3 Reasons to Start Investing In Dividend Stocks

Red-hot returns, crisp shares: These are just a couple of the many benefits of investing in dividend stocks. Your favorite beverage company? Check. Electric carmaker? Double check. How about a stock that gives you a steady stream of cash flow, too? Yup, that’s a big tick, too. And while the list of such companies is endless, not every dividend stock is right for you. After all, not all stocks that pay dividends are reliable and not all companies that pay dividends are good investments. So why choose these rather than other stocks? Here are the top three reasons to invest in dividend stocks:



When it comes to dividend stocks, liquidity means investors can easily buy and sell their shares without having to worry about injuring the share price by buying or selling too many at once. This makes these stocks more attractive for investors looking for a steady stream of income with some liquidity.

1.Dividend stocks have a history of paying dividends


One of the most compelling reasons to invest in dividend stocks is their history. Over the past decade, around 70% of dividend stocks have managed to pay consistent dividends. In other words, while a stock may not be paying a dividend now, there’s a good chance it will in the future. And that’s just part of the story. A study by S&P Dow Jones Indices and CFRA found that over the past five years, more than 83% of S&P 500 Dividend Aristocrats had beaten their non-dividend counterparts in terms of total returns.


2.Dividend stocks are solid investments


Dividends are a form of return on investment (ROI) that rewards shareholders. When companies pay dividends, they are returning some of their profit to shareholders. What’s more, many dividend stocks have a long history of paying out reliable returns each year and the ROI that you can expect is higher than those offered by other investments. For example, let’s say company ABC pays $1 in dividends per share. Let’s also say that company XYZ pays $0.50 in dividends per share. Company ABC could be considered a better investment than company XYZ because it pays more in dividends each year ($1 vs. $0.50). That’s not to say that investing in company XYZ is a bad idea, but if you want to get the most bang for your buck, then it might be better to invest with company ABC instead. Dividend stocks should always be part of your overall portfolio strategy because the more you have invested, the less risk you will have when one or two stocks perform poorly. This allows you to sleep soundly at night knowing that you are taking care of your future needs through steady dividend payments and reduced risk


3.Dividend stocks have great liquidity


Liquidity is a term used in the stock market to describe how quickly you can buy or sell a share. When we talk about liquidity, we mean something that can be converted into cash, like shares of stock. One thing many people underestimate is the importance of liquidity. Consider what happens when you’re ready to sell your shares of company XYZ and there are no buyers available? You may have to wait for days, weeks or even months before someone buys your shares. On the other hand, if someone wants to buy your shares today and you're willing to sell them, it'll take seconds for them to purchase them from you. When it comes to dividend stocks, liquidity means investors can easily buy and sell their shares without having to worry about injuring the share price by buying or selling too many at once. This makes these stocks more attractive for investors looking for a steady stream of income with some liquidity. Another way dividend stocks are beneficial overall is that they tend not be as volatile as other stocks. Companies that pay dividends often report their earnings on quarterly basis instead of daily or monthly reports which means they don't have as much volatility in their share price over time because they are less likely to experience sudden spikes or slumps in day-to-day trading activity.


Bottom line


You’re investing for the long haul A dividend stock can generate a reliable, predictable income stream. With dividends, you get paid now on your investment and in the future from what that investment earns over time. A dividend can provide a steady income stream over a time period of 10 years or more, which is crucial if you’re looking to diversify your portfolio. That’s because not all investments are created equal: Some stocks offer growth potential while others offer income stability. And while both types of investments play an important role in building a balanced portfolio, it’s worth considering how much you need at this point in your life and what stage you’re at with your other investments.


Getting started with investing is easy. If you learn about the basic types of investments and find the right advisor, you can begin making more informed financial choices for the future.

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