If you are nervous about the stock market, one way of starting on your journey is to buy a tracker that tracks the major indices. If you can choose when to sell you will not lose any money, as major markets in the long run go up, partly to inflation. There will be plenty of thick and thin, so when the markets are falling it may be best to have a modest yield to add to your Snowball.
With markets near to all time highs it’s a very dangerous time to buy a tracker.
Here, you would have doubled your money and the variable dividend re-invested into a higher yielder would have added to your Snowball. What appeared at the time to be a high risk purchase, in fact turned out to be a low risk purchase.
Do you ever feel “the curse” of investing at exactly the wrong point? Like your investing is too late, at the wrong time, or maybe that you’re just unlucky?
Well meet Bob – the World’s Worst Market Timer. Bob began his working career in 1970 at age 22 and was a diligent saver and planner.
His plan was to save $2,000 a year during the 1970’s, then increase his savings by $2,000 each decade. In other words $2,000/year in the 70’s, $4,000/yr in the 80’s, $6,000/year in the 90’s… you get the picture.
Bob started in 1970 with $2,000, added $2,000 in ’71 and ’72, then decided to take the plunge and invest in the S&P 500 at the end of 1972. (Time out: there were no index funds in 1972, but come along with me for illustration purposes).
Now in 1973 – 74, the S&P dropped by nearly 50%. Bob had invested his life savings at the peak, just before it fell in half ! Bob was bummed, but Bob had a plan and he was sticking to it. You see Bob never sold his shares. He didn’t want to be wrong twice by investing at the peak and then selling when prices were low. Smart move Bob !
So Bob kept saving $2k/year in the 70’s and then $4k/yr in the 80’s. But he was feeling the sting of his last investment and did not feel comfortable adding to his fund until he had seen the markets rise a fair amount. In August of 1987 Bob decided to put 15 years of his savings to work. Seriously Bob?
This time the market fell more than 30% right after Bob invested. Bob, amazed at his investing prowess, did not sell.
After the 1987 crash, Bob was really planning to wait it out. In the late 1990s everything was on fire. The internet was unbelievable new technology and stocks were flying high. By 1999 Bob had accumulated $68,000 from saving each year. A firm believer that the Y2K bug was boloney, Bob invested his cash in December 1999 just before a 50% decline that lasted until 2002.
The next buy decision in October 2007 would be one more big investment before he would retire. He had saved up $64,000 since 2000, deciding to invest this right before the financial crisis that saw Bob experience another 50% decline. Monkey’s throwing darts were probably better at investing than Bob.
Distraught and disheartened, Bob continued to save each year and accumulated another $40k. He kept his investments in the market until he retired at the end of 2013.
So let’s recap: Bob is definitely has “bad timing”, only investing at market peaks just before severe market declines. Here are the purchase dates, subsequent declines and the amounts Bob invested:
Fortunately Bob was a good saver, and actually a good investor. You see once he made his investment he considered it to be a long-term commitment and never sold his shares. Even the Bear Market of the 70’s, Black Monday in 1987, the Tech Bubble or the Financial Crisis did not cause him to sell or “get out” of the market.
He never sold a single share. So how did he do?
Bob almost fell out of his chair when his advisor told him he was a millionaire! Even though Bob made every single investment at the peak, he still ended up with $1.1M! How you might ask? Bob actually had what we would call “Good Investor Behavior”.
First, Bob was a diligent and consistent saver. He never waivered from his savings plan (recall $2k/year in the 70’s, $4k in the 80’s, $6k in the 90’s, $8k in the 2000’s, $10k in the 2010’s until his retirement in 2013 at age 65).
Second, Bob allowed his investments to compound through the decades, never selling out of the market over his +40 years of investing – his working career.
During that time Bob endured tremendous psychological toil from seeing huge losses accumulate right after he made each investment. But Bob had a long-term perspective and was willing to stick with his savings and investment plan – even if his timing was “a bit off”. He saved and kept his head down.
Certainly you realize Bob is an illustration. We would never advise only investing in a single strategy, let alone a single investment like an index fund. If Bob had invested systematically, the same amount each month, increasing his savings like he did he would have ended up with even more money, (over $2.3M) – but that would not have been Bob, the Worlds Worst Market Timer.
So what are the lessons?
