Dividend paying stocks are a popular investment.
There are multiple benefits that you get when you invest in dividend paying stocks.
1.
Prices don't have to increase in order for you to make money.
You make money from receiving dividends.
You can also compound you wealth by reinvesting in the same company or another company.
By compounding your dividends you will be surprised how much your net worth will total over the long term.
You will be stunt by the amount of your net worth.
That is the power of compounding.
Your cash flow will eventually be so great through compounding effect to the point you will be financially free.
This is very different from non-dividend paying stocks which you can earn money only by selling the stock.
2.
Historically dividend paying stocks have been good safe investments for tough times since most investors turn to investing in them to avoid having their portfolio hammered.
3.
Earns passive income as the company pays their shareholders dividends from their earnings.
Paying dividends indicates that the company is having good income.
4.
Consistency of dividend payment is most important.
If the is growing it is better.
Even though the future cannot be guaranteed, we can make intelligent estimates of the dividends by studying the past.
Of importance is dividend payment every year for at least 3-5 years and dividend payout ratio which can be sustained.
Also, if the company has a history of raising dividends its shows the company is confident of its future.
5.
Investors who invest for the long term believe that a dividend will help them reach their target of financial freedom.
They also believe their net worth will increase as the stock's price rises because of its dividend and dividend growth.
While there are other factors which will make the stock price increase, dividends is definitely a important factor.
6.
Long term investors always win as they always in fundamentally strong companies.
As fundamentally strong companies are stable companies, they will always be able to pay dividends.
Also, investing in strong fundamental companies reduces the risk of losing your capital in the long term.
7.
Companies that pay dividend also help you to hedge against inflation.
Fundamentally strong companies will be able to earn more by raising prices or introducing new products.
As they earn more they will be able to raise dividends which will help you to hedge against inflation.
The above points give you, the investor, the insights to become a long term investor who will earn passive income through dividend paying stocks.
By being a dividend investor you will be to achieve financial freedom as well as increase your net worth.