Why You Should Buy Dividend Stocks

Investors are again recommending the proven strategy of buying into dividend-paying stocks. Not only have dividend stocks proven more stable than other stocks in bear markets, but they also provide an investor with a consistent paycheck. This type of market play allows long-term investors a way to make money without losing ownership of their stocks. Retirees who want a return on their money and a living wage, too, will find dividend-paying stocks to be more practical than bonds or other short-term strategies as they share in a company’s profits each quarter.

Consistent Payout

Investors may find dividend payments to be their game-changer in a depressed stock market. While no one can be certain what kind of market tomorrow will bring, a consistent flow of dividend payments provides a hedge against losing all value with a sudden shock to the market. Of course, if a company does not have a good quarter, they will not have a dividend to pay out. However, many corporations have a proven record of sending consistent paychecks and providing profits a step ahead of inflation. Some of these include companies with a record of paying dividends regularly for the past 25 years.

Dividend Increases

While increasing the number of dividend-paying stocks in one’s portfolio will not make an investor filthy rich, it will prove to be a double win in most cases. Taking dividends does not mean one compromises stock valuation. Most companies in strong industries, such as utilities for example, maintain an attractive yield as their stock price and dividends typically grow at a matched pace each year. These benefits make dividends attractive to those close to retirement or already retired, since they have continual cash flow without compromising their net worth. This strategy has begun to appeal to a wide variety of investors with the unpredictable market and growing inflation.

Hedge Against Inflation

A well-chosen selection of dividend-paying stocks will help an investor hedge against inflation. While many have thought of bonds as the fail-safe investment strategy, many investment experts encourage their clients to consider the advantages of dividends. Bonds can often reflect a weak economy, but dividends have a record of keeping ahead of inflation, outperforming bonds on a 15-year comparison, and giving the investor a little peace of mind in a turbulent market. However, should the market pick up, dividends do well in a bull market also. With the high numbers of baby boomers looking to the stock market for retirement solutions, the dividend-paying companies are becoming an important buffer for many portfolios.