A common misconception among novice investors is that picking growth stocks is necessary to generate lucrative portfolio gains. Often the best performing stocks are actually blue chip companies that grow their revenue and profits steadily and consistently over long periods of time. In turn, these companies can reward shareholders in the form of a dividend.
Warren Buffett perfected this approach to portfolio management. Are Berkshire Hathaway portfolio owns very few smaller growth stocks. Instead, Buffett is known for taking positions in leading brands with strong cash flow and dividend payments.
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One Buffett share it looks particularly tempting right now, it’s a credit card company Visa (NYSE:V). Below I will explore why Visa is a solid choice for passive income and assess how owning the stock for decades could be a wise move.
On October 29, Visa reported financial and operating results for its fiscal fourth quarter and full year 2024. One of the highlights of the report was that Visa’s board of directors approved a 13% increase in the company’s quarterly dividend, making this came to $0.59 per quarter. part.
As the chart below shows, Visa has steadily increased its dividend since the company’s initial public offering (IPO) in 2008.
Investors hold onto dividend stocks for several reasons. For retirees, dividend income can be a good source of cash and help prevent you from dipping into your savings for unnecessary reasons.
Younger demographics may also want to expand their holdings with reliable dividend players.
The chart above shows how Visa stock has performed since its IPO, both on a standalone and on a total return basis. The big difference between these two lines is that the total return involves reinvesting dividend income into Visa stock, rather than receiving the payment in cash. As you can see, reinvesting dividends has significantly increased Visa’s long-term returns.
Unlike retirees, younger investors may not need to top up their savings every month or quarter. But as the chart makes clear, reinvesting dividend income into your stock portfolio can increase your profits in a material way.
An important thing for dividend investors to consider is whether or not these payments are sustainable. In other words, does the company in question have the financial resources to not only pay a dividend, but hopefully also increase it?
