Many people invest in dividend-paying stocks to take advantage of the steady payments and the opportunity to reinvest the dividends to purchase additional shares of stock. Since many dividend-paying stocks represent companies that are considered financially stable and mature, the stock prices of these companies may steadily increase over time while shareholders enjoy periodic dividend payments. In addition, these well-established companies often raise dividends over time. For example, a company may offer a 2.5% dividend one year, and the next year pay a 3% dividend. It's certainly not guaranteed; however, once a company has the reputation of delivering reliable dividends that increase over time, it is going to work hard not to disappoint its investors.
A
company that pays consistent, rising dividends is likely a financially
healthy firm that generates consistent cash flow (this cash, after all,
is where the dividends come from). These companies are often stable, and
their stock prices tend to be less volatile than the market in general.
As such, they may be lower risk than companies that do not pay
dividends and that have more volatile price movements.
Because many dividend-paying stocks are lower risk, the stocks are an
appealing investment for both younger people looking for a way to
generate income over the long haul, and for people approaching
retirement - or who are in retirement - who desire a source of
retirement income.
Related Articles
No comments:
Post a Comment