Dividend stocks are a great means for many, many individuals to generate secure, passive income that enable them to retire financially free and will grow in time.
If you not convinced and you think dividend investing is boring, (we encourage you to read the article at http://www.philstockworld.com/2016/05/14/best-way-for-buying-options-of-stocks-for-monthly-dividend/ to change your mind), not too fast, and can’t give you the highest return on your investment, then consider the following 5 reasons why you still ought to purchase dividend stocks.
#1 Dividend Stocks Additionally Give the Finest Capital Gains
A lot of times, investors have the understanding that dividend stocks produce hardly any capital gains and have slow growth. The best dividend stocks can also be the best capital gainers.
From 1972-2013, Ned Davis Research did a study on the S&P 500. They discovered stocks that grew their dividends over time tended to outperform the rest of the index in terms of growth. Every $100 invested in dividend growth stocks grew to $5,997. Compare this to only $264 for non-dividend payers.
#2 Dividend Stocks Have Less Hazard
In other words, you stand to make a return that is higher while confronting lower risk. You no longer have to subscribe to the idea that “higher danger equals higher return”.
Dividend growers give the highest annualized yields. Lower volatility is meant by a lower standard deviation, and your yields are less unstable. So if you’re the form that doesn’t have the rollercoaster ride which is the stock market occasionally, dividend stocks are definitely your cup of tea.
#3 Receive Secure Passive Income All the Time
We’ve already proved it’s easy to see why and that dividend growers may give the best yields while having the lowest risk: dividend stocks that are great will pay your dividends to you every single time, regardless of how the stock market moves up or down. And the greatest ones will pay you a dividend that is growing.
So it doesn’t matter if stock market bubble burst is initiated by China or if Greece will or will not depart the Eurozone, as long as you hold on to your own stock. You know that you will receive your dividends on time like clockwork each and every year.
So if your fiscal demands need you to generate passive income that is secure from your investments regularly, then dividend stocks satisfy your needs exceptionally good.
# 4 Reinvesting Your Dividends Gives You Supercharged Returns
It’s already wonderful enough that dividend stocks give you great returns, lower risk, and passive income that is stable. If you can afford to wait for a while, delay spending your dividends today. That way, you can reinvest your dividends and supercharge your investment yields:
But if you reinvested your dividends, your entire gain would be 16,797 – a return 8,400% higher! Incredible.
Investors consistently discuss the power of compound interest if you just follow the simple rule today of reinvesting your dividends and in this case, the effect is dramatically apparent.
#5 Invest in the Best Businesses in the World
Ultimately, investing in stocks that pay you steady and growing your dividends every year also means you’re investing in some of the very best businesses on the planet.
Why is this then?
The logic is straightforward. If a business can consistently pay a growing dividend year after year to you, it means the firm is also able to generate higher earnings, higher profit and, most of all, higher cash flow to keep up its dividend increase. And only the best companies on earth with the most successful business models can do that each and every year.
A list of dividend stocks at Dividend.com shows that some companies have increased their dividends consistently. Every year. For at least the last 25 years. This includes some of the best and many successful businesses like 3M, Coca-Cola, Procter & Gamble. The top business on this particular list, Diebold, Inc., have increased its dividends every year for 61 years direct. Amazing.
As you can see, dividend stocks are amazing investments – they offer high yields, lower-risk, stable income that is passive, and you can sleep at night knowing your money is parked with some of the strongest and most resistant firms in the world.
At the same time, we don’t advocate you purchase a stock just because it pays you a high dividend. This is probably the most common error hobbyist income investors consistently make. There’s a LOT more investigation to be done before it is possible to identify an excellent dividend stock that’s not only able to pay high dividends but also have a dividend that’s sustainable and will continue to grow dividends many years (or decades) down the road.