3 Benefits of Dividend Stocks

Purchasing dividend stocks is a popular strategy for many investors. Not every stock pays dividends, the most popular dividend stocks, however, are the ones that do pay out. Here are a few benefits that come with investing in dividend stocks.

1. Steady Income Stream

The biggest advantage of buying stocks that pay dividends is that you get a regular stream of income. Some stocks pay dividends quarterly and some pay monthly. Even if it amounts to a small amount per stock, the more shares that you buy over the years, the larger your dividend payments become. Before long, you will find you have a passive source of income. Everyone strives to create passive sources of income as your income is no longer tied directly to the amount of hours that you work. Therefore, with a big enough dividend income, you can supplement your income nicely. 

2. Stocks Do Not Have to Increase

The vast majority of attention in the stock market goes to those stocks that increase in price rapidly. While it is nice to find one of those stocks before the increase takes place, the likelihood of doing so is not that high. Yes, you will probably be able to get steady growth from a number of stocks, but you may also get some decreases along the way. With a dividend stock, it does not have to go up in order for you to make money. The value can stay right where it is and you would still be able to receive money from dividends. While most investors are out watching stock charts and praying that the price of their shares goes up, you can be content to receive a dividend regardless of what happens to the stock price. If the price of the stock goes up, this is a bonus for you, but not required for success. 

3. Shows Strength

While this is not a universal rule, many investors like to choose dividend stocks as it is a sign of strength in the market. If a company has enough profit coming in that they can pay out dividends to all of their stockholders every quarter, you should feel good about the company. Since dividends are optional, they would not be paying out those dividends if they did not have enough money to do so. The ability to pay out dividends signifies that things are going well with your particular company. 

This is a general rule and is not steadfast. Many companies prefer to reinvest the profits that they make back into the company and grow the stock price of the shares for their stockholders. However, they might be just as successful and strong as a company that issues a dividend. 

Regardless of the logic, many investors will choose a company based on whether or not it pays a dividend. They are typically very strong companies that have a lot of good things going for them. 

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