Are you a home run hitter?

Bill Parrott |

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, 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.