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My Top 3 Dividend Stocks to Buy Now

Aug 19, 2019

Editor's note: Dear reader, the markets have been volatile these last few weeks. Finding the right stocks to buy is not a easy task. I published this piece about two weeks ago, because I could sense a need among my readers for small cap stock recommendations of a more stable nature. The strong dividend payout of these stocks offers that stability. It's a good idea to revisit them.


Richa Agarwal, Research analyst

This is a real story...

In the late 1940s, Quincy, a small town in Florida, became the richest, in per capita terms, in the US.

It wasn't the natural resources or a flourishing trade that helped the city bag this title.

It was in fact, one man's taste for aerated drinks. That man was Pat Munroe, a well-known banker in the town.

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In the 1920s, when the entire US economy was caught in the grip of recession, Munroe made an interesting observation. He noticed that while people were cutting down spending amid the slowdown, one small luxury they were not willing to give up on was a bottle of Coca Cola. This was a product with evergreen demand.

Amid a conflict with bottlers and sugar companies, the stock had crashed 50% from its offer price when it went public in 1919. A savvy Munroe began loading up on the shares of Coca Cola. He further asked the folks in the town to do so. He even lent money to people to buy Coca Cola shares, and underwrote bank loans, backed by these shares.

Quincy perhaps was the only town that was relatively unscathed by the great economic depression, thanks to the dividends from the stock. Some used these to buy more of the stock. Over the next two decades, this modest farming town became the richest town (per capita) in the US.

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Quincy became home to at least 67 'Coca Cola Millionaires', who passed this wealth to next generation.

Here's the most fascinating part...

As per various reports, a US$40 investment (offer price for Coke) in 1919 would have multiplied over 5,50,000 times, assuming all dividends were reinvested. Someone who chose to not reinvest dividends and spend them instead, would have multiplied their investment over 20,000 times!

Such is the power of well-run dividend paying companies.

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When bought at reasonable valuations...they can be the best compounding vehicles.

But dividend investing is hardly this simple.

A company that borrows to pay you dividends is unlikely to add any value to your portfolio. Also, you can't just bet on the stocks with high dividend yield. You must make sure that these dividends will keep flowing.

The key is to bet on bargain stocks with solid fundamentals, that are led by competent and ethical managements, and offer healthy dividends too. My recent report - Steady Income Smallcaps shares 3 such dividend multibaggers opportunities.

As markets continue to rattle amid earning season, upcoming elections, volatile crude price and US China trade war, it's a great idea to add some stability to your portfolio by adding dividend stocks.

Warm regards,

Richa Agarwal
Richa Agarwal
Editor and Research Analyst, Hidden Treasure

PS: Equitymaster's small cap expert, Richa Agarwal, believes a very select group of small-cap stocks are on the verge of a profitable rebound. Get the details here.

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4 Responses to "My Top 3 Dividend Stocks to Buy Now"

vipul

Sep 1, 2019

Pl. let me know Three stock I should have it in my Portfolio?

Like 

BHAVESH ARVIND SHAH

Aug 31, 2019

Please guide me to look for high dividend paying company

Like 

S MUTHU

Aug 20, 2019

High. Dividend paying equity shares

Like (6)

Senthil Kumar M

Aug 19, 2019

I request you to sent me the 3 stocks name

Like (4)
  
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