This is Why I’m Still Buying Dividend Stocks
One mistake many beginner investor makes is ignoring dividends. Sure, it may seem dividends are only a small part of any stock portfolio however everyone wants to see the price go up, up and up. But smart investors or those who want to be listen up. When it comes to long term investing, dividend stocks have a lot of advantages, after all, when was the last time someone paid you for owning something? When doing some stock market investing, it’s best to look to the future, and what dividend stocks can do for you. Dividend stocks allow you to own a part of a business and get a cash distribution each year.
Here are my reasons why you should buy into dividend paying stocks:
Almost Risk Free Stock Market Investing
There’s no such thing as 100% safe when you invest, but when a company has enough funds to pay out their investors, then it is most likely a strong company. Most dividend stocks are companies with solid backgrounds, and can withstand most economic situations like a Global Pandemic or High Inflation. Because they are making good profits, and are able to pay their expenses and still have excess income to share with their investors, then you know this a great company. Between a company who pays out dividends and one with a stock price that fluctuates which one do you think has a better chance of protecting your capital?
When investing look at their quarterly earnings, profits and expenses including debt, this will give you an idea if the company is in good financial shape.
Dividends Increase your Capital Gains
Some companies offer DRIPs or dividend reinvestment plans. Basically, instead of paying you the cash out, your share of the dividends gets reinvested to buy you more stock that means you are essentially getting stock for free. And when that stock price goes up, then more capital gains for you. Eventually, this type of plan can benefit you when doing long term investing.
Remember that most dividend stock income is taxed at a lower rate as well which will save you money in taxes in the future.
Dividend stocks are true passive income
Can you imagine, sitting on the beach, relaxing and money keeps going into your bank account. Dividends are income which are handed to you on a silver platter without you having to lift a finger! Aside from what you’re reaping from increasing stock prices, you get a regular payment in form of dividends. Buy more of the dividend stock and you get even more income. The benefits of compounding interest are incredible, this is how wealth is built.
Do whatever you want with it, use it to pay debt, buy a fancy car or, if you were thinking of long term investing, set up a system where you take your payments and invest in more dividend stocks. When you have enough shares, well then just keep relaxing on the beach while you enjoy your income!
Of course, when the economy is not doing so well, a company can cut back on its dividends. Still, a successful value investing strategy require smart investors know that dividend stocks which have a high yield is a way to collect income from a source which will be around for a long time.
This is by far my favorite form of passive income, sure you can also Stake Cryptocurrency or trade Forex, but they all require a bit more work or technical knowledge, dividend investing can be very profitable and provide even more upside than growth stocks in some cases.
Here is a list of the dividend stocks I have in my portfolio.
Remember that most of these companies increase their dividends each year, even though most markets are down in 2022, in most cases stocks tend to appreciate over time, you can generate passive income while you hold your shares!
If you have comments or questions feel free to email me or follow me on Twitter.