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☕️ Sunday Coffee: How Well Does the MaxDividends Strategy Work for Building a Growing Passive Income?

We analyzed 25 years of US and global stock markets

Author

Max Dividends
July 26, 2024

Recently, the analysts at Hartford Funds, in collaboration with Ned Davis Research, updated their extensive study on dividend stocks ("The Power of Dividends: Past, Present, and Future").

This study compared the performance and volatility of dividend-paying stocks to non-payers over 50 years (1973-2023).

Here’s what they found:

  • Non-dividend paying stocks: Averaged a 4.27% annual return and were 18% more volatile than the S&P 500.

  • Dividend-paying stocks: Delivered a 9.17% average annual return and were 6% less volatile than the S&P 500.

Why Dividends Matter

Companies that regularly pay dividends tend to be profitable and transparent, offering a reliable growth outlook. These businesses are expected to increase in value over time, enriching their patient shareholders.

Before diving into investments, my team and I did thorough research on the best ways to invest in reliable, high-dividend stocks. Here’s what we concluded:

1. Predictable Income: Dividends are profits you will definitely receive. They provide a predictable, tangible income stream that goes straight into your pocket every month or quarter.

2. Reinvest for Growth: Reinvesting your dividends can create a snowball effect. As you buy more shares, you earn more dividends, which increases your total income.

3. Stability Over Speculation: Investing in stocks that don’t pay dividends means you’re banking on price growth, which can be unpredictable. High-dividend stocks offer clear, regular payouts, providing stability regardless of market conditions.

“Anybody who invested in growth stocks last year, for instance, would have watched their investment go up, up , up, then come crashing back down in January. But dividends can't be clawed back, once they're paid out, that gain is permanent.”

Unknown but experienced investor on Reddit

The Numbers Speak

What can you expect from the MaxDividends strategy? Let’s look at the research:

Fact #1: Stability of Dividend Payments:

  • 91% of MaxDividends companies continue paying dividends without interruption 15+ years after purchase.

  • 84% continue paying dividends without interruption 20+ years after purchase.

We analyzed 25 years of US and global stock markets, focusing on the stability of dividend payments from companies selected using the MaxDividends strategy. Here are the results: 

Holding Period | Stopped Paying Dividends (%)

    2 years - 3.35%  
    5 years - 4.26%
    7 years - 7.69%
   10+ years - 8.47%
   15+ years - 10.14%
   20+ years - 17.35%

Fact #2: Growing Dividend Payments:

  • 96% of portfolios based on MaxDividends stocks pay more dividends the following year compared to the purchase year, without additional investments.

We selected 50 random 1-year time periods, starting in 1999 and ending in 2024. For each selected year, we formed the Top 10 stocks according to the MaxDividends strategy.

Next, we calculated the amount of dividends that these companies paid at the time of purchase and compared them with the amount of dividends they paid after 1 year.

In all 50 cases, the dividend amount for the following year was higher than the dividend amount at the time of purchase without reinvestment of dividends.

In each case, the dividend amount increased by an average of 9.63% year-over-year. That is, if at the beginning of the period you had $100 in dividends, then next year you will have $109.63.

Timeline of U.S. Stock Market Crashes

2008 Recession: 159 companies suite to parameters of MaxDividends stocks

  • 147 increased dividends that year

  • 11 kept the same payments

  • 1 cut dividends ~15%

  • 0 canceled dividend payouts

2015 Stock Market Selloff: 137 companies suite to parameters of MaxDividends stocks

  • 125 increased dividends that year

  • 10 kept the same payments

  • 2 cut average ~17%

  • 0 canceled dividend payouts

2020 Coronavirus Crash: 129 companies suite to parameters of MaxDividends stocks

  • 117 increased dividends that year

  • 12 kept the same payments

  • 0 cut the dividend payments

  • 0 canceled dividend payouts

Fact #3: Long-term performance:

  • MaxDividends stock outperforms the broader market over the long term 11.32% vs. 9.91% for the broad market

We ran 100+ multiple-period single tests and 250+ rolling tests

  1. Buying the Top 10 MaxDividends stocks and selling them after a year, reinvesting the dividends. Here’s what we found:

An example of one such test is shown in the screenshot below. MaxDividends reinvestment-adjusted return: +12.09% per annum over 20 years, which is 2.18% higher than the broad market’s return.

  1. In another case, we used the MaxDividends app strategy, buying the Top 10 MaxDividends shares and selling companies only if they:

    A) stopped paying/raising dividends

    B) became unprofitable, did not develop any longer

Rolling tests results. 65 scenarios.

