When I first started researching the dividend growth strategy back in early 2010 I became quite excited by what I found to be a very robust strategy. The tangible benefits of dividends are obvious: you collect real cash that you can easily touch and see. That tangibility allows one’s emotions to be less affected by the daily gyrations of the stock market. While for many it’s still tough to see their net worth fluctuate wildly, rising cash payouts that you can can either reinvest or use to pay for living expenses cushions the blows.
But I will admit that I was a bit confounded by the dividends themselves at first. Specifically, the relatively small amount of them.
I would look at Johnson & Johnson’s (JNJ) payout and see the $0.49 they were paying to shareholders quarterly (the dividend in early 2010) and wonder how someone is actually supposed to build wealth off of that. I mean we’re talking a little more than 50 cents here. Every three months?! What am I going to buy with that? A McNugget?
— Guru Focus