Dividend Paying Growth Stocks

• These stocks enable investors to earn return on investment (ROI) through regular dividend distributions and significant share price appreciation.
  • This allows investors to capture the two main areas where ROI can be gained through investing in a stock.
• For a stock/company to offer such an opportunity to an investor it must be able to support company growth with less than 100% of its earnings.
  • For a dividend to continually be paid, a portion of earnings must be distributed to shareholders.
  • When a company does not need to retain 100% of its earnings and still be able to adequately support the company’s growth, then investors may benefit from share price appreciation, since the company is growing larger.
    • The assumption here is that the company is growing in a smart manner and that the growth will lead to greater value to all shareholders.  If this is not true, then the growth will not likely lead to a greater per share price.
• A recent example of an industry offering the best of both worlds to its shareholders was the international maritime  shipping industry from around 2005-2008.
  • Many shipping companies were paying over 7% dividends annually & saw significant share price growth.
    • International shipping demands increased, shipping rates then increased, the ability of more ships to meet the increase in demand was lagging (takes time to build a ship).
      • Shipping companies had higher order/shipping volumes and increased rates.
  • Note – Since 2008 many shipping companies have suspended their dividend distributions and have taken a significant hit to their share prices.