Durable Dividends

Follow The Path Of Least Resistance

Nick Ward

56 postsSeptember 9, 2021

Anyone who follows my writing knows that I sleep well at night with my investment portfolio because of the conviction that I have when it comes to the reliably increasing passive income stream that my dividend growth portfolio creates.

Every night when I lay my head down on the pillow, I rest easy, knowing that I am making money while I sleep.

But it’s more than that. The dividend growth strategy isn’t some sketchy or abstract scheme, it’s not some elaborate or intricate side hustle, it’s not some sort of risky proposition…actually, it’s elegantly simple: by partnering with the highest quality companies in the world as a long-term shareholder, I’m able to sit back and relax with these global businesses with illustrious brand names and enviable market positions generate strong cash flows and share a portion of said cash with me as an owner of a portion of their business.

There are companies which have been paying annual increasing dividends for decades and decades on end. Sure, they’re mature, sometimes they seem stodgy, admittedly, they’re boring, and yet, they’re masters of compounding wealth for shareholders.

From a financial point of view, it doesn’t get much better than that…

Which is exactly why I harp, again and again, on the idea of financial freedom via dividend income and the dividend growth strategy which is my chosen vehicle along the pathway towards the promised land.

Recently, I had someone stop me and say that while they hear this message loud and clear, they continue to have reservations about the S.W.A.N. (sleep well at night) nature of the dividend growth strategy.

They brought up concerns about the next black swan event being the “real one”, implying something much worse than what we’ve seen inspire market sell-offs in the recent past.

They also brought up a litany of potential misfortunes, including things like a major health crisis, divorce, the loss of a job, etc, which would also detail an investors’ financial situation and therefore, their journey towards financial freedom.

They mentioned that the dividend growth strategy doesn’t offer protections against such things and therefore, with these fears in mind, they wondered how it is that I feel so comfortable with my portfolio and investing strategy.

Well, I thought these concerns were significant enough to pen an article in response to. I imagine that this individual isn’t the only reader of mine who has similar concerns and therefore, having an article out there that I can refer fearful readers to in the future serves a dual purpose; not only will this article *hopefully* provide peace of mind, but it will also likely save me time in the future (copy and pasting a URL is much quicker than typing out this message over and over again).

First of all, I will say that the last two “black swan events” that we’ve experienced, the financial crisis which led to the Great Recession and the outbreak of the COVID-19 pandemic, have been major – and let me repeat myself…major events.

The severity of these issues should not be discounted.

Both resulted in the market falling roughly 50%. There was a time during the depths of the financial crisis that very bright minds believed that the modern financial system as we know it was bound for failure. Circumstances were dire, to say the least. And, while the bounceback from the COVID-19 recession was extremely quick, the fact is, we’re still dealing with a once-in-a-century type of biological event right now and the way I see it, it doesn’t get more “real” than these sort of bearish circumstances.

Sure, there are events which I can imagine – a nuclear holocaust, for example – which would be even worse. However, I don’t think it makes a lot of sense for prudent investors to spend a lot of time and energy preparing for a Mad Max type of dystopian future.

If such an event ever occurs, there is not a single investing strategy which will protect wealth. If society digresses back to the stone age, the types of knowledge and skills which will prove useful have very little to do with financial literacy.

When survival is all that matters, it won’t matter what sort of assets someone owns. All will be chaos and without law and order, even things like gold and silver bullion, which some people like to hang their hats on, will prove worthless (or even dangerous to hold) if you’re not able to protect it.

In short, I don’t think it makes sense to fear that sort of thing when it comes to portfolio management. If there’s an event that causes blue chips such as PepsiCo (PEP), Johnson and Johnson (JNJ), or Microsoft (MSFT) to cease paying their dividends, we’re likely all in trouble and the performance of our portfolios won’t be anywhere near the forefront of our minds.

Admittedly, this is a simple-minded stance, though as I’ve said many times before, oftentimes, the simplest and easiest route is the best one for an investor to take.

