Waiting to take off on a flight back to New Hampshire after meeting clients in Florida recently, I had time to reflect on my client visits in the Sunshine State. Among the people I visited were a successful third generation business owner in his thirties, a retiree in his seventies, a business owner in her sixties, and another business owner in her fifties. It would seem to most that there would be little in common between these individuals from a financial perspective considering their wide age differences, but there is a common element to all their financial plans. Dividend paying stocks can be a valuable component for many investors in navigating various life stages working towards their financial goals.
The Entrepreneur
The highest return on investment for most entrepreneurs is the investment in their own business. Our business, Cohen Investment Advisors, is growing strong, and we keep investing back into the business by hiring more people, expanding our marketing, and strategically adding technology to better serve our clients and run the business. However, no matter how good the outlook may be, it is advisable to diversify ten to twenty percent of profits into other investments including shares of stock in other companies or interests in real estate holdings.
Our mid-thirties client is investing primarily in his family business but also has holdings with us invested in dividend paying stocks. For him and his father, also a client, favorite holdings include Meta, Alphabet, and Microsoft which all pay dividends and have been strong growth companies.
The Established Professional
Our client in her mid-sixties is considering retiring in the next five years but faces the common challenge of watching over the finances and helping make health care decisions for her aging mother. Her mother, a longtime client, is still enjoying the dividends from companies in her portfolio bought many years earlier and the dividends and growth have helped sustain her finances well into her nineties. Favorite holdings for both mother and daughter include Johnson & Johnson, Coca Cola, Procter & Gamble, and Home Depot, all of which have paid dividends consistently and have a history of raising them annually. They are also well managed so that the share price has grown significantly over the years. This dividend income can be reinvested to supplement the portfolio’s growth in the working years. In retirement, the dividends are distributed to contribute toward a meaningful lifestyle.
The Retiree
A retiree client whom I visited – in his seventies – depends on income from his portfolio to supplement his Social Security income, so like many other retirees, he favors higher yielding dividend stocks like American Electric Power, AT&T, Chevron, Kinder Morgan, Realty Income, UPS, Citigroup, and Pfizer. His overall portfolio has been yielding over four percent, and the portfolio average dividend income has consistently grown to keep pace with inflation.
In times like this, with the broad market having corrected ten percent recently, high dividend yielding portfolios have held up well relative to the market and even have the potential to gain like in 2022, the last time the market had an annual loss.
A Life Well-Lived
Missed on this trip was a favorite client of ours, a longtime ninety-seven-year-old client who passed away a month prior. This dear client’s favorite holding was Apple. He bought this position about eighteen years earlier, and the company has Historically performed well with dividends that have shown consistent growth over time. Investing in a portfolio of companies with long-term potential like Apple, which pays dividends and consistently grows, can be a means to build significant wealth over a lifetime. Our friend leaves behind a cherished legacy that will live on through generations of his beloved family.
A Fun Coincidence
At the time the plane was to depart, our pilot made an announcement that President Trump just landed at Palm Beach Airport, and we needed to wait for clearance as the President headed to Mar-O-Largo. Coincidently, the pilot of our flight happened to be one of our clients who is also an investor in a portfolio of dividend-payers. He and his wife are nearing retirement, and their investment portfolio income will supplement their real estate rental income and future Social Security to fund their retirement years. Another of our clients in Florida, also in 
her fifties, owns dividend paying stocks with a similar objective.
History Lesson
In our many years of experience, dividends have a place in all portfolios, from the thirty something to the ninety something clients and everyone in between. Additionally, the positions owned can be passed down from one generation to the next. Your family can continue to hold the same portfolio of company shares you accumulate over your life and the dividends could enhance their life for decades to come. Perhaps there is no better way to plan your estate than to ensure you pass down an investment portfolio to your family. Many valuable lessons can be learned from the histories of companies in which you own shares.
