I became a stock investor by accident. An acquaintance moved into the CEO position of a small, public company. As I’d worked with the man on a few projects and knew his banking acumen, I decided to buy a few shares. When the stock rose appreciably, I sold some and bought into another company. The value of the second company grew and before long, my $2,000 initial investment became $40,000. Naturally, I found it difficult to sleep nights, wondering what to do with this cache, because I knew my good fortune was pure dumb luck. Eventually, I decided to consult a stockbroker.
The one I chose was a former student of mine. I knew him to be honest and very bright and he did a good job for me. He chose a safe investment with secured returns. Bonds. I was happy until he decided to throw over his career for a sailing trip around the world. I needed a new broker. Another former student gave me a recommendation and it proved to be a match. I’ve been with my second adviser for 25 years and couldn’t be happier.
This brief history of my investment strategy is my way of saying no one should take investment advice from me. I got lucky. Nonetheless, I came across an article by Jen Wieczner which, after the 2008-9 financial debacle, struck me as wisdom that needed to be shared. (“Dividends Could Offer Shelter in Stormy Markets,” by Jen Wiezcner, Fortune, May 2015, pg.62.) Her advice to a cautious investor is to include stocks in a portfolio that pay good dividends. A dividend is money a company pays out periodically to its shareholders.
That suggestion may seem obvious but what I didn’t realize is that some investment companies specialize in dividend stocks, buying shares of companies that Wiezcner identifies as The Aristocrats. These would include Johnson &Johnson, Target or 3M, to name 3, publically traded companies that have never missed paying a dividends in either the best of times or the worst of times. She writes, for example, that since 1999, the Standard and Poors (S&P) 500 Dividend Aristocrats, has not only weathered stock market downturns but has bounced back at twice the rate of the general market. (Ibid pg. 62) What helped in their recovery were those dividends that kept on giving. Buying the aristocrats, individually or through a fund like the S&P won’t come cheaply as the companies are fully valued; but they provide some security in the rollercoaster world of the stock market. A young person can weather the ups and downs of turbulent times. But when the horizon is shorter, consorting with aristocrats is worth considering.