5 Jul

Dividend stocks: why I think Terry Smith’s advice could help you retire rich

first_img Image source: Getty Images. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! This FTSE 100 asset manager has been in business more than 200 years and has a reputation for stability and long-term focus. I see this as a great dividend stock — I’d buy the SDRC shares for extra yield. Company I’m a dedicated income investor who only buys dividend stocks. But my portfolio income will take a battering this year due to the widespread dividend cuts we’ve seen since March.I’m keen to see if there’s anything I can do to improve my portfolio performance in future crashes. So I was interested to see an article by star fund manager Terry Smith in the FT this week which noted “the folly of investing in equities for income”.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Am I really stupid, or is Terry Smith wrong?Terry Smith runs the Fundsmith fund management business. Since its launch in 2010, the Fundsmith Equity Fund has risen by more than 300%. That’s a pretty impressive track record.Mr Smith makes two main points about dividends. The first is that many FTSE 100 companies have been paying unsustainable dividends in recent years. I think this is a fair criticism.At the time of writing, the FTSE 100 has a dividend cover level of 1.5. In other words, companies are paying out an average of 66% of their earnings as dividends. This leaves only 33% of earnings to reinvest in growth or repay debt.In truth, cover is much lower for some big dividend stocks, including dividend heavyweights such as Vodafone, BP, HSBC and Royal Dutch Shell. HSBC and Shell have already cut or suspended their dividends. I suspect we could see more big casualties over the next year.Dividend stocks I’d buy for long-term incomeMr Smith’s suggestion is that investors who want to buy dividend stocks should look for companies with higher levels of dividend cover. He’s also keen on businesses with controlling family ownership, where management often takes more care to ensure the dividend is affordable.I’ve hunted through the FTSE 100 and FTSE 250 to find companies that tick these boxes. Here’s a selection: The popular budget airline is facing difficult times at the moment. There are certainly no dividends on offer.However, founder Sir Stelios Haji-Ioannou and his family still control 33% of the shares. They seem likely to support any refinancing that might be needed. “This Stock Could Be Like Buying Amazon in 1997” Simply click below to discover how you can take advantage of this. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. ABF owns fashion retailer Primark, plus a range of food and sugar businesses. It’s still managed and controlled by the founding Weston family.The dividend has just been cut for the first time since 1988, to reflect the challenges facing Primark. This is disappointing, but I expect the payout to return and still rate this as a dividend stock. See all posts by Roland Head Roland Head | Saturday, 2nd May, 2020 Enter Your Email Address Comment I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Mr Smith could help us get richMost of these dividend stocks have delivered above-average returns for long-term shareholders. And if you hunt through the FTSE 250 and AIM markets, you’ll find more such firms.I reckon that following Terry Smith’s advice on dividends could definitely boost your future profits. Personally, I’m using the stock market crash to buy more high-quality defensive dividend stocks for my portfolio. I think Mr Smith would approve. Hargreaves Lansdown Schroders Associated British Foods Our 6 ‘Best Buys Now’ Shares This fund supermarket and retail broker isn’t a multi-generational business (yet). But profitability is superb and founders Peter Hargreaves and Stephen Lansdown still own 33% of the shares.Hargreaves Lansdown offers a 3% dividend yield at the moment. I think it’s maturing into a good dividend stock. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Roland Head owns shares of Royal Dutch Shell B. The Motley Fool UK has recommended Associated British Foods, Hargreaves Lansdown, HSBC Holdings, and Schroders (Non-Voting). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Dividend stocks: why I think Terry Smith’s advice could help you retire rich easyJetlast_img read more