It’s not as simple as just focusing on dividend or growth investing. What are the fundamentals of the business underlying a stock? It’s important not to overpay for a business. For dividend investing, there are ways to improve the safety of your dividend.
Dividend-paying multi-baggers that are priced for purchase today will be used as examples, including one Canadian Basic Materials company and one U.S. company.
I came across an article written by Financial Samurai (or Sam), who worked in the finance industry for 13 years. The article was titled: Why It’s Better To Invest In Growth Stocks Over Dividend Stocks For Younger Investors.
It takes a lot of capital to generate meaningful income
Sam starts off saying: “Even if you have a $500,000 dividend stock portfolio yielding 3% that’s only $15,000 a year.”
Indeed, there are different ways to double your money. It’s a matter of if you want to focus more on income or growth.
Young people are better off focusing on growth stocks
Sam opines that:
“If you’re relatively young, say under 40 years old, investing the majority of your equity exposure in dividend yielding stocks is a suboptimal investment strategy.”
He continues that:
“Out of the few multi-bagger return stocks I’ve had over the past 16 years, none of them have been dividend stocks.”
Although none of the multi-baggers he owned were dividend stocks, there are always examples if you look for them.