5 Reasons Why You Should Invest In Dividend Stocks Immediately
Is investing risky? Yes. You can lose a lot of money (if you sell). But the alternatives like saving are not really alternatives at all. “Savers are losers” Robert Kiyosaki said in Rich Dad, Poor Dad. Not necessarily in the context you’re thinking. But literally losers as in, the money you save is losing ground to inflation/cost of living. You’re losing money.
The stock market is a way to buy “shares” of company, own pieces of a company, and share in the spoils. This is a much better strategy than saving.
What are dividend stocks?
Dividend stocks pay out some of the profits to shareholders. Quarterly, monthly, depending on the stock. Most of the stable stocks pay out between 3-10% of your holdings. So you can see how this is a much better way to build wealth, or earn passive income than saving.
Some stocks have D.R.I.P.s (Dividend Reinvestment Programs) that automatically reinvest each dividend earned. So your holdings compound and grow faster.
I want to talk about these great features and the 5 reasons why you should invest in dividend stocks.
1. It’s simple and easy
Minimal information and knowledge is required. You can find a dividend-oriented mutual fund and put money there, set it and forget it.
For the minimalist who doesn’t have a computer, you can buy and trade stocks for free on your smartphone with Robinhood.
I’ll post resources at the end of this to learn the basics.
What I do is look for reliable utility stocks like PSEG. Everyone needs electricity. That’s the prism I evaluate stocks through. Then I bookend my portfolio with higher yielding riskier stocks.
2. Financial growth
Build your nest egg by either finding undervalued stocks and selling when they take off, or build by compounding dividends. I prefer dividends! You can also buy options which is assessing the future price of a stock and earning profits by being right.
You can trade options on Robinhood too. By the way, sign up with Robinhood here, and get a free stock share.
After years of compounding dividend stocks you can become wealthy depending on the dividend yield. It all depends on the amount of money you’re willing to put in from your business or pay check. Additional factors are the Dividend Yield, Dividend Growth Rate, and Dividend Payout Ratio.
You can also gain by PPS increase + dividend earning. Your portfolio can really swell if you attack investing from the right angle.
3. Passive income
After you’ve built up a nest egg, or a certain sized portfolio, let’s say a million dollars. And the avg dividend yield for your million dollar portfolio is 6.7%. That means you’ll earn $67k in passive income that year before taxes. You can retire if you make enough for your lifestyle level.
That’s what it’s all about. Making enough to where you can’t use your valuable time as you see fit.
If your goal is higher than you’ll just compound even faster.
There are many investors who are living a great life with a few million in their portfolio earning them 5 or 6 figures a year. They might still have their day job as well. So you’re talking about a passive income of fun money, reinvesting, or a combination of both as highlighted below.
4. Growth and income
Some people use both #2 and #3. They take a portion of their portfolio and compound, and take another portion and use it for passive income. This strategy is smarter when you have a big portfolio. If you want to still grow while relieving your financial burdens, this is what many people do.
You own pieces of these companies. And as part owners, you can attend investor meetings. You also get a copy of the financials every quarter. So you as an investor, and part owner, can make decisions about owning the shares. There is little speculation (as with Cryptocurrency) and little surprise.
So you really can become engrossed in the process of growth in a particular stock.
We’ve seen the advent of tech IPOs. Stocks that come out with little infrastructure, no working product, just a lot of hype. Investors buy up these tech IPOs and then they’re dumped, and drop in value. This wild speculative side of tech stock IPOs is not something that happens in most dividend stocks.
The dividend stocks I own are mostly in health and public utilities. No surprises there. Consistent pay outs and stable price per share growth.
I avoid tech stocks like SNAP like the plague. Most of them are straight trash.
Dividend Diversity : Outstanding website breaking down strategies for dividend investing and stock screening.
Dividend.com : The BIBLE of dividend investing. Total dividend stock analysis and screening. Portfolio tracking and earnings calculator. Dividend stock rating system. Has everything you need. The best dividend stocks of every type are listed by filters.
Robinhood : Free stock trading app. No fees for trading. Option buying and cryptocurrency trading available. Download and get a free stock.
This is a brief overview but I’ll go over more points about dividend stocks soon so stay tuned.