How Founding Families Drive Dividend Fortunes
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There's something interesting (and reassuring) about a business that has the founding family still at the helm. Even during tough economic periods, family-controlled firms tend to be incredibly dependable when it comes to paying dividends.
The underlying reason for this is pretty straightforward: the families usually count on these dividends as a significant source of their income. This is what they use to fund their livelihood, and this personal dependence on the dividends is motivation to continue paying them regardless of what’s going on in the economy.
Fortunately, for us investors, there's no shortage of companies that contain a strong family presence at their core. Some of the most prominent examples include:
Walmart (WMT): Under the ownership of the Walton family, who are direct descendants of the founder, Sam Walton, approximately 45% of Walmart's outstanding shares are held through trusts and Walton Enterprises, their primary investment entity.
Regarding the dividend, Walmart's consistency is hard to beat. The company has rightfully claimed its throne as a dividend king, having raised its dividend for 50 years in a row.
Estée Lauder Companies Inc. (EL): This beauty industry titan, founded by Estée and Joseph Lauder, is still under the significant influence of the Lauder family, with family members occupying strategic positions within the company. They control roughly 38% of the common stock and about 86% of the voting power, and the company has paid dividends every year since going public in 1995.
Brown-Forman Corporation (BF.B): Known for iconic brands like Jack Daniel's and Woodford Reserve, this company has been steered by the Brown family for more than 100 years, with the family currently owning about 50% of the company. Brown-Forman has paid dividends for 80 years and has increased the dividend for 40 of those years, making them a dividend aristocrat.
Now, switching our focus towards individual investors like you and me, consider the reality that you, too, are creating the foundation for your family’s financial future, not unlike the founding families of these companies.
Many of you may be the pioneering investors in your family tree—the first to embark on this investing journey. By laying the groundwork today in your own portfolio, you're essentially sowing the seeds for a money tree that will grow to provide passive income for generations to come.
At least, it has the potential to do so. The hope is that the future stewards of this wealth, your descendants, will manage it wisely. The knowledge and lessons you pass down to them will be just as important as the wealth itself. After all, the money’s as good as gone if it’s not handled with care.
With that said, I want to hear from you: What led you to start investing? Was it something you picked up from your parents or grandparents, or did you discover it on your own? Write to me here and let me know.
And a big thank you to all of the readers who responded to last week's newsletter! You can read some of the responses down below in the "Hot Takes" section. 👇
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IN MY PORTFOLIO 📈
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ICYMI 🎥
All My Dividend Income In March | $68,800 PORTFOLIO
In March, I received 10 dividend payments from some awesome stocks and ETFs like SNA, V, and SCHD.
In this video, we’ll go through each of those payments so you can see all of my dividend income received for the month, as well as my total income received so far in 2024.
CAREFULLY CURATED 🔍
📺 Dividend Investing vs "The 4% Rule" - Deciding between receiving dividend income during retirement or selling your shares to create your own "dividend" has been a long-standing debate. This video outlines some of the pros and cons to each approach to help you decide which one might suit you better.
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SINCE YOU ASKED 💬
"Is there upside to picking and choosing stocks and hoping you beat the market, or should you just buy the market?"
- MrKurrie22 | YouTube
The upside to picking individual stocks is that there's a possibility you could outperform the market. However, the downside is that you might not, so there's that.
Deciding whether to invest in individual companies depends on how hands-on you want to be with your portfolio. If you like the idea of sifting through companies, spending time learning about them, and selecting the ones you believe are the best, then individual stocks might be right for you.
On the other hand, if you prefer a more hands-off approach, then ETFs and index funds are the way to go. You can also take a hybrid approach and invest in both ETFs and individual stocks, but if you choose individual stocks, you need to be prepared to do your homework.
In my experience, doing the research has been rewarding, and I think it's fun, but it's certainly not everyone's cup of tea. It's crucial to understanding how involved you want to be as an investor.
Have a question? Ask me here to see it featured in an upcoming newsletter.
HOT TAKES 🔥
Last week, I asked readers which discounted stocks they're looking to buy this month. Here are some of the responses:
Pat said: I'm looking at NextEra Energy (NEE). It's a local company, has made enormous investments in solar, natural gas, and also electricity transmission, is coming back from a bad 52 weeks, just crossed above its 200 day SMA, and pays out (and has paid out) a solid and increasing dividend for 29 straight years.
Vincent said: Another favorite of mine is NKE. Also a nice price at the moment. Great dividend growth, 11.07% 5Y CAGR. During the summer, this brand will be seen by millions of people all over the world because of the Olympics as well.
James said: The newest stock I have my eyes on right now is SPLG. It’s an ETF that closely follows the S&P 500. While the dividend isn’t anything to brag about it’s just a solid 60 something dollar stock that does the same thing as VOO in my opinion and is the first stock that I have that follows the S&P 500.
LAST WORD 👋
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Click here to join the DRIP N' Sip Discord group. Like I said, it's totally free, and I look forward to seeing you in there!
