
As an example of this trend, consider research from Brandes Investment Partners
It showed that the lowest decile of price-to-earnings ratio stocks outperformed the highest decile of price-to-earnings ratio stocks by 10.1% per year between 1975 and 2010.
The obvious benefit of investing in dividend stocks is they allow you to generate a passive income stream from your investment portfolio.