Are Dividend Investors Idiots?

In a recent article by John Heinzl (Globe and Mail) he asks himself if, as a dividend growth investor, he and all other dividend investors are idiots? Heinzl outlines the feelings that we typically have every so often as dividend investors. That is, missing out on the “multibaggers” that everyone is talking about around the water cooler at work.

Here is a quote that sums up how us dividend investors might feel at the moment:

…Because when everyone else is doing the logical thing and shoveling money into growth stocks that are shooting to the moon, only a big fat idiot would stubbornly sit on a portfolio of boring dividend stocks that are, for the most part, doing jack squat.

It’s interesting that he mentions high flying stocks like Potash Corp. and Research in Motion as being the ones that he missed out on, while he talks about owning our favorite dividend growers – banks, insurers, pipelines and drug makers.

How Far Can You See?

When investing in dividend growth stocks , it isn’t about making a killing this week or this month.

  • It is about investing for the long haul and watching your dividend income rise consistently year over year while your “investor” counterparts are searching for the next hot tip.
  • It’s about holding onto that dividend paying stock and not worrying about the stock price, as long as that dividend keeps growing.
  • It’s about protecting your hard-earned money from inflation and making your money work for you.
  • It’s about knowing the company can’t fake a cash dividend.
  • It’s about money in your pocket.

Over the long term we know (and Heinzl reiterates) that dividend growing common stock prices also out perform those stocks that pay stable or no dividends.

So What Now?

There is a famous saying from Warren Buffett that goes something like this:

“Be fearful when others are greedy, and greedy when others are fearful”

Of course this is easier said than done, otherwise we’d all be running a multi-billion dollar company like Berkshire Hathaway.

While it may take some serious resolve to start loading up on some of our favorite dividend payers, most notably banks stocks, sticking to a long term plan will make you rich in the long run.

So, to echo the words of Mr. Heinzl I’ll end with this quote:

Am I going to sell my dividend stocks to buy these high fliers now? Hell, no. If anything, I’ll be adding to my existing positions, and reinvesting the extra dividends in even more shares to take advantage of the magic of compounding.

So, don’t worry about the water cooler talk and stick to your plan. Soon enough you’ll be saying goodbye to the water cooler forever when the compounding effects of your rising dividend income begins to exceed your salary!

Here’s to your wealth!


  1. Great post!

    I agree 100% that sticking to the plan is necessary for accumulating wealth but lets face it, not so fun.

    Home Run Economics can not only be exciting but healthy for your portfolio in the long-term.
    By risking a little money on multi-bagger speculation, one will hopefully not be inclined to give in to other urges. Discipline is needed to set your limit and play only with that amount. If you lose it, save up and try again.

    You might say, what role does ‘fun’ play in financial freedom?
    A lot because if you don’t have a little fun in life what’s the point of hoarding all that money. Practice having fun now with your money so that when you finally have your mature money trees you enjoy them.

    My thoughts as always.

  2. Companies that can grow dividend constantly are the ones that have good financial strength.

    They are big enough to still grow their earnings, thus growing the dividend.

    Definitely a safer way to invest than betting on growth stocks.

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