Each investor needs to balance yield and growth. If you put all your efforts into stocks with a high yield but no growth, you could also buy a high-yield bond. It seems to be much safer because dividends might be cut to satisfy bond holders and to pay debt down.
A growth strategy might work better; just think on Twitter, Facebook or the other unicorns on the market. But do you believe that billions of market valuations in a few years should be sustainable when the corporate has nothing to sell. The only asset unicorns have is a fast growing customer base. Often they have no clue about how they can make with them.
In addition, a company that earns money but did not give anything back to shareholders is also risky. Your wealth depends on high stock prices. I there is a crises, you might get some trouble.
A right way in my view is to find the right mix of growth and dividend payments. Below, you can find a good list of a portfolio that has a solid growth rate and pays a nice dividend per year.
You might see, the higher the growth at a high initial yield, the bigger the final value in the end. If you find investments with a 4% initial yield that grows dividends by 12% yearly, your 100k portfolio will end in USD 1.6 million in 30 years.
|How Your Investment Portfolio Grows |
When You Bet On Dividend Growth Stocks
(click to enlarge)
The results of the spreadsheet are shown above for the value of a portfolio with initial capital $100,000 after 30 years. The initial dividend yield ranges from 1% to 4% while the dividend growth rate ranges from 2% to 12%.
In the following week I like to show you those stocks that have achieved a 12% Growth rate in the past 10 years while paying yields over 4%.