By The Sizemore Letter<\/u><\/p>\n
On my last trip to Baltimore, I sat down with InvestorPlace’s Alyssa Oursler to explain why dividend investing makes sense for young investors.<\/p>\n
It’s not just about generating income in retirement.\u00a0 If used in the right context, dividends can be used as a growth and quality screen as well.\u00a0 A well-built dividend stock portfolio built early can set you for life.\u00a0 Here is an excerpt from Alyssa’s article<\/a>:<\/p>\n Should young investors care about dividends? According to Charles Sizemore,\u00a0the founder and editor of the\u00a0Sizemore Investment Letter<\/a>, the answer is \u201cabsolutely.\u201d<\/p>\n It\u2019s not just because yields are nice and dividends foster good behavior from management.\u00a0Instead, the real appeal comes\u00a0from dividend growth potential. As Charles explains,\u00a0\u201dIf a dividend payout is growing every year, the yield on your initial investment could be massive.\u201d<\/p>\n Let\u2019s look at PespsiCo<\/strong>\u00a0(PEP<\/a>), one of InvestorPlace<\/em>\u2018s Dependable Dividend Stocks<\/a>. The food and beverage giant currently rewards shareholders with 57-cent payout every quarter. That totals a $2.28 payout every year, so if you divide that by the current share price of approximately $79, you get a dividend yield of around 2.9%.<\/p>\n But consider this: If you had bought PepsiCo stock 10 years ago, your yield on cost would be\u00a0much\u00a0<\/em>larger.<\/p>\n In the fall of 2003, PEP was trading for $44 per share and shelled out a quarterly dividend of 16 cents \u2014 good for an annual payout of 64 cents. Anyone who bought into PepsiCo at that time wouldn\u2019t have been blown away by that 1.5% yield. But now that the dividend has grown steadily for a decade, those investors have an eye-popping yield on cost.<\/p>\n Take the current $2.28 payout per share and divide it by the 2003 share price of $44, and you have a yield north of 5%. Not to mention, investors also are sitting on the capital gains reaped since then.<\/p>\n If PepsiCo continues to increase its payouts, as it has been doing for more than 40 consecutive years \u2014 including during the financial crisis \u2014 investors buying today could watch their yield on cost increase big-time as well.<\/p>\n<\/blockquote>\n Charles Lewis Sizemore, CFA, is the editor of the\u00a0Sizemore Investment Letter<\/a>\u00a0and the chief investment officer of investments firm Sizemore Capital Management.\u00a0Click here<\/a>\u00a0to learn about his top 5 global investing trends and get your copy of \u201cThe Top 5 Million Dollar Trends of 2013.\u201d<\/em><\/p>\n This article first appeared on Sizemore Insights as VIDEO: Young Investors Should Focus on Dividend Growth<\/a><\/p>\n\n