7 Reasons why Dividends are Awesome

michaelInvestment ManagementLeave a Comment

7 Reason Why Dividends are Awesome

I truly believe that every individual should have dividend paying stocks in their investment portfolio. Here are 7 great reasons why this is the case!

I’m a huge fan of dividends for a variety of reasons. This is likely one of the biggest because when you invest in solid companies that have a history of paying dividends, you have will have a reliable income stream that will continue to pay regardless of what the market does. Sure sometimes companies inevitably lower their dividends but a strong company won’t or even if they do, will eventually bring their dividends to at least the level that it was before. Thus, dividends are an extremely reliable and dependable source of passive income.
If you invest in a company that is strong financially, the company will continue to raise dividends. According to this article, Coca Cola, Johnson & Johnson, 3M, and P&G have all raised their dividends for the past 50 years. 50 years! That’s including the tech bubble bursting and the financial crises we had in 2008 with the Lehman shock. That’s extremely impressive and also proves my first point that dividends from strong companies are very dependable.
Depending on where you live in the world, dividend income is treated favorably relative to regular income (income from you day job) and this makes owning stocks that pay dividends that much more lucrative.

In this article by the Globe and Mail in Canada, it says that if you earn almost $50,000 of eligible Canadian dividends and have that as your only income source, then you don’t pay a penny in income taxes. Now isn’t that impressive?

This is yet another of my favorite reasons to invest in stocks for dividends. To give you a super simple example, if you had invested $10,000 in Coca Cola back in 2004 when Coca Cola was paying $0.25 per share every quarter, ignoring all capital gains on the stocks, Coca Cola would be paying $0.66 per share every quarter ($0.33 per share but there was a stock split in 2012). That’s 264% increase in the dividend!

If you were receiving a 3% dividend yield then, you would now be getting a 7.92% dividend yield for your initial investment. Do you think you could have gotten the same raise at work?

As I’ve already mentioned, with strong companies even when the market is struggling they don’t lower dividends. That means that even when the share prices may be falling, if you hold these stocks and everyone is panicking you’ll be just fine because you’ll continue to get those dividend payments!

In fact, you should be looking to invest more in these stocks as you’ll be able to buy these amazing companies for such a cheap price. It’s like stocking up on a bargain, only you’re accelerating the pace at which you can reach financial freedom! And this is actually very important. If you’re serious about reaching financial freedom, you want to find the best ways of achieving it with as little effort as possible. Once you determine the types of investments you’re after, then why wouldn’t you buy more of that investment if it’s available at a cheaper price? Obviously, you need to do your due diligence to ensure that the investment itself hasn’t dropped in level.

You hear it everyone, you buy low and sell high. If you’re building an investment portfolio for financial freedom you won’t be selling much but sometimes it makes sense to either rebalance or sell off a portion of your investment portfolio to buy other lucrative investments. Regardless of your plan for your investment portfolio, dividends pay you while you wait and that’s what make them so amazing!
If you’ve spent some time on Freedom Nova, you know that I’m a little biased when it comes to dividends and investing in stocks. Why the percentage of stocks that you hold in your investment portfolio will vary, I strongly feel that having stocks that pay dividends are a vital part of everyone’s investment portfolio. Even if you have ways of making endless amount of cash (don’t we all wish we did?) it still makes sense to diversify some of that money into a dividend paying investment portfolio.

Please like, follow, and/or subscribe to Freedom Nova!

Must Reads!

  • Read about figuring out your roadmap to Financial Freedom here!
  • Grasp the essentials of constructing your customized Investment Portfolio here!
  • The Master List of ways to save money!
  • Master List of Income Sources!

Leave a Reply

Your email address will not be published. Required fields are marked *