Build an all-weather portfolio with Dividend Aristocrats

Stock investing is one of the best and proven approaches to building personal wealth. Very few other asset classes can demonstrate such a good performance over the long term. Still, stock investors risk their invested capital today hoping to bag big profits in the future. There is no guarantee or safety net to prevent from unexpected losses. Buying a stock, even the most conservative stock, carries a risk and is a bet on future profits. And this is the reason why many long-term investors turn to dividend-paying stocks. Not only do these stocks generate income in the near term but they are also among the best stocks to own in general.

Dividends are income paid to shareholders. That makes frequency of payments a key factor in differentiating between low- and high-quality dividend-paying stocks. The best ones typically pay their shareholders on a regular basis, either annually, quarterly or sometimes even monthly.

The amount of the pay out matters too. A simple gauge of this is a stock’s dividend yield (dividend per share calculated on an annual basis divided by the price per share).

The very best-case scenario is, that the dividend is paid consistently and increases over time causing the yield on your principal to rise. You can turn tosStocks with 25 or more consecutive years of dividend growth, commonly called Dividend Aristocrats. A consistently rising dividend signals strong underlying financials, a reason why Dividend Aristocrats have outperformed the S&P 500 over the past 20-plus years. By reinvesting the dividends you can supercharge the stocks’ performance over the long term.

You can use these high-quality dividend payers to build an the all-weather stock portfolio. Not only have they proved able to deliver strong, long-term growth to a portfolio, but they can also provide stability thanks to their dividend pay outs and their increased appeal during bear markets.

Sven Franssen