Why invest in the best dividend stocks?

Posted by alisonreid29 on March 6th, 2015

When someone invests in stocks for a long-term, they get more than just money by selling their shares. When a company announces their annual report, it usually announces a dividend. This is, of course, only if the company made money during the financial year. Dividends are bonuses given to the shareholders and they can be in the form of cash or in the form of more shares. The best dividend stocks can make plenty of money for the shareholders and these stocks belong to the best companies in the world.

Any company exists to make money. The profit earned from business is used in various ways. A part of the profit may be used for business expansion or it could be used for the development of the employees or process improvement or better customer service and so on. It completely depends on a company as to how it would spend its profits.

Many companies raise money through shareholding. They encourage investors to buy shares and the amount generated is used in conducting the business. So, when a company makes profits at the end of the year, it wants to thank its shareholders for pledging their money for its business. A part of the profit is then paid to the shareholders as dividend. A definite price per share is calculated as dividend. So, the shareholders get dividends in accordance with the number of shares that they hold.

Dividends can be paid as cash or they can be paid in the form of additional shares. When someone invests in the best dividend stocks, they usually opt for the latter option. As a result, they stand to gain more as dividend when the next allocation is done. However, a shareholder has to have complete confidence in a company to reinvest in its shares. This is why the most established companies gain because they have the best dividend paying stocks.

When someone invests in the best dividend stocks and they reinvest the dividend in purchasing additional stocks, this arrangement is beneficial for the company too. After all, reinvestment in stocks is akin to reinvestment in the company. The money raised can be used for doing more and better business. As a result, a company can offer more to its shareholders year after year. As far as the shareholders are concerned, they have the option to make more money because they expect the company to do better and earn more in future. It’s a win-win situation for both.

If you know about the share market, you would know that it’s extremely volatile. The share price of a company can go through the roof one day and plummet the other day. Hence, investing in the best dividend stocks is a prudent choice. These are stocks that belong to the old school and established companies and the chances of making losses is almost nil.

If you want to invest in the best dividend stocks and continue to earn handsome dividends every year, consult an expert and they will tell you how.

When you invest in the best dividend stocks, you can safely assume that you will continue to earn handsome dividends year after year.