Why should you care about dividends? Simply put, dividends add money to your portfolio, they directly contribute to your net worth.
A dividend is a cash payment made to shareholders. For example if you own 1000 shares in company XYZ and the company pays a dollar dividend per share per year, you will earn $1000 (1000 shares x $1) in cash every year as long as you own those shares and the company continues to payout the dividend. Over time the dividends can add up, and provide you with financial freedom.
My regular readers will know that I love dividends. I came across a great article recently published by the Financial Post that I’d like to share with you. The article entitled “5 reasons to love dividends” (by Peter Hodson) covers the benefits of own dividend paying stocks. Here is the list of 5 reasons, be sure to read the complete article over at the Financial Post:
1. Dividend-growing companies are stellar performers (especially when interest rates rise)
2. Dividends make you reconsider selling a stock
3. Dividends instill discipline in company management
4. Dividends can reduce volatility
5. Dividends have a tax advantage
Here’s my favorite part of the article: “Being able to relax all day and collect dividends, which boost returns and lower volatility in your portfolio — and maybe all of it tax free — makes it easy to see why dividend stocks have quickly become favourites for Canadians.”
Remember in order to achieve financial success, invest in quality dividend paying stocks when they are undervalued!
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