This post was originally shared in my DT Email Newsletter here.
“Hi Willie, what do you think about Hutchison Port Trust? It’s trading in USD. The dividends have been quite high over the past few years. Love your thoughts.”
I know where this is going.
Hutchison Port Trust pays a very high dividend yield. In fact, a high single digit yield.
Yet I wouldn’t dive straight into the stock. Why?
You see, many people believe the way to invest in dividends is ONLY looking at high yield. But this is a paradox of investing that few people realize. It’s dangerous.
In my view, if there’s one concept I like every one of my readers to know well is this: the true power of dividend investing is considering its “total returns”, not just high dividend yield.
Total returns mean you also pay attention to capital gains and dividend growth:
Total Return = Capital Gains + Dividend Growth + Dividend Yield
Now, this isn’t a new concept coined by me. Many years ago, I was inspired by a lady called Geraldine Weiss, who co-founded a financial newsletter called Investment Quality Trend in 1966.
She started to advocate about dividend growth investing. She was even nicknamed the “Grande Dame of Dividends” and “The Dividend Detective”.
In her book called Dividends Don’t Lie (I highly encourage you to read it), she demystified the concept of dividend investing. I still read this book till this day.
Put it this way, the growth potential of a total return portfolio is the only reason for investors to invest in stocks.
The thing is, dividend growth investing is so powerful because it provides stability in the market. When the market goes down, dividends become more and more important because that is the value that investors hold when they own stocks.
That’s why people say dividend stocks don’t fall as much as other stocks do. It’s true.
Over the years, my Dividend Grower Portfolio has been more resilient than the broader stock market index. In fact, I expect in bad times the performance of a dividend portfolio will be more bulletproof than the general market.
In 2025, my portfolio performance continued to perform better than the index despite the tariff war in 2025 and the more recent Middle East war.
Dividends have a “Fanbase Effect”
Dividend stocks tend to be more stable because of what I call a “Fanbase Effect”.
A company raising dividends year after year creates stickiness and attracts a loyal fanbase of dividend investors.
What this means is shareholders who own dividend stocks are less likely to sell their shares and hurt stock prices when times aren’t that good.
This fan base effect allows you to experience less volatility on your portfolio, giving you more attractive risk-adjusted returns.
Plus, when your portfolio grows out of the capital gains and dividend growth, it beats inflation. This is important if your portfolio is going to provide you with a source of stable, safe and passive income.
These high-quality stocks, unlike Hutchison Port Trust, not only produce consistent profit margins, it generates huge free cash flow. This free cash flow allows companies to buy back its shares (share price grow), but pay me dividends year after year.
But more importantly, their dividends grow. That’s how you achieve a high dividend yield.
So, don’t just buy stocks based ONLY on “high dividend yield”. I make sure my portfolio has a healthy dose of capital gains, dividend growth and dividend yield.
By the way, If there’s one other book you need to read for the weekend, it’s
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
