Dividend investing is an excellent strategy to receive income from your investments or to grow your wealth. Dividends are regular cash payments that a company sends to its investors. You can receive dividends as income, or you can instruct the company or your broker to reinvest your dividends in additional shares of stock.
The very best dividend-paying stocks grow your wealth in three ways. First, your portfolio will increase as the price of the stock appreciates. Secondly, you will receive an income stream of dividend payments, which you can collect in cash or reinvest to further boost your holdings. Finally, many companies increase their dividends over time, often providing an income stream that often outpaces inflation, and greatly increasing the yield the longer you hold the investment.
Dividend stocks are commonly viewed as safe investments, but you still need to choose carefully. Identifying the best dividend stocks means more than a just looking for the stocks that pay the highest dividends. Look for ‘safe’ companies that have raised their dividends every year for at least the last 25 years. These so-called “Dividend Aristocrats” provide dependable income as well as capital appreciation.
Another advantage to dividend stocks is their tax treatment, since ordinary dividends are taxed at a lower rate than ordinary income for most investors.
A dividend portfolio should contain a dozen or more dividend stocks, diversified across industries. This protects you from price volatility and spreads out your dividend checks to provide more even income.
Cabot Benjamin Graham Value Investor provides recommendations for the very best dividend stocks—those that are undervalued by the market. Investing in these stocks before they increase in price will boost your holdings and provide income.
You can also learn more about our new advisory, Cabot Dividend Investor (powered by IRIS, our proprietary Individualized Retirement Income System which has delivered total returns of 326% since March of 2009 while handing investors a 14.1% yield).
To learn more about investing in dividend stocks, and the best stocks right now,
request our free special report, “10 Best Dividend-Paying Stocks.”
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10 Best Dividend-Paying Stocks
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For more information on Dividend Investing, click on the links below:
Why Dividends are Important
History shows that dividend income is an important part of your total return when investing in common stocks.
What are Dividend Aristocrats?
Learn about what is considered the "gold standard" for dividend-generating stocks.
What is a Special Dividend?
Learn more about how dividends should play an important role in any portfolio.
Attractive Dividend Yields
Newsletter editor Roy Ward recommends one bond fund and two ETFs that offer attractive dividend yields.
If I buy a stock on the ex-dividend date, will I receive the dividend for that quarter?