  • Average annual return: 11.32% vs. 9.91% for the broad market.

  • Average MaxDrawdown: -46.02% vs. -51.90% for the broad market.

  • Portfolio average deviation: 14.82% vs. 14.99% for the broad market.

🙏 To focus on what we love, we need stop worrying about daily expenses. For me, the solution was creating a growing passive income stream through dividend stocks.

As an author of the MaxDividends Strategy I follow it to pick up high-yield & dividend growth stocks to live off dividends and retire early. I share my way and methodology of achieving the dream goal to live off dividends step by step.

MaxDividends Key Concept

Predictability in important things is the foundation of peace of mind. Peace of mind is the basis of financial well-being. MaxDividends is all about peace of mind.

At MaxDividends, we focus on a dividend growth strategy. It’s a great fit for investors who want capital appreciation, a decent level of safety, and growing income.

As the name suggests, dividend growth investing is all about finding stocks that pay dividends and can keep growing them over time. MaxDividends is all about that plus maximizing yields to get the most from dividends and boost growing passive income on your side.

Dividend strategy has been proven to beat the broader market over time, provided the stocks selected can withstand threats from competition and economic recessions.

In MaxDividends Community we follow our time-tested strategy for tapping into overlooked dividend plays that can make your portfolio more resistant to recessions and other market panics and pack on consistent gains for years to come.

Top Secret Stuff is Going Inside

MaxDividends Mission

Help & support everyone on the way to build growing passive income, retire early and live off dividends.

Build your own dividend machine with MaxDividends to launch growing passive income, retire early and live off dividends with community like-minded

MaxDividends Community

MaxDividends is subscriber’s supported newsletter with community and community member’s tools to start building long-term growing passive income to live off dividends and retire early.

Choosing a strong environment is the key to achieving outstanding results. If you surround yourself with people who dream bigger than you, you increase your chances of reaching greater heights. Surround yourself only with those who will support you on your path to success.

MaxDividends Community: What You’ll Get Here

  • MaxDividends Stocks of the Week: Top 10 Undervalued, High-Yield & Dividend Growth Stocks Every Week

+Bonus - access to full list of MaxDividends stocks updated weekly. Boost your passive income for living off dividends.

  • Top Dividend Insights

Unlock Top-notch dividend growth investment ideas and insights, handpicked to help you crush your financial goals, retire early and live off dividends.

  • RoadMap to Live Off Dividends

Ready-to-go step by step weekly guide to achieving financial freedom.

  • Easy Peasy: Build Your MaxDividends Portfolio to Live Off Dividends with Pre-Selected Stock Sets

Grab ready-made MaxDividends stock sets starting at $300, $500, or $1000 each week.

  • MaxDividends Bussiness Overview

Posts & Podcasts with deep dives into the top dividend stocks we hold. Key points, current statement, perspectives and consensus.

  • Max Dividends Portfolio: Goal $12,000 Monthly for 120 Months

My personal MaxDividends portfolios and short list with all the changes and updates weekly.

  • MaxDividends App & Tools Access

Comprehensive tools to help you on the way retire early and live off dividends.

  • Community Like-Minded Access

Stay in touch with me and other MaxDividends followers. MaxDividends community chat of like-minded who wants to live off dividends and retire early. Discuss ideas, share insights, build plans and set goals. Support, motivation, like-minded - all in!

  • Sunday Coffee

My personal life & business column where I share life moments, insights on stock investing, long-term investment philosophy, and intriguing thoughts to benefit you.

🟢 What ELSE You’ll Get

  • Top Dividend Ideas

  • Undervalued Dividend Lists

Undervalued Dividend Eagles (updated monthly) Undervalued Dividend Kings (updated monthly) Undervalued Dividend Aristocrats (updated monthly)

  • Dividend Insights

Top 5 MaxDividends Ideas of the Month Top 3 the Most Promising Dividend Ideas of the Week List of Dangerous Dividend Stocks (updated monthly)

🟢 And even MORE

The Best Dividend Tools in the World from MaxDividends Team

  • Dividend Screener: Find Your Own Hidden Gems

  • Dividend Portfolio Tracker: Take Under Control All Aspects of Your Passive Income

  • Dividend Checker: Check Financial and Dividend Score 19000+ companies worldwide

Someone's sitting in the shade today because someone planted a tree a long time ago. ― Warren Buffett.

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MaxDividends Mission: Help & Support Everyone On the Way of Building Passive Growing Income, Retire Early and Live off Dividends