Dear DTA,
I’m trying to make money for retirement. I also want to purchase land and real estate.
-Charles S.
Great to hear from you, Charles.
Your goals are, of course, admirable. Many of us want to secure our financial future and retire comfortably. And many of us want to own real estate, too.
There’s an investment strategy out there that allows you to build the wealth and passive income necessary to retire comfortably – even retire early – and also own a slice of real estate without the associated headaches.
In fact, I’ve personally used this investment strategy to quit my job at 32, become financially independent in my early 30s, and own real estate without having to manage properties.
This investment strategy is dividend growth investing.
Once upon a time, I was broke. I was actually below broke – my net worth was negative. And this wasn’t even that long ago. We’re talking early 2010 here.
Yet I turned it all around by living below my means and investing in high-quality dividend growth stocks, amassing a six-figure dividend growth stock portfolio in the process.
This real-life, real-money portfolio of mine generates the five-figure passive and growing dividend income I need to cover my lifestyle, rendering me financially free.
It’s such a simple and straightforward strategy, making it perfect for novice or experienced investors alike.
It involves buying (at attractive valuations) and holding (for the long term) shares in high-quality businesses that reward their shareholders with a growing share of the growing profit the businesses generate by selling more products and/or services to people all over the world.
Common stock, after all, represents equity in real-life businesses. These businesses are selling real-life products and/or services to real-life people. And, of course, the profit that’s generated in the process is real-life money.
Since shareholders are the collective owners of any publicly traded company, they deserve their rightful share of that profit. That rightful share is a dividend. And as that profit grows, so should those dividend payments.
Since we all have real-life bills to pay, dividends – which are real-life cash payments that are deposited into your brokerage account – are a fantastic source of passive cash flow that can be used to sustain oneself and fund a comfortable retirement.
You can find more than 800 US-listed dividend growth stocks by checking out David Fish’s Dividend Champions, Contenders, and Challengers list.
If a company hasn’t paid an increasing dividend for at least the last five consecutive years, it’s not on Mr. Fish’s list.
You’ll notice many wonderful, blue-chip stocks on this list.
Think Johnson & Johnson (JNJ), Microsoft Corporation (MSFT), and The Coca-Cola Co. (KO).
These are companies that have been increasing their shareholders’ wealth and passive cash flow for decades.
While passive dividend income is great, passive dividend income that is growing is even better.
That means your purchasing power is increasing, which means your lifestyle opportunities are growing in turn.
This can allow for not just a comfortable retirement, but a retirement that becomes more comfortable every single year.
And as I noted earlier, you can also own real estate without the usual headaches through this strategy.
That’s because many high-quality dividend growth stocks are also real estate investment trusts that own real estate and rent their properties out to tenants.
A good example is Realty Income Corp. (O).
They own approximately 5,000 properties across the United States. And they rent this commercial property out to tenants in all kinds of industries. Realty Income Corp. counts major pharmacies, movie theater chains, grocery stores, and gyms as tenants.
When you buy shares in Realty Income Corp., you own a slice of all of these properties.
As such, you own a slice of the cash flow these properties generate. Realty Income Corp. pays out a monthly dividend, which is, of course, a portion of the cash flow the business generates.
The stock yields a very healthy 4.46% as of this writing.
Better yet, as that cash flow increases (as Realty Income Corp. grows their property base and increases their rent on existing properties), your passive dividend income increases.
Indeed, Realty Income Corp. has paid a dividend for 566 months. And they’ve increased their dividend for 24 consecutive years.
You’re essentially in the landlord game (a great game) without having to play by the normal rules.
Doesn’t get much better than that.
While this response is designed to go over a few key ideas from a high level, far more detail can be found across the site.
For instance, fellow contributor Dave Van Knapp put together an excellent and detailed guide to dividend growth investing.
And I personally highlight an undervalued dividend growth stock every Sunday, as part of a long-running series of articles that allow me to pitch a compelling long-term dividend growth investment idea to fellow dividend growth investors.
You can have a comfortable retirement. You can own real estate. And you can accomplish both simultaneously, in this fantastically complementary way.
But you have to take action as soon as possible, Charles.
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.