IFB49: The Massive Potential of Undervalued Dividend Aristocrats

Welcome to episode 49 of the Investing for Beginners podcast. In today’s show, Andrew speaks to Nick McCallum from Sure Dividend.
You might remember Ben Reynolds from episode 7; Ben’s the founder of suredividend.com.  Nick writes for him, and together they are starting a new podcast called the sure investing podcast. And so you know I’m kind of friends with Ben, and we’ve been going back and forth so I thought it’d be a good time to release this episode.
This interview that I’m going to do here with Nick around the same time that Ben and Nick are releasing their podcasts out into the world. It would be a great opportunity for you guys to check them out and if you’re at all interested in dividends you can listen to Ben’s interview, we did in episode 7.
Listen to today’s interview and get a lot of insights on the power of basically combining value stocks and dividend stocks and creating the best types of compounding interest and wealth that you can.
Andrew: To start off first off thank you, Nick, for coming on.
Nick: my pleasure I’m excited to be here.
Andrew: and one of my favorite articles you wrote it is called the better investment dividend stocks or growth stocks. I love that idea because especially in today’s environment everybody, and it doesn’t matter what asset class we’re talking about. Everybody wants to gravitate towards capital appreciation everybody wants to talk about what has doubled what’s tripled what’s could triple.
Obviously, we thought with all the tech stocks today we saw biotech in previous years, and we see it with the crypto, and it has fallen off a bit. But you see a lot of momentum build on itself, and a lot of that momentum when you’re talking about the stock market starts from these companies that might not necessarily be so profitable, but they’re growing at a fast rate in whatever metric Wall Street likes to use for the day.
Basically these growth stocks create really big increases in share price, and it creates a sort of craze, and you can see a lot of these different bubbles and you kind of get like that contrasted with a dividend stock where people might think that that’s maybe a little bit more boring.
Have you done any research on dividend stocks versus growth stocks and maybe what were some of the simple findings you got from that and we can kind of take that more in depth from there.
Nick: well I guess the first thing that’s worth pointing out is that the whole stigma of dividend stocks versus growth stocks is a little bit misleading because there are growth stocks that pay dividends. And there are dividend stocks that are growing, and I would say there are quite a few stocks that meet those criteria.
the research that we’ve done suggests that dividend stocks tend to be better than growth stocks and in fact, stocks with higher yields tend to perform better than stocks with your lower yields almost being equal.
Now we’ve seen evidence that says the highest-yielding quintile of stocks that performs the lowest yielding quintile stocks by about 2% per year over long periods of time. We’ve also seen evidence that says stocks that grow their dividends beats those with unchanging dividends by two and a half percent per year.
I think that that that description of stocks that grow their dividends over time is the sweet spot between dividend stocks and growth stocks and you could say you know classify them as dividend growth stocks.
I think that they get the benefits of both dividend stocks and growth stocks and they also capture other unintended benefits that aren’t characterized in another one of those other two groups.
Andrew: do you have any examples off the top of your head of some stocks that we’ve seen in the past that were able ...