Dividend Stocks To Hold Forever

| March 27, 2015

Dividend stocks are like hotel rooms.

Some you never want to leave and some you want to check out of the moment you walk in.

The billionaire John Paul Getty and I once stayed at the same hotel. It was one of those hotel rooms you never want to leave… The Park Sonnenhoff in Vaduz, Liechtenstein, a small country wedged between Switzerland and Austria.

The only problem is that we weren’t there at the same time.

Otherwise, I would have been grilling Getty about his dividend stocks. After all, in 1957, Fortune magazine named him the wealthiest man in America. Not a bad guy to learn from.

Getty may have had more alimony payments than dividend stocks… he was divorced five times.

But while his wives came and went, his dividend stocks stuck around.

One of these stocks he bought in 1932 when it was bloodied by the Great Depression.

You can follow in Getty’s footsteps and buy the same stock today.

Different name, different price, but the same bargain that made Getty so rich.

The Dividend Stock That Paid 5 Alimonies

In 1929, a share of Tidewater Associated Oil sold for $380.

In 1932, you could buy a share for $40. That’s when Getty went in and added to his Tidewater Holdings.

Sure enough, the economy came around, oil prices went back up, and so did the price of Tidewater. The company went through a few name changes and was acquired by Texaco in 1984.

Then in 2001, Texaco merged its refining operations into Chevron $CVX.

Which brings us to today…

This Is The Kind Of Dividend Stock You Hold Forever

Chevron is a good example of a dividend stock you’ll never want to sell.

Especially if you believe that oil prices have been roughed up about as much as they’re going to be.

Chevron is an S&P 500 Dividend Aristocrat. It has been paying a growing dividend for 27 years.

What is a dividend without this kind of consistent payout and growth?

Not much. One-night stands, flash in the pan dividend stocks don’t create wealth. They might be fun, they might give you a rush, but dividends that are paid one quarter and vanish the next aren’t what smart investors look for.

They look for solid companies.

And while Chevron no longer looks like The Tidewater Associated Oil Company John Paul Getty invested in 80 odd years ago, what made Tidewater a target for Getty makes Chevron attractive today.

If there’s a warning signal, and this is definitely something to consider, the dividend payout ratio is not good right now… it’s 109.5%.

Most of the time, a number like this would send me running for cover.

They tend to be time bombs.

Read my article that explains why.

This means there’s a simple question you need to ask…

Does Chevron have enough money tucked away to keep paying the dividend while profits are roughed up by lower oil prices?

Take a look at the balance sheet and you’ll see that Chevron has plenty of cash… more than $12 billion.

It’s stopped its stock buyback and it’s spending less on exploration.

It’s also selling off some assets to pump up the cash.

So Chevron has trimmed its sails.

And it’s not in the high rent district of stock prices. The Price Earnings Ratio is 10.17.

That’s a 45% discount from the overall market.

And when you look back on Chevron’s stock price performance…

It’s been able to plow through the ups and downs of the past 15 years. You’ll see some nice growth…

Dividend Stocks Chevron Chart

And remember… the growth in the stock price came at the same time dividends kept growing.

So these are some of the reasons why you should check out a company like Chevron when you’re on the prowl for good dividend paying stocks.

But there’s something else to keep in mind.

Something you won’t find on a chart or in the balance sheet.

When you’re sizing up companies to find the best dividend stocks, never underestimate the importance of patience…

The Lost Secret Of A Dividend Stock Billionaire

John Paul Getty revealed this secret 50 years ago.

Today, Getty has fallen out of fashion. Nowadays investors are smitten with Warren Buffet.

But back in the late 1950s, back when Cadillacs had fins and TV shows were broadcast in black and white, Getty was the man.

The wealthiest man in America.

Here’s what John Paul Getty revealed in his wonderful book, “How To Be Rich,” published in 1965…

“It is possible to make money — and a great deal of money — in the stock market. But it can’t be done overnight or by haphazard buying and selling. The big profits go to the intelligent, careful and patient investors, not to the reckless and overeager speculator. The seasoned investor buys his stocks when they are priced low, holds them for the long-pull rise and takes in-between dips and slumps in stride.”

Go Find Your Own Dividend Stocks To Hold Forever

Take John Paul Getty’s advice. Don’t get all riled up about “dips and slumps.”

Look at the Chevron chart again. You’ll see four different stretches over the past 15 years when the stock seemed like it was going nowhere.

And these days, you see it going south.

Don’t be what Getty called, “the reckless and overeager speculator.” Show some of his patience.

Take the “dips and slumps” in stride.

Take a page out of Getty’s playbook. He’s left the dividend investor a lot of great advice.

But you know, looking back on Getty’s remarkable life, you can’t help but wonder…

Why was Getty more patient with his dividend stocks than he was with his five wives?

Regards,

Michael Jennings
Dividend Stocks Research 

Note:  Michael Jennings writes and edits DividendStocksResearch.com. Sign up for our free dividend reports and dividend newsletter at http://www.dividendstocksresearch.com/free-sign-up. We’ll show you how to create regular income by investing in dividend stocks, easily, step-by-step.

 

Tags: , , , , ,

Category: Dividend Stocks

About the Author ()

Michael Jennings is the Editor of the Dividend Stock Research site. Dividend Stock Trading can be difficult. Michael Jennings provides you step by step guidance through the rough world of Dividend Investing.

Comments are closed.