If you’re like a lot of folks, you worry about inflation … and the danger it presents for your retirement.
You’re not alone. And you’re not crazy.
Inflation is a hidden retirement killer because it makes the value of the dollars you save today worth less and less in the future, right when you need them for retirement.
You might also be worried about another financial crisis wrecking your investments. After all, many investors were badly hurt in the 2000 stock crash and the 2008 stock crash.
If you’re someone who wants “wealth defense” against dangers like inflation and stock crashes, then the “no-brainer” decision for you is to own elite dividend-paying businesses … stable cash-generating machines like Coca-Cola (NYSE:KO), ExxonMobil (NYSE:XOM), and 3M (NYSE:MMM) have been over the years.
As I detailed in this essay, stocks that consistently raise their dividends outperform all other types of stocks.
The chart below shows how a $10,000 investment in non-dividend-paying stocks in 1972 would be worth just $30,136 now.
But that same $10,000 in stocks that are increasing their dividend would be worth a whopping $630,024.
That’s an extra $600,000 in your nest egg by investing in dividend growers.
Owning an elite dividend-paying business is a good inflation defense because its strong brand and loyal customer base will allow it to raise prices along with inflation. Its dividend will often increase at a faster rate of inflation, so the value of your income stream will remain intact.
Top-paying dividend stocks are safer, better places to park long-term wealth than any currency or any government bond.
And although fans of gold ownership don’t like to admit it, strong dividend-paying stocks are much better for parking long-term wealth than gold.
You see, governments have a long history of debasing currencies.
When governments want to pay for wars and big social programs, they often create extra currency units (like dollars). Every currency unit that is created devalues the existing currency units. This is called “inflating” the money supply.
Inflation is a way for governments to quietly clip small bits of value from the dollars in your wallet and bank account.
Inflation is one of the greatest dangers a person saving for retirement faces. It can massively impair the future buying power of the money you save today.
This is why owning elite high-growth dividend stocks is so important. Great businesses hold their value through inflationary periods.
Warren Buffett, the world’s most successful investor, figured this out a long time ago.
Buffett urges people who are worried about inflation and currency devaluation to own world-class businesses. Buffett figured out a long time ago that owning great businesses is a better inflation-defense than owning gold.
I agree with Buffett on this point. The numbers prove it. Owning great businesses is way better than gold when it comes to preserving and growing wealth over the long term.
Consider that from the start of 1990 through early 2014 – a time period that includes booms and busts for both stocks and gold – gold returned 222%.
Now consider during that time …
Coca-Cola returned 1,270%.
ExxonMobil returned 1,573%.
McDonald’s (NYSE:MCD) returned 1,660%.
Walmart (NYSE:WMT) returned 1,775%.
Johnson & Johnson (NYSE:JNJ) returned 2,213%.
(Note: These numbers factor in dividend reinvestment.)
Keep in mind … these companies were well-established firms back in 1990. It wasn’t like you were buying untested startups.
The numbers are clear. Owning elite businesses that generate consistent dividends is a better long-term strategy than owning gold.
If you believe inflation presents a danger to your retirement savings (and you should), I encourage you to think deeply about this idea … and how the world’s greatest investor, Warren Buffett, sees it.
Go ahead and own some gold. Own some real estate. But keep in mind the proven wealth-building power of owning elite dividend-paying businesses. Solid dividend stocks are among the best inflation-proof, recession-proof investments in the world.
P.S. Thanks to Donald Trump’s new tax plan, an elite group of dividend-paying stocks is poised to soar in the coming year. You can learn all about how the new tax plan is set to create a $2.6 TRILLION windfall for investors — and how YOU can get your share of the cash — right here.