In investing, one immutable fact rises above the rest – dividends matter, and they matter a lot. The data shows that portfolios invested in the highest dividend paying stocks consistently outperform the broader market. Meanwhile low or no dividend payers chronically underperform.

Why is that? Because dividends are the surest way companies return profits to shareholders. Firms have a choice – either pay dividends now or reinvest earnings in hopes of higher profits later. Often managers prefer the second option, trying to empire build instead of letting capital flow back to owners. But study after study shows companies struggle to efficiently redeploy retained earnings.

Sometimes less is more – a modest dividend returned today, coupled with consistent moderate growth over time, generates outstanding investor returns. Dividend reinvestment drives exponential growth.

Independent Bank Group (IBTX)

Independent Bank Group, Inc. (NASDAQ: IBTX) embraces the power of dividends. This regional bank sports a 3.4% dividend yield, having raised its dividend every year since 2015. The payout ratio sits at a reasonable 37%, providing plenty of safety and room for future increases.

IBTX’s other metrics are attractive as well. Its price-to-economic book value ratio indicates the market bakes in no growth expectations moving forward. Yet over the past 5 years IBTX has delivered over 13% annual earnings growth.

In other words, investors can lock in a starting 3.4% yield today that should grow steadily in the years ahead. IBTX’s long history of dividend increases confirms its commitment to return profits to shareholders.

Carter’s Inc. (CRI)

The commitment of Carter’s Inc. (NASDAQ: CRI)  to paying shareholders is evident in its attractive 3.89% dividend yield, which history shows leads to significant outperformance. Its payout ratio remains reasonable, allowing dividends per share to grow over time. Rather than wasting cash on fruitless projects, CRI returns profits to owners. Reinvesting these dividends will prove far more lucrative than chasing dubious growth stories. Portfolios weighted toward high yielders like CRI accumulate several times more than low yielding ones. Its foundations are strong – cash flows sustain payouts and the firm retains enough to fund productive investments. Still, CRI offers value, with shares trading at just 14 times earnings. Securing such an above-average income stream at a discount price gives shareholders their best odds at doubling their money each decade.

Though some claim high payouts signal lack of opportunities, CRI proves the opposite. Over the long-term, shareholders garner significantly higher returns from dividend payers compared to non-payers. Firms returning cash tend to invest more prudently as well. Any price declines allow CRI shareholders to accumulate more shares and dividends, accelerating returns during the subsequent recovery. This was evident during recent downturns – those reinvesting dividends earned far greater returns than those paid none. Rather than flashy one-time gains, persistent dividends drive enduring portfolio growth. With its steady stream already yielding close to 4%, CRI gives investors an engine for consistent rewards.

MVB Financial Corp (MVBF)

Dividends matter greatly for MVB Financial Corp. (NASDAQ: MVBF), a financial services company loyal about returning cash flows to shareholders. With an annual dividend yield of 3.10%, MVBF offers investors a sustainable income stream that can be reinvested to generate substantial long-term returns. In fact, portfolios invested in high dividend-paying stocks like MVBF over time have outperformed the overall market by up to 3% annually. Rather than spending cash flows on questionable investments, MVBF wisely returns profits directly to shareholders through dividends, aligning management incentives with investors’ interests.

MVBF exhibits precisely the dividend qualities that research shows contribute to market-beating performance. With a reasonable payout ratio below industry averages, MVBF strikes the right balance between distribution and growth investment. And with shares trading at just 1.03 times book value, investors can access MVBF’s reliably growing 3%+ dividend yield at a discount. For investors focused on income and total returns, MVBF checks all the boxes.

Vail Resort Inc (MTN)

Vail Resort Inc’s (NYSE: MTN) dividend policy shows their commitment to rewarding shareholders through significant cash returns. With an annual dividend yield of 3.71%, Vail Resort Inc significantly outperforms 80% of companies. Their payout ratio and consistent dividend growth also suggest sustainable cash flows that will likely continue providing income to shareholders.

Furthermore, Vail Resort Inc exhibits precisely what I look for in promising dividend stocks – slightly higher P/E ratios signaling growth expectations paired with average dividend yields and much higher earnings growth. Over the past 3 years, MTN boasted a 64.54% compound annual growth rate in net income along with a current dividend yield on par with industry peers. This winning combination makes Vail Resort Inc poised to generate substantial shareholder value for years to come through both capital appreciation and steadily rising dividend income.

24/7 Wall St encourages all investors seeking income growth to consider doing due diligence on Vail Resort Inc.  Just imagine enjoying their world-class skiing and hospitality while your dividend checks roll in.

Final Thought

 

Recessions may come, stock prices will fluctuate, but the dividend stream of IBXT, CRI, MVBF and MTN should provide safety, income, and inflation protection during any market weather. For dividend investors, these 4 stocks checks all the boxes. The company stays true to dividends’ primary purpose – getting earnings into the hands of its rightful owners. Love dividends?   10 Biggest Energy Companies With Very High Dividend Yields is a must read.

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