Five Reasons Why It’s Great To Be A Dividend Growth Investor During Market Turmoil

| August 7, 2019 | 0 Comments

dividend growth investorI’m sure I don’t need to tell anyone out there that the US stock market has been volatile over the last few days.

An escalation of the US-China trade war, along with what now might be a currency war on top of it, has only added to concerns after a Federal Reserve interest rate cut announcement that was accompanied by language that wasn’t as dovish as Wall Street was looking for.

Anyway, stocks go up. Stocks go down. Over the last few days, it’s mostly been the latter.

However, it’s important to keep perspective here.

The S&P 500 is still up 13.48% YTD. Notwithstanding the last few days, 2019 has been an excellent year thus far in terms of the performance of US equities. We remain only a few percentage points off of the all-time market high.

I’ve been writing for years about how intelligent and successful investors ignore the noise and focus on the long term.

But many people find this to be easier said than done.

Dividend growth investing is, in my experience, the perfect strategy for achieving financial independence and retiring early.

However, even dividend growth investors experience market turmoil. The volatility is still there. And I’ve heard from many people over the years who find this difficult to withstand in real-time.

So I thought I’d share with you readers five reasons why it’s great to be a dividend growth investor during market turmoil.


A broader market pullback sells itself. Literally.

Complaining about cheaper stock prices would be like going to the grocery store and complaining about cheaper food. It’s silly.

After all, I’d much rather buy, say, JPMorgan Chase & Co. (JPM) at $109.57 (its price today) than $116.67 (its price last Thursday).

A cheaper price means more shares for the money, along with a higher yield.

Taking JPM as an example, $1,500 now buys 13.68 shares. On Thursday, you only would have received 12.85 shares for that same $1,500.

Might not seem like a big difference, but it definitely affects your compounding over the course of the next few decades of your life.

Moreover, it affects your income. Lower prices result in higher yield, all else equal. The stock yields 3.29% today. It yielded 3.09% on Thursday. That’s a full 20 basis points.

13.68 shares nets you $49.25 in annual income. 12.85 shares nets you $46.26 in annual income.

That’s just one investment. Imagine repeating this over and over again across an entire portfolio. Plus, you’re receiving dividend raises on top of the higher yield and more income.

Cheaper stocks are almost always a better thing. It would be nonsensical to not want more equity in a business for the same outlay of capital. It would be crazy to not like getting paid more money.


Can you guess who’s buying more stock than anyone else? 

I’ll save you from wondering.

It’s companies themselves!

We individual investors might pat ourselves on the back for putting capital away, but the companies we invest in are, in aggregate, buying way more stock than we are.

After forking over about $1 trillion on buybacks last year, major companies are back at it again in 2019.

And if you think they don’t take advantage of pullbacks, think again.

During a remarkably tumultuous fourth quarter of 2018, companies were buying stock hand over fist:

In the fourth quarter last year, American companies bought an estimated $240 billion of their own shares, according to an analysis by the Goldman Sachs team that handles stock buybacks for major companies. That’s nearly 60 percent higher than during the same period in 2017.

Everything I noted in the prior section applies here, too. Except it’s greatly magnified when companies are buying their own stock, simply due to the sheer magnitude of the numbers.

This is why major pullbacks should almost always be welcome, even if you’re not actively accumulating stock yourself.


I don’t mind volatility. It doesn’t bother me. As Warren Buffett will tell you, volatility is not the same thing as risk.

But I also recognize and admit that I’m a unique guy.

Most people find volatility, especially downside volatility, to be a stomach-wrenching thing to endure.

Well, I have good news for you.

High-quality dividend growth stocks tend to be less volatile than the broader market during periods of market turmoil.

This is intuitive.

The companies that are paying out ever-increasing dividends are recession-resistant businesses by their very nature. That’s how a lengthy track record of dividend raises gets built.

The nature of these businesses help their stocks hold up quite well during periods of market turmoil and/or economic turmoil:

For example in 2008 the Dividend Aristocrats Index declined -21.9%, compared to the S&P 500 with a decline of -37%.

