When I first started writing finance articles, I noticed that my author peers would often include income investing rules like “I only consider a security if it is yielding at least 3%.” That is a rule that has some rationality if you are near retirement or have some plans to collect the cash produced by your investments and do something with it in the near term. But still, I had some type of intuition that this rule was suboptimal, as I noticed that many of the firms with the highest earnings and dividend growth rates tended to have market prices that would only give you an initial yield of 1% or 2%.
The question I seek to answer through case studies is this: What happens if you actively choose to forego current income today, and instead opt to own something that doesn’t give you much income now, but has a … Read the rest of this article!