High Dividend Stocks and Growth ETFs: Which Are Better?

Growth Investing, high dividend stocks, & ETFs

As investors we are here to make money.  We are always looking for the most favorable return.  Since there are many ways to skin the proverbial cat of reaching our goals, we need to look into the total picture of costs and benefits of all options.


For most of my investing career I’ve taken the growth investing approach through buying market index ETFs.  I’m young and they provide a less risky way of achieving baseline returns. Though since I’m relatively young; passing my mid twenties, I’m wondering if I should be looking at other approaches.


Dividend investing through high dividend stocks is another popular approach to building wealth.


Growth investing

Is a style of investment strategy focused on capital appreciation.  The company rather reinvests the profits into other income generating activities.  Newer companies, and expanding empires can generate much more benefit for shareholders by spending the money themselves.  


Dividend investing with High Dividend Stocks

Is a style of investment that focuses buying companies who issue payments to its shareholders, usually as a distribution of profits.  Essentially they can’t find a better way to invest profits to generate more business.  They may be a mature company with such a surplus.


Capital appreciation is very attractive to investors, but so is the idea of monthly distributions.  For myself, and probably many others, the means is not important, so much as is the end point.


So whichever process and selection of companies or funds gets me to my financial goals quicker, is the one I want to pursue.


I’m going to compare my current investment strategy of a total market growth ETF and some of the top high dividend stocks from the dividend  aristocrat list.  I will choose one company from each industry listed in the group of dividend aristocrats for diversification. I will pick the stocks based on my awareness of the company, and their dividend yield being above 3%.


Growth Investing: Using a total market ETF (VTI)


This is my current strategy.  I’ve only been investing for a few years, but since the short amount of time I’ve been investing for doesn’t give us a really accurate picture, I will be looking back 15 years to see where we would be.


Note: Since all the stocks I’ve chosen to evaluate are in USD, I will be using the total US market fund VTI which is in USD for an easy comparison.  VUN is the fund I currently use, VTI and VUN both track to total US stock market, just in different currencies.


The reason I initially chose the strategy of going all in on an index fund ETF is because in many cases of the reading I’ve done, most people don’t consistently beat the market.  And the boring consistency of owning everything generally shows better results than active aggressive management. Or so I’ve read.


An additional appeal is that the total market is self cleansing,  all businesses are either moving forward or being eliminated and replaced by someone better.  With this logic, the total market can only go up. The mix of winners and losers also eases the blow of bear markets – declines – but it limits the growth of bull markets – increases.


Let’s see how $10,000 invested back in 2003 would look over the years.

high dividend stocks and growth etf


My $10,000 would be approximately $44,000 after 15 years


High Dividend stocks: Using a handful of dividend aristocrat companies.


Now the draw of dividend investing is that you’re getting a pay cheque each month, and this cut of profit is also meant to ease the declines in the market.  All of these companies have increased their dividend yield for atleast 25 years.


I’ve chosen these companies to examine and benchmark against the total market based on my awareness of the brand, the higher dividend yield and based on the industry. Like I mentioned above, each company must be paying a +3% dividend and be all from different industries for diversification.  In total there are 7 major industries included in the Dividend aristocrat list. Here are the results. $10,000 split 7 ways is a $1,429 investment for each of the individual stocks.

These are American Dividend Aristocrats.  In the future perhaps I will do a comparison of Canadian Dividend stocks.

Note: I’ve used this calculator to determine the end values of each stock.  And I’ve rounded each final number to the closest dollar value.


Company 2003 investment 2018 Worth
Proctor & Gamble (PG) $1,429 $3,885
Emerson Electric (EMR) $1,429 $6,376
Johnson & Johnson (JNJ) $1,429 $5,122
Target Inc (TGT) $1,429 $4,566
Cincinnati Financial (CINF) $1,429 $5,162
Air Products & Chemical (ADP) $1,429 $8,281
Chevron Corp (CVX) $1,429 $8,548
Total $10,003 $41,940

My $10,000 would be approximately $42,000 after 15 years.



This limited comparison into investing between individual high dividend  stocks vs. one total market growth fund shows that the total market fund wins out by a few thousand dollars. 


Additionally, the benefits to investing in the total market fund include a serious ease of use.  You didn’t need to evaluate individual  high dividend stocks and there were probably rough years to endure with the individual stocks.


It should be noted if I was to take a fine tooth comb to each individual high dividend stock in the Dividend Aristocrat list, I may been able to outperform the total market with my picks.  But I don’t have the time or energy to do that as an individual investor.


This isn’t financial advice.  Your own research and consultation with a professional is always advised before buying investment vehicles.  Happy investing! Do you have any thoughts about my comparison? Did I miss something? What is your style of investing, I am curious to hear!  Comment below!

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