The Growing Power of Dividends

Learn everything you need to know in '7 Winning Strategies for Dividend Investors' for FREE from The Successful Investor.

The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.

Topic: Dividend Stocks

Learn how to find the best stocks to follow for growth, value, and long-term returns

Discover the best stocks to follow, including dividend-paying blue-chip stocks, growth stocks, and ETFs, to develop a diversified portfolio with great prospects

You have to learn a lot of things to become a successful investor, and few people learn them all in any logical progression. Instead, most of us move from one subject of interest to another, with a lot of zigs and zags in between.

But by following our conservative philosophy, you can attain what we’d call the best of all possible investment worlds: a heads-you-win, tails-you-break-even situation. When times are good, it can be extraordinarily profitable. But during the inevitable market downturns, it cuts your losses and leaves you well positioned to profit again in the inevitable recovery.

The Growing Power of Dividends

Learn everything you need to know in '7 Winning Strategies for Dividend Investors' for FREE from The Successful Investor.

The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.

Blue chip companies are some of the best stocks to follow and invest in for maximum gains

We believe that investors should devote the biggest part of their portfolios to large, well-established “blue chip” securities. At the same time, though, a strong portfolio anchored with blue chip stocks also offers the opportunity to invest a smaller part of your portfolio in promising smaller companies without subjecting yourself to excessive overall risk. And the best of these smaller companies may one day grow into blue chips themselves.

We advise investors to look for top-performing stocks among blue chip companies that are likely to pay off if business and the stock market are good—but that won’t hurt them too much during those inevitable periods when business or the markets are bad.

In a deep or long-lasting market setback, your blue chip stocks will tend to go down, along with everybody else’s stocks. But we think they will go down less, and recover sooner.

Recognize that the best stocks to invest in have consistently paid dividends for many years and will likely continue to do so

When you pick the best income stocks, you are, for the most part, investing in the safest and most secure companies. That’s in large part because of the dividends that the best income stocks pay. Dividends, after all, are much more stable than earnings projections. What’s more, dividends are impossible to fake; either the company has the cash to pay dividends or it doesn’t.

Look for aggressive growth stocks with hidden value to add to your portfolio returns

We also recommend looking for value from individual stocks that attract far less investor attention than they deserve and give buyers a bargain. They may also attract takeover bids.

Hidden assets can consist of real estate or underused brand names. For example, companies often carry their real-estate assets on the corporate books at their purchase price, even though their value may have multiplied many times over the years. The purchase price goes on its balance sheet as the historical value of the asset. Over a period of years or decades, the market value of that real estate may climb substantially. But the historical purchase price remains unchanged on the balance sheet.

In some cases, a company’s real estate can come to exceed the market value of its stock. This type of hidden asset may only become apparent to investors when the company upgrades the use of the real estate.

One of today’s best-hidden assets in aggressive investing is research and development spending by technology stocks. High research and development budgets let tech stocks keep adding profitable new products to their lines and improving existing ones.

Looking for hidden value can produce huge profits—and when you lose, you generally don’t lose that much.

Use our three-part Successful Investor approach to discover the best stocks to follow and invest in

These three safeguards will tend to limit your losses at the worst of times. But over long periods, they also let you profit nearly automatically.

  1. Invest mainly in well-established, mostly dividend-paying companies.
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities).
  3. Avoid or downplay stocks in the broker/media limelight.

Bonus tip: Learn characteristics of the best stocks to follow for ETF investments that will give you more secure returns

We still feel that investors will profit the most with a well-balanced portfolio of high-quality individual stocks, but ETFs can also play a role in a portfolio. Here are some tips on how to find the best performing ETFs.

The best conservative ETFs represent a low-cost, tax-efficient way for investors to make money over the long term. They offer well-diversified portfolios with exceptionally low management fees.

However, we think you should stick with “traditional” ETFs. Traditional ETFs follow the lead of whoever sponsors the index, although the sponsors do from time to time change the stocks that make up the index. They also can tinker with the rules for calculating the index. ETFs change their portfolio holdings to reflect these changes, without considering the impact those changes may have on the performance of the ETF portfolio.

What are some of the stocks you’ve invested in that turned out to be especially bad choices?


Tell Us What YOU Think

You must be logged in to post a comment.

Please be respectful with your comments and help us keep this an area that everyone can enjoy. If you believe a comment is abusive or otherwise violates our Terms of Use, please click here to report it to the administrator.