An investor recently asked us if we could help him get a solid dividend portfolio set up to kick off the new year. And we were more than happy to help, asserts growth and income expert Brit Ryle, editor of The Wealth Advisory.
Dividends are a big part of our strategy here at The Wealth Advisory. And reinvesting them is the most important part of that aspect. It's something that we do with our own accounts. And it's something that we insist everyone who takes our advice do, as well.
That's because it's the best way to make your nest egg grow. It's compound interest to the extreme. Say you own a $100 stock that goes up by 5% in a year. Your holding would now be worth $105.
But say the stock pays a modest dividend of $1 per year, too. So, you started with $100. Your capital gain got you an extra $5, and the dividend got you $1 more. That's a 6% gain! Doesn't sound like much but it adds up. I mean, six is 20% bigger than five.
Now, consider if you reinvest that dividend. We'll need to have a few more shares here. But the math is the same. You own 100 shares of the $100 stock ($10,000). Capital appreciation on each share is $5. The dividend is $1. But you got 100 dividend payments. So, you've got enough to buy another share of the stock, if you add $5 of your own cash to make the math easier.
So, this year, your original 100 shares are worth a total of $10,500, and you've got an extra share worth $105 that you didn't really pay for. And you'll get an extra dollar from it this year. You've got overall holdings worth $10,605. That's a 6.05% gain. And over time, it'll add up in a big way.
So, when we got the request to make a list of our favorite stocks for dividend reinvestment, we were elated to oblige.
And without further ado, here in no particular order are our Top 10 Dividend Reinvestment Stocks for 2019.
1. Realty Income (O)
The monthly dividend company is coming up on its 600th consecutive dividend. And it recently gave investors their 92nd consecutive quarterly dividend hike. Plus, it offers a dividend reinvestment program (DRIP). So, you can put those monthly payments right back to work in buying more stock. And you can avoid paying broker fees on those new shares.
2. Bank of America (BAC)
Bank of America has proven us right time and time again. We got massive stock gains as it shook off the dust from the mortgage crisis. And we've seen our dividend grow from a measly $0.01 to $0.12 per quarter. We don't expect the same kind of stock price growth, but we're betting on that dividend increasing. Make sure to take advantage of BAC's DRIP option, as well.
3. Innovative Industrial Properties (IIPR)
Innovative Industrial Properties is one of our favorite investments for obvious reasons. It's given us blockbuster gains over the year that we've been invested. But it's also steadily grown the dividend, too. And we see that continuing. Cannabis will be bigger than alcohol and tobacco. And IIPR is the landlord to the cannabis industry. Revenues will keep growing. And the company has to pay at least 90% of pretax income to investors. You can reinvest your payments through a DRIP like BAC and Realty Income, too.
4. CoreSite Realty (COR)
CoreSite, our "internet royalties" play, is just at the beginning of its growth. The need for data storage and easy access will only grow as the world becomes more interconnected. 5G adaptation will speed up the process. CoreSite keeps boosting its payment and offers a DRIP so you can keep that money working hard. We see more stock gains and many more dividend hikes coming.
5. Prologis (PLD)
Prologis is one of the biggest players in its field. And it's still growing. Mostly, that's through acquisition. But it's also building new facilities specifically designed for customers like Amazon. Online retailers need three times the industrial space as traditional ones. That means as online retail keeps growing, so will the need for Prologis' expertise.
6. STAG Industrial (STAG)
Like its bigger sister Prologis, STAG is in the perfect place to profit from the explosive expansion of online retail. STAG is still small and maneuverable. So, it can adapt to new customer needs faster than players like Prologis. And its focus on large-scale clientele makes it a perfect fit for companies like Amazon and Walmart. Plus, thanks to its small size, we can expect faster stock growth than with bigger industrial REITs. And that size also makes it a tasty takeover target.
7. Uniti Group (UNIT)
Uniti Group has been one of our favorite stocks since it was still Communication Sales & Leasing. And nothing has changed except its name. Uniti is the owner of top-quality assets. And thanks to well-planned acquisitions, it's no longer reliant on its former parent for all its revenue. The coming adoption of 5G wireless should also bode well for Uniti. Fiber networks are the perfect places to mount 5G antennas. And Uniti owns lots of fiber.
8. Cisco Systems (CSCO)
Cisco didn't give us all the money we'd thought it would this year. But it did give a lot. We got a dividend hike to start the year. And management announced a $25 billion repurchase plan in February to celebrate tax savings. But the company still has over $42 billion in cash on hand. That means you can expect another dividend increase in 2019. Cisco has a DRIP like all the others on this list. So, I strongly recommend you take advantage.
9. Walgreens Boots Alliance (WBA)
Walgreens has boosted its quarterly dividend payment by 289% over the past decade. And it's hiked that payment every year for almost a half a century. The company is expanding wisely by adding Rite Aid stores to its stable at a discounted price. And it's also branching out into other health-care markets. Plus, in the face of some continued market weakness, consumer staple stocks like pharmacies tend to outperform the rest of the market. Look for another pay increase in 2019. And get into the DRIP to make sure those growing cash payments go straight to work.
10. Omega Healthcare Investors (OHI)
I know that I've pretty much named all our REITs in this list, but they're all such great investments. They're growing dividends. And they're growing in share prices, too. However, Omega is in a class by itself. It's in an industry that will only continue to grow as people continue to age. And even though it might get hit some in a correction — or God forbid, a recession — it'll hold up better than most stocks. People don't stop getting health care because the economy is bad. This is both a great way to grow your profits and the perfect plan for protecting them, as well. Plus, if you don't need the income right now, you can put it right back to work with a DRIP.