Dividend Investing for Income and Growth

Shawn | Sep 10, 2010 |

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Dividend investing is a great way to begin growing your wealth. Dividends are a payment made to shareholders from company profits or retained earnings. They are usually paid on a regular basis. Quarterly payments are the most common for American-based domestic companies. Usually payments are in cash, but sometimes dividends are paid out in company stock. Dividends are taxable, so this is a consideration should you hold these investments in taxable accounts.

Usually shareholders have a couple of alternatives when receiving their dividend payments. They can receive the cash, or they can reinvest the dividends in additional shares. If the shareholder opts to receive cash, the money can eventually be used to buy additional investments. Keep the cash in your account and let the dividends accumulate. It is amazing how quickly dividends, received on a regular schedule can add up. A shareholder also has the option of directly receiving cash when the dividends are paid out. Retirees often count on dividends for part of their cash flow and income.

The second alternative for dividend payouts, reinvesting dividends, offers a great way to continue adding shares to a portfolio without investing additional money.

Dividend investing reduces the volatility of your portfolio in uncertain economic times, such as our economy has experienced over the past couple of years. Stock prices plunged a couple of years ago, made a comeback, and have been on a roller coaster for a few months. But most companies maintained their dividend. A bonus for those reinvesting dividends is that, when receiving dividends in a period of low stock prices, additional shares are purchased at the lower price.

An investor researching stocks will find it difficult to decide which stocks to buy. One way to invest in a broad range of dividend yielding stocks is to invest in high yield dividend mutual funds. Fund managers research the companies and make buysell decisions. They invest in a number of stocks that offer dividends on a regular basis. Even in a down market high yield dividend mutual funds provide some income andor opportunities for reinvesting.

Begin building your wealth with an investment in high yield dividend mutual funds. Most mutual fund companies offer high yield funds, and there are also ETFs (exchange traded funds) available. Dividend investing offers a great way to start investing now, and continue investing without adding additional cash, if unable to do so. Reinvest your dividends and watch your investment grow.