To celebrate my son's third birthday, I'm giving him an
unusual gift this year. It's an investment in his future, and one
that you may want to consider for your kids or grandchildren
As excited as I was to see the grin on his face when he opened
his big birthday gift, a kid-sized John Deere tractor, the "real"
gift is much more meaningful. And I know that in 10 or 20 years,
he'll be thanking me.
That's because I'm making a small investment in his
future. I'll be buying a select group of stocks that almost
always outperform the stock market. It's just the right
kind of investment for someone with a long time horizon.
The stocks that I'll be buying for my son are "dividend
These are companies that have a history of increasing the size
of their dividend payments. They're financially fit and
committed to returning capital to shareholders. As a result, they
return more profits in the form of dividend payments
Now, these stocks often aren't the highest yielding stocks.
And some of them frankly have low dividend yields of just 1 - 3%.
But the yield isn't what matters.
While the dividends help contribute to the gains, the real
profits are from capital gains. That's because a company that
regularly raises it's dividend by 10% every year will likely see
it's stock increase by about 10% too. And when you add that
capital gain and the dividend yield, you get a market beating
Data from investment firms BlackRock and Deutsche Bank found
that since 1986, S&P 500 stocks with the highest dividend
growth rates fared best.
The firms reported that the fastest dividend growers
delivered total returns of 20.5% versus 13% gains from the
highest yielding stocks.
For someone like my three-year old son - with a very long time
horizon - investing for total return makes the most sense. After
all, he doesn't need the income today to pay his bills.
In short, I'll be opening up an online brokerage account for
my son, and buying shares of a handful of dividend growers. In
addition to buying the stocks, I'll be enrolling him in the
divided reinvestment program of each company.
Of course, I could just buy an ETF of dividend growers - like
PowerShares Dividend Achievers (
Morningstar Dividend Leaders (
However, I personally prefer handpicking stocks that will be
thriving in the years to come, and growing their dividends along
I know first hand that owning dividend growers, reinvesting
the dividends, and holding onto those stocks for 10 or 15 years
is a great way to build meaningful wealth.
After all, this was exactly what my grandparents did in the
early 1980s when they gave me a few shares of Exxon. That small
gift grew considerably in value, and kicked off my passion for
the stock market at a young age. But I'll tell you that
story another day…I hope that by giving my son a similar gift, he
too will begin building wealth from a young age.
If you have young people in your life, even a token investment
in one of these dividend growers could make a huge difference in
their lives. And you don't have to be rich to give this gift.
If you've made investments for your children or grandchildren,
I would love to hear from you. What stocks have you bought for
your family members? Drop me an email to share your story.
You can reach me at email@example.com
P.S. It'll be a short week here at Wyatt Investment
Research. Our office will be closed on July 4
in observation of the Independence Day holiday in the U.S. You
can expect to receive
Income & Prosperity
Monday through Wednesday this week.