If you are going to invest, invest with an optimistic outlook. Long-Term thinking often rewards the optimist. Unless you think the world is coming to an end, optimists are typically rewarded.
Temporary, short-term losses are part of the deal when you invest. How you react to those losses will be one of the biggest determinants of your investment performance.
The biggest factor in investment success is savings. How much you save, and how methodically you save has a much bigger impact than investment return. Get these three things right along with a disciplined investment strategy and you should do well. Even Bob did well. Nice work Bob.
As part of your Snowball, add a tracker, add funds from your dividends when markets crash.
In this dividend champions list, we will take a look at some of the best stocks to invest in.
Dividend Aristocrats are firms within the S&P 500 Index that have consistently raised their dividend payments for a minimum of 25 straight years. On the other hand, Dividend Champions are companies that have also maintained at least 25 years of dividend increases but may not be part of the S&P 500.
Despite the difference in classifications, stocks with a history of growing dividends have long remained a favorite among investors. After facing nearly two years of sluggish performance, these stocks are regaining popularity in 2025. Global funds focused on dividend-paying equities are now seeing renewed investor interest, as many look for reliable income sources amid ongoing economic and geopolitical uncertainty. According to LSEG’s Lipper data, dividend-focused exchange-traded funds worldwide attracted $23.7 billion in inflows during the first half of 2025 — marking their strongest showing in three years.
Steve Watson, an equity portfolio manager at Capital Group, made the following comment:
“Consistent dividend growth signals a company’s managers are disciplined at capital allocation and confident about future business prospects. With tariff negotiations likely to linger for months, dividend growers could provide portfolios with a measure of stability when markets become volatile.”
Given this, we will take a look at some of the best stocks in our dividend champions list.
Our Methodology
For this article, we scanned the list of Dividend Champions, companies that have raised their dividends for 25 years or more, and picked companies that are comparatively lesser known to investors but are reliable investment options. Next, the hedge fund sentiment was measured using data from 1,000 hedge funds tracked by Insider Monkey in Q1 2025. The list is ranked in ascending order of the number of hedge funds having stakes in the companies.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points.
Norwood Financial Corp. (NASDAQ:NWFL) is among the best stocks on our dividend champions list. In July, the company, along with PB Bankshares, announced that their boards have approved a merger agreement under which PB Bankshares will be merged into Norwood. The merger will create a combined institution with around $3.0 billion in assets, positioning it as a leading community bank serving Northeastern, Central, and Southeastern Pennsylvania.
This move significantly broadens Norwood Financial Corp. (NASDAQ:NWFL)’s presence, extending its reach into faster-growing markets across Central and Southeastern Pennsylvania. The company recently announced earnings for its Q2 2025 and reported strong results. Its return on assets improved by 31 basis points to reach 1.06% compared to Q2 2024. Net interest margin rose 13 basis points from the previous quarter and 63 basis points year-over-year. Loan growth was strong, with annualized increases of 4.4% for the quarter and 8.2% year-to-date. Meanwhile, deposits expanded at a 15% annualized pace year-to-date, while the cost of deposits declined by 20 basis points since Q4 2024.
Norwood Financial Corp. (NASDAQ:NWFL) ended the quarter with over $53 million available in cash and cash equivalents. On June 18, the company declared a quarterly dividend of $0.31 per share, which was in line with its previous dividend. Overall, it raised its payouts for 33 years in a row. The stock has a dividend yield of 5.05%, as of July 23.
California Water Service Group (NYSE:CWT) is a California-based public utility company that offers drinking water and wastewater services. The company remains committed to securing a timely and positive outcome in its 2024 California General Rate Case, recognizing its importance in supporting infrastructure investment and maintaining long-term service reliability. On a broader economic level, management believes that the company’s steady performance, reliable results driven by rate base growth, and solid dividend program present a compelling opportunity to deliver long-term value to shareholders.
In the first quarter of 2025, California Water Service Group (NYSE:CWT) reported revenue of $204 million, down 25% from the same period last year. As of March 31, 2025, the Group held $90.1 million in cash and cash equivalents, including $45.7 million in restricted funds. In addition, the Group had access to $315 million in short-term borrowing through its credit lines, available upon satisfying the borrowing requirements for both the Group and its subsidiary, California Water Service (Cal Water).
California Water Service Group (NYSE:CWT) currently offers a quarterly dividend of $0.30 per share, having raised it by 7.1% in January this year. This was the company’s 58th consecutive year of dividend growth, which makes CWT one of the best dividend stocks on our dividend champions list. The stock has a dividend yield of 2.66%, as of July 23.
Community Financial System, Inc. (NYSE:CBU) is a financial services firm with operations across four key areas: banking, employee benefits, insurance, and wealth management. Its banking arm, Community Bank, N.A., ranks among the top 100 banks in the US by asset size, managing over $16 billion. The bank serves customers through roughly 200 branches located in Upstate New York, Northeastern Pennsylvania, Vermont, and Western Massachusetts.
Community Financial System, Inc. (NYSE:CBU) recently announced earnings for the second quarter of 2025. The company posted revenue of $199.3 million, which saw an 8.4% growth from the same period last year. It reported net interest income of $124.7 million for the second quarter, marking a new quarterly record and reflecting a 14% increase, or $15.3 million, compared to the same period last year. During the quarter, the company also announced an agreement with Santander Bank, N.A. to acquire seven branch locations in the Allentown, Pennsylvania area. The acquisition includes select branch-related loans, deposits, and wealth management relationships, and is expected to advance the company’s previously outlined retail growth strategy.
Community Financial System, Inc. (NYSE:CBU) ended the quarter with $237.2 million available in cash and cash equivalents. On July 16, the company declared a 2.2% hike in its quarterly dividend to $0.47 per share. Through this increase, the company stretched its dividend growth streak to 33 years, which places it on the dividend champions list. The stock has a dividend yield of 2.66%, as of July 23.
Donaldson Company, Inc. (NYSE:DCI) is one of the best dividend stocks on our dividend champions list. The company manufactures filters used in a wide range of applications— from computers and power plants to large industrial machinery— helping protect these systems from damage and enhancing their overall efficiency. The stock has surged by over 6.6% since the start of 2025.
Donaldson Company, Inc. (NYSE:DCI) demonstrated its strength by reporting record sales and record adjusted earnings per share in fiscal Q3 2025. It also increased its full-year adjusted earnings per share guidance and accelerated its share repurchase program, buying back 3.3% of its outstanding shares since the beginning of the year. The company reported revenue of $940.1 million, up 1.3% from the same period last year. The revenue also beat consensus estimates by $6.65 million.
For the first nine months of the year, Donaldson Company, Inc. (NYSE:DCI) generated $251 million in operating cash flow and had $178.5 million available in cash and cash equivalents. The company remained committed to its shareholder obligation, returning $32.3 million to investors through dividends in the third quarter. Currently, it offers a quarterly dividend of $0.30 per share and has a dividend yield of 1.68%, as of July 23. The company has been growing its payouts for 29 years.
Commerce Bancshares, Inc. (NASDAQ:CBSH) is a regional bank holding company that provides a wide range of services, including banking, lending, payment processing, wealth management, and trust solutions. Its success is supported by a solid compliance structure, strong capital position, careful risk management practices, and a strong emphasis on serving its customers. The stock has surged by nearly 3% in the past 12 months.
Commerce Bancshares, Inc. (NASDAQ:CBSH) reported strong earnings in the second quarter of 2025, with revenues of $448.4 million. The revenue saw a 6.7% growth from the same period last year and also beat analysts’ estimates by $12.54 million. Commerce reported solid financial results for the second quarter, driven by its diversified business model and the strength of its team. The performance was supported by an increase in loans, healthy fee income, low credit costs, and ongoing discipline in managing expenses— factors that have consistently contributed to the company’s long-term profit growth.
I like a good investment trust, and some of the real estate variety (REITs) seem especially good value to me. Possibly my top pick, Primary Health Properties (LSE: PHP), looks even better after first-half results on 24 July.
It puts the shares on a 10% discount to NAV. And in this case, I don’t think that’s the best way to value the stock anyway.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Rising income
Primary Health invests in healthcare facilities. And it rents them out on long-term leases, with the NHS one of its key clients. If the rents keep coming in at a steady pace, why would anyone really care about the value of the buildings? I don’t.
For those who do care about the underlying property market, CEO Mark Davies had some welcome words. He said: “The improving rental growth outlook and a stabilisation of our property yields at 5.25% signal that we’ve moved through a key inflexion point in the property cycle.”
