Dividend Paying Equity

Dividend Paying Equity or stocks are companies that issue a dividend from their cash flow.  Historically the majority of stock market returns have come from dividends that companies issue.  Company’s issues dividends usually on a quarterly basis, however some companies issue dividends on a one time basis, while others issues a yearly dividend.

 

Why Invest in Companies that issue a Dividend?

There are a number of reasons to invest in companies that issue a dividend, such as that companies that pay a dividend tend to be more establish stable blue chip companies like Microsoft and IBM. Another reason to investment in dividend paying companies is that when you reinvest the dividends and buy more shares in the companies that are issuing the dividends you feel the effects of compounding; basically you are reinvesting the money that you are making. Over time compounding returns have a tremendous impact on your investment portfolio.

Another reason to invest in dividend paying stocks is that it beats the market. Everyone loves to jump on the next hot stock and ride it for huge gains, but unless you can time the market those types of investments can sometimes end up disastrous, just take a look at a 15 year chart of Amazon.com or Yahoo.com. Timing is a major factor in hot stocks and depending on your risk factors and your investment objectives your portfolio have and sometimes should have growth stocks, however that needs to be discussed your with financial adviser.

Additionally, dividends are taxed differently. Under current tax rates dividends for the most part are taxed at 15% which is a lot lower than the majority of income tax rates.

 

Dividend Paying ETFs

Its just not stocks that people can invest in and collect a dividend, you can also invest in dividend paying ETFs (Exchange Traded Funds). An ETF is a collection of investments, mainly stocks of bonds that are managed by a professional company, similar to Mutual Funds. One of the differences between ETFs and Mutual Funds are their expense ration or the cost to operate the Fund, with usually Mutual Funds being more expensive to own.  There are many different types of EFTs, included ones tailored to invest in companies that issue a dividend.

What is DividendPayingEquity.com

We are a group of individuals who are passionate about stocks and making money for you and as a result we profile companies that are issuing dividends, their rates, payout dates, our opinions and so one. We are not registered financial advisers.

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