Family Photo

The Pros and Cons of Dividend Stocks.

 

When a corporation earns a profit, that money can either be re-invested in the business or paid to shareholders as a dividend. Many corporations keep a portion of their earnings and pay the rest as a dividend.

Since dividend stocks offer regular dividends as well as long-term equity growth, are they a better investment?

Like so many questions related to investing, the answer is "yes" and "no". Here are some factors to consider:

* Every dividend you receive reduces the risk of the investment and contributes to long-term return.

* Some companies raise their dividend to distract investors from the fact that their shares are underperforming.

* Dividends contribute to shareholder loyalty, which can make companies less susceptible to market volatility, so the share value may be more stable.

* Some studies indicate that companies that pay high dividends also have high earnings growth over the long term.

* When a company reduces or suspends dividends - even if it's a constructive move to help build value - negative media reports can impact share prices.

* Some companies pay dividends because they lack the ingenuity to invest their money in ways that could help the company grow more strongly.

If you're considering investing in dividend stocks, I can suggest a trusted local financial planner who can help you make an informed decision based on your specific goals and needs. Call me today for more info.

More helpful tips coming soon...

Your trusted mortgage advisor,

Jeff Kerwin

Back...