What is a Dividend Aristocrat & How to Use Them to Invest as Beginners

Investing doesn’t have to be complicated or require large sums of money. You can try a simple and effective strategy that involves investing a small amount in dividend aristocrat stocks each payday.

What are Dividend Aristocrat Stocks?

Dividend aristocrats are companies with a history of consistently increasing their dividend payouts for at least 25 consecutive years. These stocks are considered more stable and reliable than other stocks.

Investing in them can be smart for long-term growth because these are well-established companies with proven financial resilience. While past performance is no guarantee of the future, it’s tough to beat the track record of companies that have shown increased dividends for more than two decades.

What is a Recurring Investment Strategy?

A recurring investment strategy involves regularly investing a fixed amount of money into selected stocks or funds. For example, every Friday you can automatically invest $5 into a different dividend aristocrat stock.

This approach, often referred to as dollar-cost averaging, helps you spread out your investments over time, reduce the impact of market volatility, and develop financial discipline. Plus, when you invest in dividend stocks, you’ll likely earn a positive return even when the underlying stocks stagnate or slightly decline.

How to Set Up Recurring Investments Every Payday

Automatically set up recurring investments in dividend aristocrats using your smartphone or computer.

1. Choose a Fee-Free Brokerage Account: Select a brokerage that offers fee-free trading to maximize your investment returns.
2. Select Your Stocks: Carefully pick the stocks you want to invest in. Focus on dividend aristocrat stocks for their proven track record.
3. Set Up an Automatic Investment Plan: Set up your account to automatically invest a fixed amount into each chosen stock. For example, you can invest $5 into each of your selected stocks. You can increase or decrease the amount you invest based on your budget.
4. Schedule Your Investments to Align with Payday: Keep your strategy simple by scheduling them on a recurring basis. For example, you can set your investments to occur every Friday, ensuring they align with payday for consistent funding.
5. Automate to Ensure Consistency: This automation guarantees that you regularly invest without having to manually do it each time.

How Much Is This Going to Be Worth Over Time?

Estimating the future value of these investments involves factors like dividend yield, stock price appreciation, and reinvestment of dividends. Assuming a conservative average annual return, here’s a rough estimate:

• 1 Year: With a weekly investment of $40 across eight stocks, the total investment would be around $2,080. With compounding dividends, this amount could increase.
• 5 Years: The total investment amount would be around $10,400, potentially growing significantly with compounded dividends and stock appreciation.
• 10 Years: Investing $40 weekly for a decade results in a principal investment of $20,800, which could grow by thousands with continued reinvestment.
• 20 Years: Over two decades, the investment would be $41,600, not accounting for the compounded growth, which could add tens of thousands more.

You Can Start With Just $1

The beauty of this strategy is its accessibility. You can start with as little as $1. The key is consistency and patience. Over time, small amounts add up exponentially, thanks to the power of compounding and reinvestment.

If you like the strategy and watching your balance grow, you can always invest more. Or, if you need to tighten up your budget, you can reduce the amount you invest per paycheck. Consistency matters more than how much you invest on a biweekly basis. 

Focus on the Long-Term When Managing Your Money

While this investment strategy is not a get-rich-quick scheme, it is a methodical approach to building wealth over time. It emphasizes the importance of regular investing, reinvesting dividends, and focusing on stable, dividend-growing companies. Investing is a marathon, not a sprint, and the key to success is focusing on the long-term picture.

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