Dear DTA,
I have just about everything I need. There are a few things I would like to have, though. But the real reason I want to buy stocks is to help people who need things to make their life more easy. I’d like to be able to help others with medical bills, utility bills, or whatever else they might need help with. The money is not for me. I appreciate your help.
-Penny N.
Great to hear from you, Penny. Thanks so much for writing in.
I don’t believe I’ve ever heard from someone who wants to invest specifically to help others, but I think that’s just fantastic.
I personally plan to give away at least half of my wealth on/before death, as I think my money can help others far more than it can help me.
Helping others makes me happier than helping myself, especially when I already have all I need.
Since you and I are interested in the same end goal, I believe I’m in a unique position to offer some insight.
But what if you could give away money regularly without touching your nest egg? What if you could provide checks and help to others for the rest of your life? What if the money you could give away continued to grow all by itself, increasing your philanthropic power?
Well, this is what dividend growth investing could offer you.
This investment strategy is incredibly flexible, approachable, and tangible.
It’s the investment strategy I used to go from below broke at 27 years old to financially free at 33 years old.
By living well below my means and investing my savings into high-quality dividend growth stocks like those you can find on David Fish’s Dividend Champions, Contenders, and Challengers list, I built up a six-figure portfolio that generates five-figure passive dividend income on my behalf.
Better yet, that passive income continues to grow all by itself, as these stocks generally regularly increase their dividends.
That’s because these are high-quality businesses that tend to sell ubiquitous and necessary products and/or services that society demands, which results in plenty of profit.
Well, that profit increases as these businesses sell more products and/or services and increase the prices on these products and/or services.
More stuff going for higher prices leads to more profit, which itself leads to higher dividends.
Moreover, those dividends are often growing faster than the rate of inflation, increasing one’s purchasing power.
Companies that have been able to increase their dividends to shareholders for more than 50 consecutive years include the likes of Johnson & Johnson (JNJ), The Coca-Cola Co. (KO), and Colgate-Palmolive Company (CL).
This strategy is approachable because one is usually focusing on blue-chip companies that are easy to understand.
After all, it’s not hard to figure out that Coca-Cola sells billions of dollars worth of beverages that people all over the world enjoy.
And the flexible nature of the strategy shows up right away, too, as the passive income can be used to buy oneself freedom initially, but the potential for philanthropy is also there down the road as the passive income grows faster than one can/will spend it.
However, since you don’t need the money at all, we’ll focus on the philanthropic potential.
This is where where the tangible nature of the strategy really shines.
See, those dividends are real cash money. It’s as if you have an invisible extra worker in your house, giving you their entire paycheck whenever they earn it. It’s tangible money that you can easily cash out and put your hands on.
And it’s that tangibility that will help those you want to positively impact, as this cash can be used to pay those medical bills, utility bills, or whatever else.
But the last thing you want to do is save up $1,000 and just give it all away, leaving nothing remaining for future giving.
That’s why it’s so important to look at dividend growth investing as a way to build yourself a legacy.
Indeed, if you look around at some of the world’s more prominent and prolific foundations, you’ll see that they’ve built legacies that are backed by high-quality businesses that pay increasing dividends.
Take the Bill & Melinda Gates Foundation for example.
The Foundation has almost $20 billion invested in stocks. And these stocks form the backbone of the Foundation’s legacy, whereby it can provide help to the world’s needy on an ongoing and, perhaps, indefinite basis.
You’ll notice plenty of high-quality dividend growth stocks in the Foundation’s portfolio: Waste Management, Inc. (WM), Canadian National Railway (CNI), and United Parcel Service, Inc. (UPS) are just a few.
Another great example is the common stock portfolio held by Berkshire Hathaway Inc. (BRK.B), which is managed by the legendary investor (and CEO) Warren Buffett.
Warren Buffett (and Bill Gates) has already signed “The Giving Pledge”, meaning that Buffett plans to give away most of his wealth to philanthropic efforts on/before death.
Buffett is actually funneling most of that giving through the Bill & Melinda Gates Foundation.
But what’s important to keep in mind here is that ~99% of Buffett’s wealth is tied up in Berkshire Hathaway stock, which itself is invested heavily in high-quality dividend growth stocks (as you can see via the portfolio link).
Berkshire Hathaway has stakes in companies like American Express Company (AXP), Johnson & Johnson, and Wells Fargo & Co. (WFC). These are all high-quality businesses that pay their shareholders increasing dividends, funded by the underlying wonderful operations that grow more profitable year after year.
So what we can see here is that some of the world’s most prolific giving is ultimately funded by some of the world’s most prolific businesses.
And you can do something very similar, albeit to a much more limited degree.
It’s essentially what I’m doing, too. I’m using the golden eggs (growing dividends) that these golden geese (high-quality businesses) lay to mostly pay my bills now, but I plan to slowly increase my giving as the eggs become more plentiful. At some point, it’ll be more eggs than I know what to do with, at which point I’ll just end up giving most/all of it away.
In order to really get a feel for how the dividend growth investment strategy works, I’d recommend checking out fellow contributor Dave Van Knapp’s entire series of lessons on dividend growth investing.
This series takes a holistic look at how the strategy works, walking someone right through all of the fundamental knowledge they might need in order to become a successful long-term investor.
And once you’re ready to actually put capital to work, which could start to build that long-term legacy for you, I highlight an undervalued high-quality dividend growth stock every Sunday.
These are weekly articles that provide valuable and actionable ideas to readers just like yourself.
You have a great outlook on life, Penny. And I admire your willingness and desire to help others. It’s something we share.
But in order to develop the knowledge necessary to build that large and lasting legacy, you’ll want to start reading and take action today.
I wish you luck and success.
Jason Fieber
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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.