“A Bunch of Malarkey”

Editor’s Note: My colleague Marc Lichtenfeld, the Chief Income Strategist over at The Oxford Club, loves dividend stocks more than anyone I know.

So today, I’ve invited him to share his knowledge on the “best of the best” among dividend-paying stocks.

I also recommend that you check out Marc’s upcoming broadcast on a little-known stock that has caught the eye of none other than Nvidia, the newly anointed most valuable company in the world.

For months, Marc’s been downright giddy about some big news that’s fast approaching for this tiny tech stock.

He’ll have more details for you at his free event – click here to reserve your spot.

– Ryan Fitzwater, Publisher


Most people would describe me as patient.

Generally, things roll off me like a defensive end off of Lamar Jackson.

At the poker table, I’ve been known not to enter a pot for a half-hour if I don’t have good cards or the right opportunity to bluff. And I’ve gone weeks without making a stock or options trade if I don’t have the right setups.

So, it’s no surprise that I’m a dividend investor and a big proponent of dividend growth stocks. You don’t buy a dividend stock if you’re planning on collecting the payout and then selling it a few weeks later.

Owning dividend stocks requires patience.

Or does it?

There’s a type of dividend payer that dramatically outperforms the market over the long term and can lead to big, short-term gains as well.

Dividend initiators.

When a company pays a dividend for the first time, it is sending a very strong signal to Wall Street that its cash flow is strong and very likely to grow. Most companies don’t recklessly part with their cash unless they know they have a lot more coming in the door.

So a dividend initiation is a gigantic vote of confidence.

And over the long term, owning stocks that initiated dividends pays off big-time.

From 1973 to 2023, dividend initiators returned a staggering 14,000%, while companies that didn’t pay dividends returned just 743%. For an investment of just $1,000, that’s the difference between making $7,430 and making $140,000.

Here are some examples of how powerful dividend initiations can be…

Just look at Covenant Logistics (Nasdaq: CVLG).

It initiated a dividend in January 2022.. And in the next year and a half, its stock more than doubled.

Covenant Logistics Doubled After Initiating a Dividend

Same with Ferrari (NYSE: RACE)…

It initiated a dividend in May 2016…

And its stock is up 975% since.

Ferrari Raced Up by 11x After Initiating a Dividend

And then there’s Nvidia (Nasdaq: NVDA).

Since it initiated a dividend in 2013…

Its stock is up an extremely rare 36,000%!

Nvidia Exploded Up 36,000% After Initiating a Dividend

But despite the mountain of data to the contrary, there are still critics who say companies that pay out dividends to shareholders are wasting their extra cash.

As President Joe Biden would say, “That’s a bunch of malarkey!”

Let’s look at why that argument doesn’t hold water.

Dividends = Stronger Earnings

Studies have shown that companies that pay dividends have more reliable earnings than those that don’t.

Douglas J. Skinner and Eugene F. Soltes, professors at the University of Chicago and Harvard University, respectively, concluded, “We find that the reported earnings of dividend-paying firms are more persistent than those of other firms and that this relationship is remarkably stable over time. We also find that dividend payers are less likely to report losses and those losses that they do report tend to be transitory losses driven by special items.”

So non-dividend-paying companies may use their cash to acquire growth, but dividend-paying companies have stronger and more consistent earnings. And a vital rule of investing is that stock prices follow earnings.

If earnings are better and more reliable for dividend-paying companies, that should mean dividend-paying companies’ stocks perform better.

And we know that they do.

In fact, dividend stocks beat the pants off of non-dividend-payers.

So the next time a friend says a company should have better things to do with its cash than pay dividends, wish them luck with their investing.

Just keep in mind that you’ll likely be the one picking up the tab for lunch in a few years, because you’ll be the one who can afford it.

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YOUR ACTION PLAN

Dividend initiations are some of my favorite “trigger events” to look for as I search for stocks that are about to soar.

I’ll be discussing some of my other favorite trigger events during an urgent broadcast on Thursday, June 27.

Why so urgent, you ask?

I recently uncovered a fascinating company that’s on track to experience a trigger event as soon as July 1… so I want to get the word out to as many people as possible before the window of opportunity closes.

Hint: Nvidia revealed recently that it has invested in five artificial intelligence stocks… and this is one of them.

(Be careful, though… After you learn all my secrets to trading trigger events, you might be picking up the tab at lunch a lot more often!)

Go here to reserve your free spot at this exclusive event.