How To Flee To Safety With Dividend Growth Stocks

Investors often turn to dividend growth systems to achieve a measure of long-term stability and safety. This strategy may provide the investor with a growing dividend stream of low volatility. While the focus is generally centered on the stability of the dividend and the payout sustainability, there is an added benefit if the investor also considers the safety of the capital. I will use the term "safety" when referring to portfolio volatility, and maximum drawdown.

Although we are building a strategy and buying what we think is "safety," the next time could be different where stocks of low volatility get hit the hardest. This may occur if a black swan event is centered around seemingly stable and slow trading stocks. Perhaps the imaginary safety buffer is thinner than we thought due to high valuations. These are risks that we must accept. Thus, while safety is a step in the right direction, it should be coupled with other concepts such as value and growth to mitigate some of the risks of buying dead or over-valued stocks.

Source: Seeking Alpha

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