I’m buying dividend stocks ahead of the next bull market

I’m buying dividend stocks on the cheap during today’s troubles. Then I’ll sit back and wait for the stock market to go on a tear.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Mature couple at the beach

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m planning for my retirement by investing in top FTSE 100 dividend-paying stocks. I’ll reinvest my dividends today, and draw them as income when I finally retire. It feels like a pretty solid plan to me.

Naturally, there are dangers. Share prices can fall. Dividends can be cut. Companies can go out of business. I think the rewards far outweigh these risks, but I swing the odds in my favour by doing three things.

The bull run will come

The first is to build a diversified portfolio of at least a dozen stocks, across different sectors of the FTSE 100. That way if one or two fall, hopefully others will compensate by holding firm or climbing. Investing is cyclical. With luck, most of my stock holdings will enjoy their day in the sun at some point.

The second way I protect myself is by only purchasing shares I plan to hold for a minimum of five to 10 years, and ideally decades. By taking such a long-term view, I can afford to sit out the bad times and wait for the good.

Right now, there’s plenty of bad news around. This is the third way I swing things in my favour. I love buying shares when they are cheap, especially when they have fallen through no fault of their own but because of a wider market sell-off.

The banking crisis has given me another opportunity to go shopping for bargain shares, as the FTSE 100 has fallen from its recent peak of 8,000 to around 7,450 at the time of writing. By purchasing shares at a low entry point, then holding on for the long term, with luck I can turbo-charge my total return.

I went on a shopping spree last October, when the FTSE 100 traded around the 6,000 mark, buying Lloyds Banking Group, Persimmon, and Rio Tinto. Until the recent sell-off, I was feeling like a clever clogs, because all their share prices quickly climbed by 10% to 20%. They have since given up a big chunk of their gains, which is what shares do sometimes. However, because I bought them cheap in the first place, I am still up on all my trades.

I’m biding my time

I also bought Rolls-Royce, even though it doesn’t pay a dividend at the moment. I thought it was too cheap to ignore, and at some point, management will hopefully resume shareholder payouts. I got lucky — the stock is up 77% since.

Persimmon and Rio Tinto have both cut their dividends since I bought them, but I wasn’t surprised. They were yielding 20% and 10% respectively. Today, they yield 4.56% and 7.75%. I’m still happy with that.

Last week, I bought asset manager M&G, which was yielding 11.43% of the time. Now I’m crossing my fingers and hoping that it proves sustainable. I don’t know how long today’s buying opportunity will last, but I do know that at some point, the stock market will turn and we’ll be onto the next bull run. I just don’t know when. Nobody ever does.

History shows that markets always recover, given time. I’m pleased with my dividend stock purchases today. With luck, I’ll be even happier when the next bull market gets underway.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Lloyds Banking Group Plc, M&g Plc, Persimmon Plc, Rio Tinto Group, and Rolls-Royce Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »