3 Reasons To Buy Stocks With Dividends
A longterm investment is a position used by investors who are predicting the market and the sectors performance. This is a technique used by the average “joe” to the top hedge fund advisors. Whether you hold a stock for a year or ten years, you should be collecting a dividend. Why you may ask? Well here are 3 reasons.
#1 Dividend stocks usually tend to be less volatile. From a companies standpoint, the ability to allocate a dividend derives from the companies liquid assets. Investors usually flock to such dividend paying stocks for a sense of annual security. They know that each quarter, they will be receiving a check. You want to get payed while holding a stock, not just when you liquidate the shares. Take for example a stock like Johnson and Johnson (JNJ) who pay a yield of 2.70% and whose share price has been hovering at the $95 price range or Procter and Gamble with a 3.25% yield at an $80 share price. This is the kind of stable growth investors should be looking for in a longterm portfolio. Large funds who are locked into a volatile security with large risk, compensate with dividend stocks.
#2 When holding a stock that pays a dividend for a considerable amount of time, it allows you to re-invest the dividend payment into the company. This is through the (DRIP) Dividend Re-investment Program where you can take the dividend funding and re-invest it into the stock at market value without incurring fees. Overtime, your share amount will accrue, which is great for the younger generation. When averaging all of the purchases made through your account, it will be reflected upon the market and the stocks value.
#3 The ability to pay a dividend shows strength in a company. Dividends are simply a portion of profits. If a stock releases annual and increasing allocations, this shows the strength and longterm stability of the company. Some of the strongest companies in the marketplace lay within the Fortune 500. These types of dividend paying companies show strong steady grow.
Low volatility, longterm growth through DRIP, and a companies profits are all byproducts of purchasing stocks with annual dividends. The ability to collect liquid assets while sitting on an investment is huge for your portfolio. All longterm holdings in your portfolio should have a dividend. Don’t sit on your assets and wish for a light at the end of the tunnel. Get payed for waiting.