Are you a home run hitter?
There are few events in sports that are more exciting than a home run. Kirk Gibson’s spectacular home run to beat the Oakland A’s in game 1 of the 1988 World Series is my all-time favorite. Carlton Fisk’s colorful home run in the 1975 World Series against the Cincinnati Reds was incredible. Aaron Boone’s game 7 home run against the Boston Red Sox that sent the Yankees to the 2003 World Series is as about as dramatic as you can get.
Do you need to hit a homerun every time you buy a stock in order to reach your financial goals? Is it necessary to swing for the fence every time you purchase a stock? It would certainly be nice to hit a four bagger with every stock purchase but it is not crucial for you to achieve financial success.
Tony Gwynn was one of my all-time favorite baseball players. He was a legendary hitter who played his entire career for the San Diego Padres. He finished his amazing career with a .338 batting average and 3,141 hits which eventually placed him in the baseball hall of fame. He was not known, however, for hitting homeruns. During his fabled twenty-year career, he only hit 135 homeruns. By comparison, Hank Aaron hammered 755 home runs and Babe Ruth swatted 714. Tony Gwynn made a career of hitting singles and doubles.
How can you employ an investment strategy of hitting singles and doubles? A time tested strategy is to buy companies that pay and grow their dividend. A company that pays a consistent and growing dividend is the equivalent of hitting singles and doubles. According to the website Dividend.com, companies that grew their dividend generated an average annual return of 10.07% from 1/31/1972 to 12/31/13 while non-dividend paying companies averaged just 2.34%. In fact, dividend paying companies that grew their dividend outperformed non-dividend paying companies in both up and down markets with much less risk.
While you wait for your homerun you can feast on a steady stream of dividend income.
being strengthened with all power according to his glorious might so that you may have great endurance and patience… Colossians 1:11
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. www.parrottwealth.com.
Source: www.baseball-reference.com; Dividend.com