King of Dividends: How Consistency and Growth Come Together

Investors looking to navigate the complexities of the stock markets should not underestimate the principle of consistency, especially when it comes to dividend stocks. While growth stocks often promise excessive gains, they also tend to be volatile. In contrast, dividend stocks offer more appealing predictability and are often targeted by investors seeking to secure their financial goals or bolster their retirement income. It turns out that the best dividend stocks are often also the most consistent. The dividend yield is a crucial factor here. It results from a company's annual dividend payment divided by its market value, or simply: dividend per share divided by the stock price. The ideal scenario is a company that regularly and substantially increases its dividend while simultaneously increasing its value—this results in a higher yield for shareholders. A prominent example is Walmart. Despite a remarkable price increase of 88.3% over the past year, Walmart's dividend yield has dropped to below 1%. This impressively demonstrates that the stock performance has significantly increased while also altering the passive income stream. Costco has also outperformed the market in terms of earnings, albeit with a special dividend policy. The company is known for paying out large, one-time special dividends when it has optimized its cash reserves. Interestingly, Sherwin-Williams has increased its dividend by 18.2% this year and ranks among the market's top performers. The company has more than tripled its dividend over the past ten years, while the stock price has quadrupled. Microsoft is another example of a company that consistently increases its dividend and buys back shares, offering a yield of 0.8%. These companies, including Walmart, Costco, Sherwin-Williams, and Microsoft, may not offer high yields for new investors today, but long-term investors benefit from high yields on a cost basis. This metric highlights that the true value of a stock can far exceed its current dividend yield.