Dividend investing isn’t sexy. It takes a commitment to the slow and steady process of buying well-known companies and letting those quarterly payments compound year by year. But even devoted income investors can leave thousands of dollars on the table when they forget about the three strategies listed below.
If you think you have what it takes to get rich the right way — and by that, I mean the “Get rich slowly” approach — then don’t ignore these tips.
1. Aim for Dividend Aristocrats with payout ratios under 75%
There are thousands of dividend-paying stocks out there for you to buy. One easy way to winnow down the list is to focus on Dividend Aristocrats. To make this select group, a company needs to have:
- Paid a dividend for at least 25 consecutive years.
- Increased said dividend at least once every year during that time frame.
But that alone isn’t enough. To get the very best Dividend Aristocrats, I suggest looking for companies that use less than 75% of their free cash flow (FCF) to pay out their dividends. FCF measures the amount of money a company brings in during a year, minus capital expenditures.