Battling the Bear with Dividend Stocks

Dividend stocks are a popular investment vehicle in the stock market today. Many investors choose these types of stocks because of their ability to produce results, even in bad financial conditions. Dividend stocks are stocks that are issued by companies that have historically paid regular dividends. The companies will typically issue a dividend once every quarter. Some companies will issue a dividend more frequently than that, by paying once a month. Here are a few things to consider about investing in dividend stocks in a bear market.

Dividend Stocks

When you are an investor in a company, you will have a right to receive a dividend payment when it is issued by the company. A dividend payment is essentially the company sending out profits to the investors of the company. This is done to share the wealth with those that have put money into the company. 

Companies are not necessarily required to make regular dividend payments. In fact, many companies rarely make dividend payments and instead choose to use the money to grow the company. They will invest in new technology, or more resources, for the company so that they can increase revenue. 

Battling the Bear

One of the best ways to get through a bear market is to have a good portion of your money invested in dividend stocks. By doing this, you will be able to bring in consistent profits even though the market is down. Companies that regularly pay dividends will give you some money, even if the price of the stock is not performing well.

Stock prices are greatly affected by market sentiment. Therefore, if you are investing in a good company, the price of their stock might be down, but everything could be fine at the company. In that case, they are still going to make their regular dividend payment even if prices are down. If you are an investor in this type of company, you will be able to bring in consistent profits while other investors are struggling.

Dividend Reinvestment

Implementing dividend reinvestment can amplify your efforts even more. When you receive a dividend payment, you will use it to purchase even more shares of the same company. Dividends are based on the amount of shares that you own in a company. As your shares increase, your dividend payment increases as well. If you do this consistently, it is going to result in purchasing more shares every time that you receive a dividend.

When you do this in a down economic market, you will be able to increase your buying power even further. When prices are low, you are going to be able to purchase more shares than normal. As long as the company is fundamentally sound, the price of the stock should rebound at some point in the future. When that happens, you are going to have many more shares than you did and you will stand to realize a large capital appreciation.

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