This week, I’m talking about opportunities and risks in today’s stock market and what you should pay attention to as an investor in today’s environment. 

Today, I’m talking about one of my favorite topics when it comes to investing - the opportunities that exist in high-quality dividend stocks. 

Dividend stocks are an opportunity right now for a couple of reasons: 

1. They will pay you income, which is critical in this low-interest rate environment. It’s not hard to find a high quality dividend stock that pays a dividend of 2-3% or more. Compare that with savings accounts that are paying nil or even a 10 year treasury with virtually no upside growth potential that is currently paying 1.42% and you have yourself a winning combination of growth potential in dividend stock along with current income that far outpaces what you can get with many bonds right now. 
2. Secondly, dividend paying companies in general haven’t been strong performers this year. Tech and consumer discretionary sectors have seen the most gains in 2020, but many of the high-quality dividend paying stocks are in sections like consumer staples, health care, industrials, financials, and utilities - all sectors that have seen little to negative growth in 2020. For you as the investor, that translates to bargains in these companies. 

In addition, as we come out the other side of the Covid recession, being discerning about quality when it comes to your portfolio will be very important. Many companies saddled with debt, poor management, and choked by a lack of cash flow will not survive. 

A hallmark of high-quality dividend paying stocks is that most of them have low debt, are well-managed and cash rich, so they are more likely to weather this difficult economic climate and come out the other side unscathed. 

In addition to the opportunity today in dividends, a strategically invested dividend portfolio is also capable of generating dividend growth rates of about 10% a year. That’s a big deal once you transition into retirement because it means in about 7 years, you could be generating twice that monthly income from your dividend portfolio as you’re generating today. 

Dividend paying stocks aren’t sexy and when a company announces a dividend increase, it’s rarely the top story on the investment news stations, but believe me, dividends are one of the best and most consistent ways to grow your income in retirement, and they represent a great buying opportunity right now. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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