Though there is no shortage of strategies to build wealth on Wall Street, buying and holding dividend stocks tends to be a step ahead of the rest.

A decade ago, J.P. Morgan Asset Management, the wealth management division of money-center bank JPMorgan Chase, issued a report that compared the annualized returns of companies initiating and growing their dividends to those of non-payers between 1972 and 2012. The analysis showed that income stocks left the non-payers in the dust -- a 9.5% annualized return over 40 years for the dividend stocks compared to a meager 1.6% annualized return for public companies with no payout during the same span.

The outperformance of dividend stocks over the long run shouldn't be a surprise. Companies that regularly pay their shareholders a dividend tend to be profitable on a recurring basis, can offer transparent long-term growth outlooks, and have previously demonstrated to investors they can successfully navigate an economic downturn. In other words, dividend stocks are perfectly positioned to increase in value over long stretches.

Continue reading

Source Fool.com