The Benefits of Investing In Dividend Stocks

Posted by Tom Edwards on November 15th, 2019

In recent times, it seems like most investors have forgotten how scary and volatile the stock market can be.  And that is understandable.  It has been a long time since the market suffered large, sustained losses. 

The Last Bear Market

I still remember how bad the last bear market was.  From its peak in 2007 to the bottom in early March of 2009, the stock market as measured by the S&P 500, fell almost 60%.

Suffice it to say the many investors suffered ongoing losses.  Even after the market turned up again, very few investors or observers thought that the gains would last.

It has been more than 10 years since the financial crisis and the bear market in stocks that it created.  We are sure to have another bear market, but I have no idea when that will happen and how bad it will be.

The one thing I know is that a dividend investing strategy can ease the pain.  Dividend-paying stocks will go down in a market too.  But companies who pay consistent dividends can limit the damage of stock market losses.

The Benefits Of Dividend Stocks

Here are several advantages to investing in companies that pay regular, recurring, and growing dividends to their investors.

Dividends are real cash you can spend or reinvest back into your investments without touching your original investment.

Good dividend growth stocks increase their dividends on an annual basis providing you with more cash at your disposal each year.

By investing fresh capital in dividend stocks, reinvesting dividends and receiving dividend increases you create a cash-generating machine.

By selecting good dividend growth stocks and holding them for the long term, the company does most of the work; not the investor.

Dividend payments and dividend increases provide evidence of a company’s financial strength.

Payment of consistent dividends instills financial discipline on the company paying them.

If you work at building your passive dividend income stream long, hard and smart enough, it can provide you with all or part of the passive income you need to achieve your financial goals.

Solid dividend-paying companies are often household names.  We use their products and services each day.

Examples of Dividend Stocks

Just about everyone I know has heard of Apple.  And many people almost always have an Apple device in their hands.  But did you know that Apple pays dividends every quarter to its investors?

Apple is best known for increasing its dividend payments every year.  Since it started paying a dividend in 2012, Apple management has increased the dividend payout on average 11% per year.  That is a nice annual increase to your income stream if you are an Apple stockholder.

Staying in the technology space, AT&T is another example of a dividend-paying company.  In contrast to Apple, the AT&T dividend does not grow rapidly.  But AT&T offers investors a high current dividend yield of more than 5%.  That is a pretty substantial rate considering we are in a low-interest-rate environment.

Conclusion

Smart investing is a must for most everyone to meet their individual financial goals.  Don’t let the next bear market in stocks rip your finances to shreds.  Consider investing in a few good dividend-paying companies to ride out the storm.

But remember that investing involves risk.  So do your research and invest your money wisely.