7 Reasons To Buy Dividend Stocks – Part 2

In the previous post I explained the first 3 reasons to Buy Dividends Stocks, in this post I will explain the other 4.

Reason To Buy Dividend Stocks

#4 Dividends Stocks Increase Over Time

Dividends Stocks Increase Over Time

Stocks are appealing has to do with the fact the dividend payout generally raises each year. That means you’ll get paid more cash every single year! Businesses that consistently raise their dividend are called dividend aristocrats.
A dividend aristocrat is an organization that not only pays a regular dividend, but also one that raises it on a regular basis (at least per annum). As an example, to make the S&P 500’s dividend aristocrat list, a business must have raised its dividend per annum for at least 25 consecutive years. Many of the businesses on this list are identifiable household names: Procter & Gamble (PG), Coca Cola (KO), Exxon Mobil (XOM), Colgate Palmolive (CL), Johnson & Johnson (JNJ), Kimberly Clark etc. They make products that millions of folks use on a daily basis. Some Canadian examples of dividend aristocrats contain: Fortis (FTS), Enbridge (ENB), TD Bank (TD), Telus (T) and Bank of Nova Scotia (BNS).
My own expertise with dividend stocks has been that in the last few years their dividends have raised on average between 5% and 7%. That’s at least twice the present inflation rate of 2%-2.5% which is another major reason why dividend stocks are so popular.

Among the reasons that dividend-paying

#5 Dividend Stocks Are An Inflation Hedge

Dividend Stocks Are An Inflation Hedge

Dividend stocks are a great investment because they often keep up with or surpass inflation with stocks, then you may see your purchasing power slowly erode as a result of inflation. Buy dividend stocks are an excellent way to keep ahead of inflation, particularly the aristocrats that often raise their payouts.

time. If you don’t correctly and have a long-term financial target invest your cash in growth assets, including dividend

 

#6 Dividends Stocks Are Tax Efficient Income

Dividends Stocks Are Tax Efficient Income

In many tax authorities, dividend income is taxed much more positively than routine employment income (ie. Cash that you work for). Businesses net of all taxes pays dividends. So it makes sense because the firm has already paid the taxes the tax burden should be less for someone receiving dividend income. People who receive dividend income must pay some sum of private income tax on it. Around 30% dividend income is taxed generally in most tax authorities. However, there’s no questioning the fact that dividends are tax efficient income. For instance, in Canada, if dividend income were a man’s only source of income, they could bring in almost 50k/year in dividends without having to pay any taxes on it.

#7 Buy Dividend Stocks Income Increases Your Cash Flow

Buy Dividend Stocks Income Increases Your Cash Flow

I am a strong believer the No. 1 issue most folks have is that they don’t have enough cash. A man’s stocks add some flexibility to a man’s finances that few other investment options can offer.

cash flow wills certainly raise because you’re purchasing an income generating asset. Generally, I constantly reinvest my dividends to grow my assets, both and my income. But if I had some unforeseen expenses or lost my job I could consistently choose the cash payments instead of reinvesting them. So dividend

Where To Locate a Very Good Dividend Stocks To Buy

First let me simply say that there's nothing special about the stocks whom I buy. In reality, they can be really rather dull. I say “ ” that is dull because these firms are usually the under the radar / company as usual sorts. In the investing world, “boring” is great because it generally means that a business’s gains and increase profile are consistent and steady which is precisely what you’re looking for as a long term investor.
Where can someone find businesses that match this profile? They could be seen in the pipeline, utility, banking, telecom and consumer basic sectors. These companies have endured for decades and have seen it all and that means that they.
If you take a gander at the top 10 holdings of a dividend mutual fund or an exchange-traded fund, you’ll certainly discover that a number of these funds possess the same set of firms. That’s no coincidence. Odds are the firms of these funds have been excellent long-term investments in the top 10 holdings. Instead, you can search the Dividend Aristocrats lists that are released each year out.
A number of notes of caution are in order yet. Beware of high yield stocks. A high return could cut the dividend entirely and could be an indicator a business is in some kind of financial problem. Second, observe the payout ratio on dividend stocks. Generally, you want your own dividend stock to have a payout ratio between 50%-60%. That gives the company room to grow its dividend as it grows its gains. A high payout ratio could mean that there's almost no room for the dividend to grow as time passes. Having said that, the telecom and utility sectors may have higher payout ratios as a result of nature of their companies.

As with all investing, it's important to do your own research and talk to a financial advisor. Below are some additional resources for those interested in learning more about buy dividend stocks.