Sunday, April 3, 2016

Dividend Investing - Millennials Move Forward

Dividend investing - it's something that most millennials currently don't understand or don't want to understand. To most of them the stock market is a giant jumble of old man funk that shouldn't be touched. In their minds, their money is better served in a savings account before it is more horribly used on a car that they can't afford but at least the payments can continuously be refinanced on. Like it or not though, they're the future of the stock market whether they know it or not.

I myself am a millennial and I'll admit that until recent years came about, I was trapped in the same garbage mindset that befalls my generation as a whole. We were raised in a time when consumerism was at one of its greatest moments. TV, radio, newscasts, and now even the internet have raided our minds and melded us into the perfect consumer. We would rather spend our money now rather than think about investing it for the long term. We've been told our whole lives why it's better to get the new phone now rather than wait. Just look at all the benefits you could reap when you buy it now rather than wait! But wait, there's more! This is where our generation fell into the pitfall that unbeknownst to us would not condition us well to deal with the future as adults. We then are left ill prepared when we exit school without having important classes such as economics because the budgets could not be approved. We would rather waste our time on what are seen as more important core classes that will get us into the best universities than spend time in classes that will ultimately prepare us for retirement that will be right down the road afterwards. The short term has become much more important in our minds because we have been told that it is more important rather than get a little bit of everything. This is why we as a generation don't care about important things that would pay huge dividends later and why we push them to the side rather than think about the long term consequences.

It can't stay like this forever though. Over time, my generation will catch up just as I have and realize that putting money into something that will pay off later is much smarter than the quick easily filled sensation that can be financed until it becomes a problem. We will realize that it's much better to be the one who loans money to others rather than to be the one who is placed into a hole so deep that we could never hope to get out. Sooner or later, the sheer reality that we may never retire will hit us and force us to think about investing. When that happens, the market will see a new type of investor. That person will be an investor so untrained that the market will get daily headaches. The bear and the bull market will meet the new Mr. Hide of the market until the millennials can find their place in the market. They will have to figure out what style of investing fits them best while likely losing pounds of cash in the market making uneducated guesses as to which companies are worth their time. Where then do they go? What type of investment style will even fit someone who has such quick and unrealistic expectations as to what life can give them?

I believe the answer to this question lies in dividend growth investing. Typical investing yields the investor a chance to make growth by means of capital gains but it really leaves a lot to be desired when it comes to satisfying the generation of millennials. It's simply not fast enough to quench the thirst of the millennials. Since we are a generation that loves immediate payouts, holding something and waiting for it to pay us only if it raises doesn't suit the build. We need a portfolio that gives both the chance of capital gains through unrealized gains but also one that pays over time to satisfy the consumer in all of us. In this way you give the child that was used to getting things right away the chance to only have to wait for monthly/quarterly/annual payouts rather than only the chance of a payout if they wait long enough and make sound investment choices.

But why should any of you care? You should care because the future of the world will be in the hands of those very people before you even know it and one of the duties of the older generations should always be to train those who are younger to make better decisions. It should be expected just as when we visit someone's house to leave it in a better place than when we entered it. I believe that dividend investing is that medium. I think that as time goes on we will see more and more millennials move towards a style of investing that is befitting of a dividend growth investor. This means that companies such as AT&T (T) and General Electric (GE) should see more and more growth in the market as they will be valued tenfold by the generation that will ultimately see it as a catalyst to their retirement. The youth that grew up with companies such as these will see them and recognize them and that paired with a healthy dividend payout should attract them further and further towards these household names. This means big things for those of us who are already in those companies. Where a lot of people may expect companies that are in the technology field that are currently loved by millennials to do well, unless they start to pay dividends like Apple (AAPL) did, they may quickly find themselves dropping out of the field of vision and being replaced by other names that we recognize that actually pay dividends.

In conclusion, I truly believe that the market is eventually going to be flooded by a series of untrained investors from my generation. It won't be anytime soon since they currently don't seem to care but eventually it will hit. When it does, dividend paying stocks will likely be at the core of it. That means that it will be even more important to be in bed with the right dividend paying companies so that we can all benefit and the cycle can come full circle.


  1. I've noticed that the younger crowd doesn't seem too interested in good old fashion DGI investing. I wonder if it's the world they've grown up in. They see companies with no real product or value get billion dollar valuations and they probably have friends hitting it big with start-ups. It may take another tech bubble to change their minds.

    1. Yeah, I see that happening in the near future. We'll have to wait and see. Most of my friends (my generation) have thousands in debt to their name and nothing else. Paycheck to paycheck.