Investing
5 Reasons Why You Should Consider Dividend-Paying Stocks In Your Investment Plan
2 min readMay 26, 2022
Buying stocks and shares is buying ownership in a company. And when that company makes a profit, the board of directors has the option to share their profits with their shareholders in the form of dividends.
Why invest in dividend-paying stocks
- Sign of profit. Companies that pay dividends are companies that have made a profit. There are two main reasons for investing in the stocks-the potential for the appreciation of the value of the stock and the potential for receiving part of the profits from the company to which the stock belongs.
- Stability. Companies that pay dividends tend to be stable. They have healthy balance sheets.
- Power of compounding. Dividend payments can be reinvested, which accelerates the power of compounding, further increasing the value of your stocks.
- Source of passive income. If you choose not to reinvest the dividends, you can use the dividends to supplement your income.
- Tax favored. Dividends are taxed more favorably in the hands of the investor. The companies that produce the dividends have already paid taxes on their income. And as a shareholder, you have also indirectly paid for the profits…