How Income Investing Beats Dividend Growth

For millions of Americans, one of the most popular ways to try to become wealthy is by playing their state lottery. According to Vox, over half of the U.S. population will buy at least one lottery ticket this year in an attempt to strike it rich. For those who might not be familiar, everyone who actually does go on to win the lottery has two different options in terms of how they’d like to receive their winnings. They can either receive the money in a single lump sum payment or you can elect to go for an annuity, which will pay out your winnings over the course of many decades. Not surprisingly, the vast majority of lotto winners choose to receive a lump sum payment.

Although some news outlets will try to say it’s smarter to go with an annuity, the fact is they’re wrong. If you’re actually good with money, then you’d be better off receiving all of your money upfront, even if that comes with a slight penalty that wouldn’t with choosing an annuity. Getting paid all of this cash comes with a lot of excellent benefits, from being able to cover a larger unexpected expense in any given year, to being able to use the extra money to invest and grow even bigger. In the same way, it’s my belief that many investors would be better off investing in higher yielding stocks today and receiving large amounts of cash flow from their holdings today, as opposed to holding lower-yielding growth stocks and waiting for them to grow their distributions over a long period of time. As I’ve said before, it’s a lot more satisfying to receive large dividend payments right now and not settle for a lower amount today and hope that they’ll continue to grow over time.