This week on the One Minute Retirement Tip podcast, I’m exploring the question: Are Value Stocks Coming Back In 2021?

Today, I’m talking about why I like value stocks more than growth stocks right now and in the years to come. 

Value stocks have been unloved and have underperformed in this new big tech age that has emerged over the last decade. But one important characteristic of many value stocks is that they pay dividends. Many growth stocks don’t. Their businesses are still new and they use all of their profits and cash to reinvest in the business and help to fuel future growth rather than returning that growth to shareholders in the form of dividends. 

Value stocks are different, because they tend to be more established and mature businesses. No longer in their explosive growth phase, they have elected to return cash to shareholders in the form of dividends. This is a good thing. If a company can balance reinvesting in the business with sending profits to shareholders through dividends, it’s a win-win, because you’re likely to see the stock price increase over time as the business grows, all the while you’re getting paid every year from dividends. 

High-quality dividend paying value stocks have chronically underperformed over the last 10 years, it’s quite possibly the most compelling time to be investing in value stocks, and capture the consistent and growing dividend income stream that these stocks provide.

I have always been a fan of high-quality dividend paying stocks as the foundation for any investor’s portfolio. And with everything but high-flying big tech being largely ignored and left behind over the last 10 years, the valuations of these companies are priced right. 

Today you can buy quality stocks with all of the important fundamental elements: 

• Low debt
• Strong cash flow 
• Consistent profitability
• Dominant businesses in their industry
• Well-managed
• Pricing power to increase prices if inflation hits without losing customers

It’s a powerful recipe for building wealth by owning great businesses, and many of these companies are trading at a discount to their intrinsic value today. 

Even with the stock market at new all-time highs, I truly believe now is the time to be backing up the truck and loading up with high quality dividend paying value stocks. 

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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