Dividend Stocks Just Got Better…

Today, I’m diving into a significant development in the investment world: the Federal Reserve’s announcement that rate cuts are coming. Let’s break down what this means for our portfolios and why dividend stocks are about to get much more attractive.

Let’s do this!

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The Key Story

Why Dividend Stocks Just Got Better - ($187K Dividend Portfolio)

The Fed’s Rate Cuts

When the Fed cuts rates, it directly affects the "risk-free" rate of return associated with treasury bills and other government-backed securities. Currently, U.S. treasury bills offer a reliable yield of just over 5%—one of the highest rates seen in recent decades. This has made them an attractive option for many investors, including heavyweights like Warren Buffett, who has been sitting on a large cash pile, earning a solid return with minimal risk.

The Impact on Dividend Stocks

In the low interest rate environment of the 2010s and early 2020s, investors flocked to equity investments, including dividend stocks, as treasury yields were unattractive. As the yields on risk-free assets decline, dividend stocks will once again become a go-to option for income-focused investors looking for higher returns.

My Long-Term Dividend Growth Portfolio

My portfolio has a current total value of $187.4k, giving me a total return of over +$65k (+53.18%). It’s highly concentrated among my top holdings:

• Visa (V), has been my biggest buy in 2024. Visa is a lower-yield company but offers reliable high growth and a scalable, high-margin business model. With a 10-year compound annual growth rate of 17.92% for its dividend and a low payout ratio of 20%, Visa has plenty of room for continued growth.

• Microsoft (MSFT) is another core pillar of my portfolio. It’s a fantastic business with fast-growing earnings and a reliable subscription revenue model. Microsoft’s dividend grows at 10% annually.

• Altria Group (MO) remains my largest dividend payer, projected to pay me $2,200 annually.

• Exxon Mobil (XOM) is another significant holding, with a total return of 244.50% and a projected annual income of $626.

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Thanks for the read! Let me know what you thought by replying back to this email.

— Zach

Disclaimer: Dividend Dividend (Dividend Data LLC) is not a professional financial service. All materials released from Dividend Data (Dividend Data LLC) are for educational and entertainment purposes. Dividend Data (Dividend Data LLC) is not a replacement for a professional's opinion. Contributors to the Dividend Data (Dividend Data LLC) might have equities mentioned in the newsletter