OK, here’s what you need to know about dividend stocks…
When a corporation earns a profit, that money can either be re-invested in the business or paid to shareholders as a dividend. Many corporations keep a portion of their earnings and pay the rest as a dividend.
Since dividend stocks offer regular dividends as well as long-term equity growth, are they a better investment?
Like so many questions related to investing, the answer is “yes” and “no”.
Here are some factors to consider:
- Every dividend you receive reduces the risk of the investment and contributes to long-term return.
- Some companies raise their dividend to distract investors from the fact that their shares are under-performing.
- Dividends contribute to shareholder loyalty, which can make companies less susceptible to market volatility, so the share value may be more stable.
- Some studies indicate that companies that pay high dividends also have high earnings growth over the long term.
- When a company reduces or suspends dividends–even if it’s a constructive move to help build value–negative media reports can impact share prices.
If you’re considering investing in dividend stocks, we can suggest a trusted local financial adviser who can help you make an informed decision based on your specific goals and needs.