It is a known fact that investing in dividend stocks as a long-term investment strategy is a good idea. Meanwhile, some people would want to see concrete examples so that they can see how it works but they continue to focus only on the top 5 dividend stocks, or perhaps even the top 10, when they should be interested in the stocks that are likely to last much longer. The examples of companies like Pepsi, Phillip Morris, and Johnson & Johnson are excellent ones.
Why the Top 5 Dividend Stocks Don’t Matter As Much:
Johnson & Johnson is one of the best examples why investors need not focus on the top dividend stocks. It is one of the best dividend payers and one that everybody should consider buying right now. 20 years ago, you would have paid around $6,750 to purchase 100 shares. Had you reinvested those dividends into the stock again, you would have around 1,200 shares today, and the price would be around $68,0000. That is ten times the original investment. These would have also paid dividends of at least $2,500 each year, which means they would have given you a 40% yield. That is impressive!
There are other examples as well, and those prove that what the top 5 dividend stocks right now is far less important. It is all about future projection. Take Pepsi, for instance. They trade for approximately $70, paying a $2.06 dividend with a 2.9% yield. That doesn’t sound awesome. However, in March 1980, Pepsi’s stock was worth just $24. It did not take three decades to go up in price. Instead, growth has been far greater. If we adjust that price in March for stock splits and dividends, it was actually trading at $0.59, with a $0.01583 dividend and 2.7% yield. The yield hasn’t changed much, therefore, but the stock price effectively went from $0.59 to $70. Meanwhile, the dividend went from nearly nothing to over $2. That is really significant growth.
Phillip Morris is no different. Had you invested $2,000 in the company in 1980, you would now have some $670,000. Your dividends would be some $9,600 per year. You see how important it is to not just consider what is popular now, but what is likely to remain popular over the years?
What You Need to Do:
Hundreds of these examples exist, all of well known companies that now generally don’t even make the cut of top 5 dividend stocks anymore because they are simply too expensive. What you need to do, therefore, is figure out which companies today will be the Pepsi, Phillip Morris, and Johnson & Johnson in three decades. You need to have the patience to invest today, and watch things grow over the next 30 years so that you really have a solid investment. The difficulty, of course, is identifying those stocks. But overall, the recommendation is to not go for what happens to be flavor of the month, but rather to find something that is predicted to have a good future.
The Top 5 highest dividend stocks according to our staff are:
1. Southwest (LUV)
2. Nike Inc. (NKE)
3. Johnson & Johnson (JNJ)
4. Home Depot (HD)
5. AT&T (T)