I’ve noticed this same phenomenon time and time again in my own portfolio.

I don’t pay any attention to the stock market on an everyday basis, but I did pull up my accounts for the express purposes of writing this article.

While the S&P 500 was down almost 3% yesterday, my FIRE Fund declined yesterday by just ~2.2%.

So my portfolio also dropped quite a bit in market value yesterday, but not nearly as much as the broader market.

Not that any daily fluctuation matters to a long-term investor. However, I thought this was illustrative in terms of what I’m discussing today.

As I noted earlier, dividend growth investors still experience market turmoil. It’s just that the experience is dulled significantly. Relying on high-quality dividend growth stocks is almost like a built-in painkiller for those sensitive to ups and downs.


As I foreshadowed in my last point, market turmoil means almost nothing to these businesses.

It’s due to the very nature of the type of companies we’re talking about here.

High-quality dividend growth stocks represent equity in world-class enterprises that are paying out rising cash dividend payments to their shareholders.

These ever-growing cash dividend payments come through in thick and thin.

A spat with China, or even a major economic recession, does not change this dynamic.

Market turmoil doesn’t mean that people suddenly stop turning on their lights, putting gas in their cars, going to work, eating food, brushing their teeth, cleaning their homes, calling and texting their friends on their smartphones, accessing the internet, watching their favorite entertainment programs, banking, or needing military protection from the government.

The world doesn’t stop turning because of a trade war, a Federal Reserve meeting gone awry, a tweet from a politician, or anything else.

It’s business as usual for these businesses.


It might be stormy outside, but it’s awfully warm and cozy inside.

That’s because a dividend growth investor continues to collect their growing dividends while market turmoil unfolds around them.

This reliable and growing cash flow adds a sense of steadiness and comfort in times of distress.

And it adds to your ability to go out and purchase these stocks on sale. You can pile up those dividends and go shopping. It’s essentially like someone gave you cash and a coupon to go out and have fun.

Except you’re not going to the mall. You’re going to my favorite store in the world.

And you’re not buying stuff you don’t need. You’re buying high-quality dividend growth stocks that can make you incredibly wealthy and free over time.

No matter what the market does over the next week, I know for sure that dividends will be rolling in from the likes of Air Products & Chemicals, Inc. (APD)The Clorox Co. (CLX), and American Express Company (AXP).

Regardless of the turmoil, I’ll be paid. In fact, I’ll be paid more than I was last year. Each of these companies are paying out bigger dividends this August than they were last August. Volatility simply gets easier and easier to stomach when those checks get fatter and fatter.


I honestly hesitated to put this piece together. I felt like writing it might be akin to caving into and participating in unnecessary headlines, drama, and noise.

However, I also thought it would provide some perspective and value to investors out there who might be struggling with some of the recent turmoil. Even though the last few days aren’t even a blip on the long-term radar of the stock market, seeing things unfold in real-time can be scary.

It’s always great to be a dividend growth investor. But it’s especially great during market turmoil.

Market turmoil is not something to fear. It’s something to celebrate.

And I hope these five points help give some of you dividend growth investors out there a better frame of reference as to why that’s true.

Full disclosure: I’m long all aforementioned stocks.

Note: This article originally appeared at Mr. Free @ 33.


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Category: Dividend Stocks

About the Author ()

ABOUT JASON FIEBER Founder and publisher of Mr. Free At 33. Founder of Dividend Mantra. Author of best-selling The Dividend Mantra Way. I became financially free at 33 years old through a combination of hard work, frugal living, strategic entrepreneurship, intelligent investing, patience, persistence, and perseverance. I'm sharing my perspective on what life is like being financially independent at such a young age in order to inspire others looking for a similar lifestyle. I'm in pursuit of happiness, and I believe that being financially free is vital toward that end. I hope that by trying to become a better version of myself every single day, I help you become a better version of you. I write about how financial independence, frugalism, dividend growth investing, passions, and minimalism all holistically work together to improve happiness from a personal perspective in real-time.

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