Wednesday , 7 December 2016


Physical Gold or Dividend Stocks – Which Are a Better Long-term Hold?

So says Marc Lichtenfeld (www.investmentu.com) in edited excerpts from his original article* entitled Protect Yourself From Gold.

This post is presented compliments of Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds), www.munKNEE.com (Your Key to Making Money!) and the Intelligence Report newsletter (It’s free – sign up here). You can also “Follow the munKNEE” daily posts on Twitter or Facebook. The article may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that these paragraphs must be included in any article re-posting to avoid copyright infringement.

Lichtenfeld goes on to say in further edited excerpts:

Gold may make investors feel better in times of crisis and financial uncertainty, but it’s hard to argue with the fact that it’s a volatile asset… That’s why I say if you really want to be sure you’re keeping pace with inflation and own assets that can survive a crisis forget gold. Instead, you should be looking at Perpetual Dividend Raisers – the stocks that raise their dividends every year.

I’m sure many of you are thinking, stocks safer than gold? That’s ridiculous, but [a] look at the numbers over the last 40 years, starting right after the U.S. dollar left the gold standard, [confirms that contention]:

Since 1973, long-term investors who went with dividend-paying stocks outperformed the folks piling into gold. An investor who held the S&P 500 for 10 years made an average of 159.3%, while those holding gold earned 86.7%.

What do these numbers tell us? They tell us that over long periods of time, investors are better off holding stocks than gold…

Do Gold or Stocks Do a Better Job Outpacing Inflation?

Over the past 40 years, inflation has pushed prices higher. Something that cost $100 in 1973 will cost $524 today. In contrast, $100 worth of gold in 1973 is now worth $1,481. However, $100 worth of the S&P 500 is now worth $1,931 (including dividends received). So stocks win that battle. They have done a better job outpacing inflation.

Do Gold or Stocks Do a Better Job in Times of Crisis?

…Think about how many times the spit has hit the fan since the early ’70s – Vietnam, Watergate, high inflation, gas shortages, the Cold War, Iran-Contra, 9/11, the dot-com collapse, the war in Iraq, the financial crisis, etc. – and through it all… stocks have performed better than gold.

The good news for gold bugs is that during the years gold rose in value, the shiny metal was a better performer than stocks – and during gold’s down years, it lost less value but, as the table shows, gold had almost as many down years as positive years.

How Best to Invest

…What’s an investor to do? Simple, buy stocks that raise their dividends every year. These solid companies, such as Johnson & Johnson (NYSE: JNJ) and Kimberly-Clark (NYSE: KMB), not only have been paying dividends every year, but have raised them every year for decades.

  • Johnson & Johnson, which has boosted its dividend for 50 years in a row, raised it an average of 11.7% per year over the past 10 years.
  • Just as appealing, Kimberly-Clark’s average dividend hike was 9.5% per year over the past 10 years.
[Such appreciation]…is more than enough to outpace inflation and increase your buying power. They are well-established companies that have been doing their thing for generations. Could they have a bad year or two in the future? Of course, but I’ll side with history here and assume the companies will continue to grow their businesses over the next decade – and every year deliver more cash back to shareholders than they did the previous year and, as we’ve seen, these types of stocks more than weather the storm if you have a long-term view.

Conclusion

Gold has made a lot of money for investors over the years but stocks have made a whole lot more. Remember that the next time there’s a crisis.

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://www.investmentu.com/2013/April/protect-yourself-from-gold.html (Copyright © 1999 – 2013)

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One comment

  1. Remember the old adage, Don’t put all your eggs into one basket…

    By having a percentage of your portfolio in real PM’s is one way to cover all your bases!