Navellier Growth: your source for market-beating growth stocks

 

Are dividend stocks worth buying? Better yet, do dividends really matter? In the latter part of the previous decade, many investors decided that they really did not. Who needed dividends when stock prices flew to the moon? Then the tech bubble popped at the beginning of this millennium. A few years on, investors are witnessing another disaster unfold on Wall Street–only this time, it's subprime-fueled financials. It's safe to say that these investors like to learn their lessons the hard way!

The fact of the matter is that dividends do matter. Dividends are a powerful component of stock investing. They provide funds for reinvestment, of course, but they also help dampen your overall portfolio's volatility, an important goal of growth investing. Dividends provide a regular flow of cash so that you can invest in new shares of the best stocks at the best time to buy them. This flow of cash makes your overall portfolio less volatile, and it also makes it easier to withstand the day-to-day gyrations of the stock market. 

According to a study by Ibbotson and Associates, stocks without dividends reinvested returned three full percentage points of return from 1984 to 2004. That's a substantial difference over a long period of time when compared to dividend stocks: You see, a $1,000 investment would grow to be more than 50% higher in value over that period just because of dividend reinvestment!

Many of the stocks in my Blue Chip Growth portfolio pay dividends. Our highest-yielding stock, Southern Copper Corp. (PCU), which currently yields 5%, has given us more than 150% total profits since we first bought it in back in 2006. Another of our long-term favorites, the Mexican telecom company America Movil (AMX), has a handsome dividend yield of over 3%. Even though the stock has better than tripled since we bought it, the dividend has kept pace, rising right along with the stock price. That's what I like to see!

Additionally, my Blue Chip Growth subscribers own several utility stocks that pay higher-than-average dividends. Defense-related stocks, which we also own, sport attractive dividend yields as well, and these companies have a history of raising their dividends over the years.

How Do You Define High Yield?

You may be wondering what's my definition of a high-dividend yielding stock, anyway. I look at the two-year government bond yield–it's currently at 1.6%. Anything above that is good. An added bonus is that as the Federal Reserve continues to lower short-term interest rates, companies that pay dividends at a rate higher than the two-year government bond will become more and more valuable.

While dividends are not one of the eight variables I use to select powerful growth stocks, I do like discovering companies that pay out part of their earnings as dividends. This means they are generating more cash than they need to operate and grow their business and are shareholder-friendly enough to return the unneeded cash to investors. Dividends give us cash to reinvest and a cushion against fluctuations. Simply put, dividends do matter, and that's why I like having a lot of dividend stocks in my Blue Chip Growth portfolio!

For the complete list of my high-yielding Blue Chip Growth stocks, try a risk-free trial of my Blue Chip Growth service today! And if my dividend stocks aren't knocking your socks off in the next six month, I'll give you a 100% refund!

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