The CEO also spoke of the new government ’10-year Health Plan.’ He said: “We welcome the government’s commitment to strengthening the NHS, particularly its emphasis on shifting more services to modern primary care facilities embedded in local communities. This plays directly to our strengths and our long-standing partnerships across the NHS.“
Merger
One key thing is overshadowing quarter-by-quarter earnings right now. It’s the planned acquisition of fellow healthcare REIT Assura. The deal, valued at £1.79bn, was recommended by the Assura board. And at the Primary Health AGM on 1 July, over 99% of shareholder voted to approve.
It throws a pretty big unknown into the ring. Forecasts for the two independent companies are scrap paper now. And the latest report talks of potential third-party joint ventures.
I suspect that’s partly why the Primary Health share price has been slipping since the AGM resolution, while Assura is up 31% year to date.
It can take some time for a merger like this to shake out. And for us to get a clear picture of the combined entity and its potential valuation. I do think investors buying now could risk share price falls in the short-ish term.
Very tempting
I don’t know what the forward valuation and dividend prospects are going to look like. But what I do know is that both REITs were already among my favourites. I reckon those who share my thought that two should be better than one might want to consider it.
If you start work and saving for retirement at 22, your pension pot by the time you reach 68 be approximately £210,000. However, if you delay this by just five years and only start saving at 27, you’ll be £40,000 worse off with just £170,000 at 68.
This is according to a new report by Standard Life, as seen by Money Week. And the calculations just get worse the more you put off saving for retirement.
If young workers only start saving into a workplace pension at 32, they’ll be looking at around £136,000 by the time they’re likely to qualify for a state pension.
Delaying saving by 15 years will make them £103,000 worse off than someone who started saving at 22, proving that each moment counts when it comes to pension funds.
These figures are based on an person starting employment with a £25,000 starting salary at 22 and receiving a yearly pay increase of 3.5%. The experts also factor in a 5% personal pension contribution and a 3% employer contribution to a scheme yielding a 5% investment return.
Rapid rises in interest rates from historically low levels have added to borrowing costs for everyone – and investment trusts are no exception.
The cost of borrowing is relevant to this type of fund because one of the unique features of the investment trust structure is the ability to use gearing – to borrow money to invest alongside shareholders’ capital.
Some trusts use gearing to boost capital returns, while others deploy it to augment income. Gearing amplifies returns on both the upside and the downside but over time it tends to play to investors’ favour. It is one of the oft-touted reasons for the long-term outperformance of investment trusts over sister open-ended funds.
Let’s take a quick look at how gearing works in practice before exploring which trusts have been fortunate enough to lock in low-cost borrowing before interest rates started to rise.
Gearing explained
Investment trust boards set the maximum level of gearing. The investment manager determines how much of this to deploy at any given time, often in consultation with the board.
Some trusts run a certain level of structural gearing, while others tend to use it tactically – depending on how good they perceive the investment opportunity to be. Crucially, this must be weighed up against the cost of debt.
To have certainty over the cost of borrowing, many trusts at least partially fund their gearing through long-term, fixed rate loans – and did so with gusto when interest rates were at rock bottom. From the start of 2016 to mid-2021, a period characterised by historically low interest rates, boards locked in £4.1 billion of low-cost debt fixed for at least two years, according to data from the Association of Investment Companies (AIC).
Since the end of 2021, the Bank of England base rate has risen from 0.1% to 5.25% and is chief among the reasons for investment trust discounts moving to their widest level since the depths of the financial crisis in 2008.
Discount widening has most severely affected trusts investing in less-liquid asset classes, such as property, infrastructure and private equity, as investors fret over the hidden cost of higher interest rates on private companies and the prospect of write-downs in the value of underlying assets. That means caution is particularly required when bargain-hunting in the illiquid market.
James Wallace, an infrastructure and renewables research analyst at Winterflood Securities, notes: “The impact of rising interest rates on financing costs has been an important area of focus for investment trusts with significant gearing, predominantly those investing in alternative asset classes.
“When assessing which funds are best positioned, not only is it important to identify those with low interest costs but it is also key to understand the portion of debt that is fixed or hedged, the payback profile and the relevant maturities to assess refinancing risk.”
We asked advisers and analysts for their top low-cost-debt picks that should be in a strong position when investor sentiment improves.
