Dividend investing seemed to fall out of favor and then make a comeback as baby boomers sought refuge from volatile markets, but many younger people have yet to discover the benefit of dividend investing.
What are dividends?
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Dividends are the distribution of corporate earnings sent to shareholders. They usually consist of cash or shares of stock which can be cashed or reinvested. The emphasis of dividend investing is not on rising share price but rather return via anticipated distribution of earnings (although it’s entirely possible to obtain both).
At a fundamental level, dividend investing makes sense: Buy what you know and share in the profit each and every time you (or any of the other hundreds of millions of people on the planet) buy the item. If the idea of holding stock that generates cash payments then dividend
investing might be a good addition to your portfolio.
Use these criteria to explore potential dividend stocks:
- 1. Don’t purchase a dividend stock exclusively on the basis of yield but rather assure the company is in a strong overall position to assure the continuity of your dividends.
- 2. Review the operating cash flow per share. No cash flow means no dividend.
- 3. Examine the history, industry and company before making a final decision.
- 4. Periodically re-evaluate your holding to head off potential problems in the future.
To find out more, head over to Wall Street Survivor.