Why Dividend Stocks Could Be Your Best Option for Now
There is no doubt that the Covid-19 pandemic had impacted significantly on the socioeconomic landscape of the world and has wreaked havoc globally in many ways with its trails likely to continue to be felt for a while. It is also generally true that there is no better time to start investing than now.
Business and market experts have been talking about a potential stock market crash from the onset of the pandemic. As opposed to panicking, smart investors are poractively seeking opportunities, riding the wave of the market uncertainty and still coming out tops in making profit from their trade transactions.
What is important is that you find the best kinds of investments for yourself that would fit into your investment objective while also earning you profit despite the volatile state of the economy.
One of such investments that can ride above the tides in the face of the global upheavals such as this one, is our trusted dividend stock.
When buying up dividend stocks for your portfolio, your first inclination may be to choose the ones with the highest dividends. That strategy makes sense in theory, but remember, you also want to look at factors like company strength and consistency. A company that pays a substantial dividend but has a rocky financial outlook probably isn’t a great choice, because if its stock value goes down, you stand to lose money.
So, what are dividend stocks?
As the name implies, dividend stocks are stocks in companies that pay out regular dividends. Dividend stocks can be an important source of passive income as they provide regular payments from company’s earnings though dividend payments which could come in the form of cash, shares or even properties.
Why you need them now.
Investing in dividends stock comes with a myriad of benefits especially in the long term as many dividend-paying companies are usually strong companies with good prospects for long-term performance.
The first reason they should be added to your investment portfolio now is that these companies are typically very stable and highly-capitalized. As such, if there are companies that should survive a downturn, they are these ones.
Another great advantage is that investors’ profit in dividend stocks comes in two ways: The first is through the appreciation in the price of the stock and the other is through distributions made by the company.
Many companies that pay dividends are strong performers, and they are able to make distributions to investors because they have a great deal of cash.
Investors who are nearing retirement or are already retired many gravitate toward dividend stocks as a source of income. These companies can also pay more than what investors could earn with government securities or other types of bonds.
Likewise, when you receive a dividend payment, the choice of what to do with it is yours. You can take that cash and use it to pay bills or take a vacation — or you can reinvest that money to grow your wealth. In fact, you can set up your investment account to automatically reinvest your dividends so you’re not tempted to cash them out, thereby effectively forcing yourself to save more.
It is, however, also important to note that there are still risks involved in investing in dividend-paying stocks in spite of these benefits as they are still subject to changing prices in the marketplace and market performances.
There is also the truth that these companies hold the power to suspend, slash, or eliminate dividend payments. Yet, this security is one of your best bet now.