1) Edinburgh Investment Trust
UK equity income trusts often deploy gearing to help maintain their strong track records of growing dividends paid to shareholders. Many have gross gearing around the 10% mark but their net gearing is generally less at present.
“looks to be in the best place going forward”, according to David Liddell, a director at IpsoFacto Investor.
It had a debenture costing 7.75% per annum, which matured in September 2022. However, a year prior to its maturity, the management team locked in replacement debt at a much lower rate of 2.44%, maturing in tranches between 2037 and 2057 – highly attractive relative to current market rates.
Although stock selection was the key driver of returns in the six months to 30 September, the revaluation of the company’s debt continued to enhance returns, adding around 1% to net asset value (NAV).
At the end of October, Edinburgh Investment Trust had net gearing of 5.2%.
has the longest track record of dividend increases of any investment trust at 57 years. It is a member of interactive investor’s
The trust has £80 million of low-cost debt of between 23 and 26-year maturity with a fixed rate of interest of 2.8% on a weighted average basis. Overall, it has £115 million of long-term structural gearing in place, as well as a more flexible overdraft facility of up to £120 million available to be deployed tactically.
“With short-term gearing relatively expensive currently, not to mention the uncertain outlook for markets, manager Job Curtis hasn’t employed any of the flexible overdraft,” says William Heathcoat Amory, a partner at Kepler Trust Intelligence.
He added: “That said, he views the long-term, fixed-rate borrowings that the board judiciously took out when interest rates were significantly lower as a big competitive advantage both in terms of generating yield and capital growth.”
The trust had net gearing of 6% at the end of October.
3) Mercantile Investment Trust
Kepler Trust Intelligence highlights the “very strong” balance sheet boasted by the UK mid-cap trust Mercantile Ord
thanks to the board securing long-term structural gearing at a “highly competitive” rate.
In September 2021, the board refinanced the trust’s ultra long-term debt, securing a total of £150 million at a blended rate of 1.9%. This consists of three tranches of senior notes including a £55 million note paying 1.98% maturing in 2041, a £50 million note paying 2.05% maturing in 2051 and a £45 million note paying 1.77% maturing in 2061. The notes run alongside a £175 million debenture at 6.125% expiring in 2030.
“These have secured the long-term funding requirements for the trust at a rate we believe can offer significant support to long-term returns,” says investment trust research analyst Ryan Lightfoot-Aminoff, also of Kepler Trust Intelligence.
The trust was geared to the tune of 13.4% on 31 October.
is committed to using long-term structural gearing to enhance long-term returns. Manager Paul Niven has the ultimate responsibility for determining the trust’s level and the timing of gearing.
During 2021 and the first half of 2022, the board took advantage of historically low interest rates to extend the maturity of its fixed rate debt with varying maturity dates between 2037 and 2061 to take total borrowings to £581.8 million at a blended rate of 2.4% – a significant reduction from 7.1% at the end of 2013.
At the end of October, the trust’s net gearing was 5%. “This level is at the lower end of a five-year range, which has averaged 7.5%, and combined with the higher levels of liquidity reflects Paul’s more cautious outlook,” says Kepler analyst Nicholas Todd.
“However, this gives Niven the flexibility to take advantage of the cheap debt whenever he sees an opportunity to do so and a lower hurdle rate for returns on investments to ensure it remains accretive to performance over the long term.”
and in particular the reduction in its short-term floating rate debt. It has been the most active among peers with regard to disposals and made £324 million of divestments in the six months to 30 September, all above their respective March 2023 valuations.
The trust had net debt of £496.8 million at the end of the period. On completion of the disposals, its £650 million revolving credit facility is expected to be around £115 million drawn, down from £494 million at its peak in April.
Fund-level gearing will comprise of these drawings, around £87 million in letters of credit and £150 million in loan notes. Net of cash, this will represent just over 10% of NAV. To protect against further interest rate rises, in July the trust bought an option to cap £200 million of its exposure to SONIA (the average rate at which financial institutions lend to each other overnight) to 6.5% for three years.
“We continue to believe that HICL has an important role to play in diversifying income streams and portfolio returns and reiterate our buy recommendation,” says Investec analyst Ben Newell.
Gearing a positive in rising markets and a negative in falling markets.
