Time flies and 2022 has arrived.
If there’s one thing that 2021 taught us, it’s that some companies have navigated uncertain times better than others.
Not only have they remained resilient, but some have also posted healthy growth.
Growth investors would have rejoiced at companies in the technology and e-commerce sectors as they saw surging demand from digital adoption.
However, investing for growth is just one way of building your wealth.
There’s also a quiet group of companies that have been paying out dividends since early 2020.
And for investors who stuck with these companies, the receipt of this passive income was a welcome relief throughout the uncertainty the world was facing.
If you’re setting your New Year’s Resolutions for 2022, here’s why you should choose passive income as one of them.
The allure of dividends
Remember that share prices can fluctuate greatly based on short-term events and investor sentiment.
A growth investor needs to sell off some of his shares if he wants to enjoy the fruits of his investment.
Dividends, however, represent a real, tangible return on your investment.
It’s cash that you can keep and use however you wish.
A cash flow “cushion”
As you build up a growing stream of passive income, these dividends also act as a comfortable “cushion” in case of emergencies.
This cash inflow can be viewed as additional income to supplement your earned income.
Or it can also be a source of passive income that you can rely on when you approach retirement.
As we have discussed earlier, certain companies can continue churning out dividends through good times and bad.
Aside from acting as a financial cushion, you also have a mental cushion that you can fall back on should the economy encounter another hiccup in future.
Steady, dependable investments
The ability to pay out consistent dividends also signals that a company has healthy financials and cash flows.
Singapore Exchange Limited (SGX: S68) is one company that has paid out regular, quarterly dividends over the years.
Even throughout 2020 and 2021, the bourse operator was paying out a consistent dividend.
SGX’s dividend has even been raised from S$0.075 per quarter in early 2020 to S$0.08 by the end of 2021.
Businesses such as US-based Tractor Supply Company (NASDAQ: TSCO) have enjoyed healthy demand for their rural lifestyle and pet care products.
The company has rewarded shareholders by raising its quarterly dividend by 30% year on year to US$0.52 during its fiscal 2021’s third quarter.
These examples show that owning strong dividend-paying companies allows you to enjoy peace of mind even through difficult times.
Easy availability of passive income
If you think that it’s tough to build a dividend portfolio, think again.
There is a wide variety of investments out there that pay out dividends.
Let’s start with REITs.
These bundles of securitised real estate are traded as units on a stock exchange, and all of them need to pay out 90% of their profits as distributions to enjoy tax benefits.
This fact alone makes them ideal dividend candidates.
REITs such as Parkway Life REIT (SGX: C2PU) and Mapletree Industrial Trust (SGX: ME8U) pay out quarterly dividends.
Others, such as Keppel DC REIT (SGX: AJBU) or Frasers Logistics and Commercial Trust (SGX: BUOU), pay dividends on a half-yearly basis.
But if you’re not comfortable selecting a REIT to invest in, there’s also the option to invest in a REIT Exchange Traded Fund (ETF).
Aside from REITs, some companies pay out a steady or even growing dividend.
Take blue-chip company Singapore Technologies Engineering (SGX: S63) for instance.
The engineering giant has paid out a consistent S$0.15 per year dividend from 2016 to 2022.
And companies such as Mastercard (NYSE: MA) and Visa (NYSE: V) have also raised their dividends through the last two years despite weaker consumer spending.
Get Smart: A Smart resolution
At the Smart Investor, we have curated a list of 24 dividend-paying stocks that form our Smart Dividend Portfolio.
This list of companies has paid out three times more in accumulated dividends in 2021 than they did the previous year.
It is a testament to the attractiveness of a carefully-selected dividend portfolio where you can continue to receive cash while engaging in activities that you enjoy.
We encourage you to try your hand at building your dividend-generating investment portfolio.
It will be one of the best New Year Resolutions you’d have made for yourself.
Our most popular service, The Smart Dividend Portfolio, will go on sale from 5-9 January! Since we first started the service, we have helped over a thousand members master dividend investing and get closer to their goals. If you’re looking for more dividend stocks, then keep a lookout for our sale announcement. Meanwhile, download your FREE report “Top 9 Dividend Stocks for 2022 – and 3 Tactical Shifts to Maximise Your Profits” and see if you can find more stock ideas today!
Disclaimer: Royston Yang owns shares of Singapore Exchange Limited, Keppel DC REIT, Mapletree Industrial Trust, Frasers Logistics & Commercial Trust, Tractor Supply Company, Visa and Mastercard..