Health insurance can help to dampen the financial burden of a major illness. There are legal steps to take to protect assets in the event of a divorce (though, for what it’s worth, I believe individuals are better off investing in their relationships and building up love equity as opposed to focusing on the downside of potential separation). And, prudent financial management (having 6 months worth of cash in a savings account) can help to stave off near-term budgetary shortfalls which are likely to occur if an individual is out of work for an extended period of time.

But, at the end of the day, the dividend growth strategy also can’t protect individuals from major life disruptions. However, once again, I’d argue that there isn’t an investment strategy and/or asset classes that could.

Instead of worrying about fearful unknowns, I believe that investors are best off focusing on what is clear and certain right before their eyes. No one knows what the future holds, but if the past is to be any sort of guide for us moving forward, the fact is, when it comes to wealth creation, the path of least resistance involves buying and holding blue chips over the long-term.

Yes, there are examples of mighty companies falling and cutting their dividends. General Electric (GE) is a recent example. But, for every Dividend Aristocrat which has fallen by the wayside, I can give examples of dozens of wonderful companies which are flourishing.

This is why diversification is important. This is why it’s important to constantly monitor company fundamentals. I tend to be a classic “buy and hold” investor because of my belief, wholeheartedly, in the strength of long-term compounding. However, I do not buy and blissfully forget.

Investors can protect themselves from a myriad of risky events by tracking metrics which signify dividend safety, security, and growth prospects.

But, generally speaking, the blue chips that I like to focus on rarely experience operational threats, issues, or disruption which cause justifiable fear or anxiety related to their dividends.

As I like to say, excellence doesn’t happen by accident. The systems and the cultures that blue chip companies have developed over the years breed continued success.

For the most part, winners continue to win in the markets and over the long-term, blue chip companies tend to generate higher and higher sales, earnings, cash flows, and ultimately, dividends, which all play a role in enriching shareholders who’re patient and disciplined enough to overcome fear and maintain constant ownership.

Go look at the long-term earning growth trajectories of any of the blue chip dividend growth names on the Dividend Champions List or the companies held in the Intelligent Dividend Investor portfolio and you’ll see an uptrend that is staggeringly reliable.

Things change over time, and that’s where having a good portfolio manager on your side counts – but, even though I hate to say it (because managing dividend growth portfolios is how I make my living), the fact is, it doesn’t take a rocket scientist to succeed with this strategy.

That’s the best part.

The power of compound interest over long periods of time is so strong, all investors really need to do is step out of the way and allow it to happen.

Fear is a natural part of life, but when it comes to investing, it is likely your worst enemy. Remember, the path of least resistance when it comes to blue chips is to the upside. When it comes to compounding, don’t fight it. Go with the flow and I suspect you’ll be handsomely rewarded.

*Disclosure:

I am/we are Long PEP, JNJ, and MSFT.

Nick Ward

56 posts

View all my Posts

Nicholas Ward is a research analyst who currently writes for Seeking Alpha, The Dividend Kings, iREIT, and Forbes Real Estate Investor. Before that, he was Founder and Editor-in-Chief of The Dividend Growth Club, as well as the Income Minded Millennial. Nicholas has also contributed to Sure Dividend, Investing Daily, and The Street, where he covered stocks in Jim Cramer's Action Alerts PLUS Portfolio.

Nicholas holds a bachelor of arts from The University of Virginia, where he studied English and studio art. Prior to transitioning into the financial industry, he managed a vineyard in the foothills of the Blue Ridge Mountains.

Vaccine Mandates and Other Healthcare News

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

Follow The Path Of Least Resistance

Nick Ward

56 postsSeptember 9, 2021

Featured Articles

The Great Housing Market Migration Is VERY Interesting

Let Dividends Help You Deal With Disappointment In The Stock Market

Amazon Wants to Ask What Ails You

Wall Street’s Workforce Crisis Should Be Taken Seriously

Santa Claus Has Left the Building

Follow The Path Of Least Resistance

56 postsSeptember 9, 2021

REIT Mutual Funds

REIT ETFs

Not All Dividends Are the Same