Passive Income And More. Why You Need Dividend Paying Stocks.
What Are Dividends?
Dividends are earnings a shareholder receives from a company from holding shares in the company. Not all companies pay dividends to their shareholders.
Companies in the growing phase may choose to reinvest their earnings rather than pay them out to their shareholders.
Why You Need Dividend Stocks in Your Portfolio
Well-established companies with stable earnings tend to pay dividends to their shareholders regularly. It’s one of the reasons people buy shares in a company besides the expectations of appreciation in the value of those shares.
- Dividends are a great source of passive income.
- If these dividend stocks drop in value in a market correction and the company is still paying the same dividends as they have in the past, this could mean your dividend yield has gone up.
- This means buying dividend-paying stocks during a market downturn is a great thing! For the higher yield.
- Companies that pay out dividends tend to be stable with positive earnings and are generally less risky.
- The other reason to invest in dividend-paying stocks is so you can reinvest the dividends and buy more of the stocks.
- Dividends are generally taxed more favorably than interest or salaried income. Because the government sees that the companies you have shares in are paying corporate tax and so they do not tax shareholders heavily for dividend income.
Bringing It All Together.
Please seek the advice of a financial advisor with the fiduciary duty to put your best interest at the forefront of any suggestions she makes.
While dividend-paying stocks are often stable, nothing is without risk. Always remember that past performance is no guarantee of future performance.
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