Are dividend stocks the key to passive income? Or is dividend investing just a way to miss out on REAL growth in the stock market?
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A common criticism of dividend stocks is that companies are wasting money by paying a dividend, because that's cash that could be used to fund growth through reinvestment into the business. While it is true that dividends come directly from a companies earnings. Most dividend paying stocks are already mature companies that are simply already too large to grow quickly. They bring in enough cash flow to BOTH fund growth and pay a dividend. This is unlike a smaller, earlier stage company that needs every dollar they earn to be reinvested back into the company in order to grow and gain market share. A company like that paying a dividend WOULD be a red flag as an investor.
Another Con to dividend stocks is that the quarterly dividend payment is a forced taxable event because you have to pay taxes on the dividends paid out to you. I would argue that this is almost a non-issue because dividend income is amongst the most tax friendly kind of investment income you can receive.
Why would you invest in dividend stocks when other stocks are returning much higher gains in share price? This is a trade off that you have to make...yes, other stocks will grow faster and higher than most dividend stocks. But in order to do so you're taking on much more risk with your money. While dividend stocks give you a slower more consistent level of growth, they also have MUCH less risk of total loss than many "growth" stocks.
#dividends #dividendstocks #dividendinvesting
A bit about my credentials...I have a B.S. degree in Finance, I've spent my entire career working in various corporate finance roles, and have been an active stock market investor for over 20 years. While all of this means I know what I'm talking about (most of the time!), it does not mean you should act solely on my word alone.
I am not intending to, nor licensed to give personalized financial advice. I'm merely trying to share my knowledge and experience so that you are able to make better financial and investment decisions for yourself based on your own research!
Put another way...
DISCLAIMER: Jay Fairbrother, including but not limited to any guests appearing in his videos, are not financial/investment advisors, brokers, or dealers. They are solely sharing their personal experience and opinions; therefore, all strategies, tips, suggestions, and recommendations shared are solely for entertainment purposes. There are financial risks associated with investing, and Jay Fairbrother’s results are not typical; therefore, do not act or refrain from acting based on any information conveyed in this video, webpage, and/or external hyperlinks. For investment advice please seek the counsel of a financial/investment advisor(s); and conduct your own due diligence.
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