Investors who have been following Brett Owens’ columns are no strangers to the concept of the “Dividend Magnet.” This strategy involves investing in companies that have a track record of growing their dividends, leading to both income growth and price appreciation. Owens recently experienced success with this strategy through his pick for the Hidden Yields service, FedEx Corp., which saw a 17% increase in its stock price shortly after his buy call. FedEx has been consistently increasing its dividend payout, which has propelled its stock higher.
FedEx’s performance over the past five years exemplifies the Dividend Magnet effect, where dividend growth tends to drive the stock price higher. Despite a slight pullback in recent months, Owens believes that the stock has strong long-term potential due to its connection to the growth of e-commerce. The recent earnings report released by FedEx revealed positive results from the company’s cost-cutting initiatives, leading to higher profits and potential shareholder value through the consideration of spinning off its delivery service.
Owens emphasizes the importance of buying stocks when their price lags behind their dividend growth, allowing investors to benefit as the gap between price and payout closes. He cites the example of Texas Instruments, a long-term investment that resulted in significant price gains and dividend hikes over a five-year period. Owens highlights the exponential growth in yield that occurs when companies consistently raise their dividends, making them attractive investments for income-focused investors.
The Dividend Magnet strategy has proven successful for Owens, with notable gains from stocks like Amgen and Mondelez International. These examples demonstrate the potential for price appreciation and income growth when investing in companies that prioritize dividend increases. While market crashes and company-specific issues can impact stock performance, Owens believes there are still plenty of opportunities to identify undervalued dividend growers like FedEx.
Looking ahead, Owens points to the potential for continued dividend hikes among US firms, with an average increase of 6% expected in 2024. This presents investors with a range of options to choose from, with the key being to identify the next undervalued dividend grower that has the potential for price appreciation. By following the Dividend Magnet strategy, investors can position themselves to benefit from both income growth and capital appreciation in the long run.
For more investment ideas and strategies related to income generation, readers can access Owens’ latest special report on early retirement portfolios and high dividend yields. Owens’ success with the Dividend Magnet strategy serves as a testament to the potential for combining dividend growth and stock price appreciation in the world of investing.
