What’s your biggest fear?

What’s the stuff that keeps you up at night?

Only you can answer that question.

But I can tell you what Americans – on average – are afraid of.

Every year, a team of researchers from Chapman University perform a survey of America’s top fears. Here’s their most recent findings:

Source: Chapman University “What Scares You” 2024 Edition

Most of the items on this list are pretty scary. But there is one item on this list that doesn’t frighten me at all…

I’m talking about: “Not Having Enough Money for the Future.”

But 55.8% of respondents to the poll acknowledged that fear. And I’m not entirely surprised. A CNBC survey from last year reported that 56% of Americans say they’re not on track to retire. Account for recent inflation, and you have a precarious financial situation for most Americans.

The presidential election really put a spotlight on this issue.

Looking at exit polls, it’s clear Americans are hurting. Here are the results for “Compared to four years ago, your family’s financial situation is:”

  • Better today: 24%

  • Worse today: 46%

  • About the same: 30%

That’s heartbreaking.

I hate the fact that there are so many Americans who are anxious, scared, and even hopeless, regarding their finances.

But it doesn’t have to be that way.

If We’ve Said It Once…

…then we’ve said it a hundred times.

The single best way to secure a dignified retirement is to own great businesses at fair prices that pay reliable – and reliably rising – dividends.

This is what we stand for at Wide Moat Research. It’s what we believe. And if you follow this basic premise, and if you’re disciplined and consistent, there is every indication that you will be substantially wealthier in the years ahead.

I would go so far as to say that until an investor understands this concept, they really shouldn’t be doing anything else with their portfolio.

All of my long-term financial plans revolve around growing dividends. In retirement, I plan to live off them. Ideally, I won’t touch a dime of my hard-earned investments throughout retirement. Instead, I’ll simply use the passive income that my investments generate to support my lifestyle.

For many, that’s the dream.

And if you ever reach the stage when your dividends will cover your cost of living, there are three benefits…

It delivers peace of mind. After all, if you’re living off your dividend payments, it means you’re not touching your principle.

You’ll also be able to pass along a significant amount of money to your kids, grandkids, or charities, thus beginning a virtuous cycle of inter-generational wealth creation.

Also, by identifying dividend growth stocks, it means your passive income stream will go over time.

So how to find these stocks?

Aristocrats

No dividend is ever 100% safe. They can all be cut at a moment’s notice. But, when we’re talking about blue-chip companies, that rarely happens.

For instance, there are currently 144 U.S. stocks that have raised their dividends for at least 25 consecutive years.

These companies are called dividend aristocrats.

Looking at these 144 companies, the average dividend yield is nearly 2.6%, the average five-year dividend growth rate is 6.6%, their average dividend payout ratio is 57%, and their average annual dividend growth rate is 41.6 years.

Many of these companies were paying dividends before I was born. And I suspect they’ll be doing so long after I die.

On the dividend aristocrat list, you’ll see several companies you’re familiar with…

  • Aflac (insurance): 42 consecutive annual raises

  • Caterpillar (construction equipment): 31 consecutive annual raises

  • Chevron (oil and gas): 37 consecutive annual raises

  • The Clorox Company (consumer staples; cleaning supplies): 47 consecutive annual raises

  • Coca-Cola (consumer staples; non-alcoholic beverages): 62 consecutive annual raises

  • Colgate-Palmolive (consumer staples; toothpaste/brushes): 61 consecutive annual raises

  • Exxon Mobil (oil and gas): 41 consecutive annual raises

  • McDonald’s (fast food): 49 consecutive annual raises

  • PepsiCo (consumer staples; drinks and snacks): 52 consecutive annual raises

  • Walmart (consume staples; retail): 51 consecutive annual raises

…just to name a few.

These are companies that investors can sleep well at night while owning, because of the strength of the brands, market share position, and their very reliable cash flows.

And by focusing on passive income, rather than share-price appreciation, you can rest easier during periods of market volatility. After all, your financial health doesn’t depend on stock sales.

Wil this mindset, all that matters is the safety of your dividends and their ability to sustainably grow.

This is why stock market sell-offs don’t scare me. And they shouldn’t scare you… so long as you are confident in the quality of your holdings.

Over the long-term, the U.S. stock market has moved consistently higher. There is every indication it will continue to do so. And until proven otherwise, every short-term sell-off is an opportunity to acquire more bule-chips… and more dividends.

There’s a lot to be afraid of. There always is.

But, with patience and process, securing enough money for your future shouldn’t be one of them.

Buy great companies. Collect your dividends. Stay the course.

And have no fear.

Regards,

Nick Ward
Analyst, Wide Moat Research