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Fri. May. 16, 2008

Seven Important Reasons for Dividend Investing *

With all the other investment strategies out there, why should investors consider dividend or income investing? Based on articles that I have previously written, presented here are seven important reasons for dividend investing:

  1. In a troubled market, dividends provide investment stability: While everyone else is panicked about their portfolio’s decline, dividend investors see a downturn as an incredible buying opportunity.
  2. Unlike earnings, dividends can’t be manipulated or faked: From an accounting standpoint, it is relatively easy through fraud and manipulation to make an income statement look quite impressive. There is no faking the cash that shows up in your brokerage account.
  3. Dividends provide continuous feedback: As time passes dividend investors see their income steadily grow. You do not have to wait five to ten years to determine if the strategy is working. Each dividend and dividend increase provides the investor with reassurance that the strategy is working.
  4. Reinvested dividends provided a significant portion of the historical equity returns: Performance in any given year is driven by capital appreciation, but long-term returns are largely the result of reinvested dividends.
  5. Good dividend companies grow their dividends: You expect your employer to give you a raise periodically. Why wouldn’t you expect the same from your investments?
  6. Spending dividends in retirement, does not harm your principle investment: In addition, a good dividend portfolio can be left to your children and their children.
  7. A dividend portfolio is relatively low maintenance: You may not want to spend your retirement managing and worrying about your portfolio.

Maybe I am just biased but, I firmly believe that dividend stocks and ETFs should have a spot in everyone’s portfolio.

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6 Responses to “Seven Important Reasons for Dividend Investing *”

  1. Dividend Growth Investor says:

    D4L,

    I like this post. Concise, Precise and to the Point!

  2. passivefamilyincome says:

    D4L – Great post! I will definitely bookmark this post. I think it confirms your strategy. I have just recently turned to buying high yielding stocks for several of the reasons you list. Reviewing this list from time to time will help me stay focused.

  3. Div Guy says:

    I am sold on dividend investing. I enjoy wathcing my dividend income increase every month!

  4. Dividends4Life says:

    Dividend Growth Investor: Thanks.

    passivefamilyincome: Don’t focus too much on high yield. Sometimes it is better to buy a stock with a lower yield, but with a high dividend growth rate.

    Div Guy: Me too!

    Best Wishes,
    D4L

  5. Living Off Dividends & Passive Income says:

    great post – i’ve added you to the #2 carnival of dividends & passive income

  6. Dividend Growth Investor - Carnivals, Festivals and Blogs says:

    ..[If you are still unsure about dividend investing, Dividends4Life presented Seven Important Reasons for Dividend Investing that would turn you into a dividend junkie]..