5 Reasons To Consider Dividends In Your Investing Strategy

Posted on: 27 December 2019

Many investors focus on the rate of return on their investment through growth in the stock market. But dividends should be a key part of your investment strategy. Why? Here are five key reasons to pay attention to your dividend return.

1. Dividends Protect From Risk. One of the key reasons to use dividends in any portfolio is to limit risk. The stock market fluctuates constantly, and that includes times when the rate of return drops or even goes negative. When times are good, consistent dividends cause accelerated growth. When times are not so good, you experience fewer losses.

2. Dividends Can Be Reinvested. When you sell a stock or bond, you net the profit and generally receive a check for the proceeds. Dividends can be taken out and used for other things, but most investors use them to bulk up their stock investment. You can stipulate in advance that you simply want to automatically reinvest these quarterly dividends without it passing through your hands. 

3. Dividends Boost Growth. Dividends are a path to quicker growth than with returns alone. By adding these payouts straight back into your portfolio, you can increase its value by leaps and bounds — certainly much more quickly than just relying on stock market growth. This is a key benefit for anyone who needs to catch up on retirement contributions. 

4. Dividends are a Different Market. When you focus on rates of return alone, you can open yourself up to extra risk or avoid risk unnecessarily. But by choosing some stocks based on high yield dividend rates, you look at a different set of metrics. You are likely to choose different stocks and take a different mind-set about the investments. This can be particularly useful for inexperienced investors looking to expand their knowledge base. 

5. Dividends May Not Cost. Many times, you can reinvest dividends as part of a reinvestment plan and pay no fees to invest. If your brokerage normally charges a fee to buy and sell stocks, this can be a benefit that saves significant money. 

Which of these dividend benefits could help your portfolio grow faster and easier? No matter whether you want to reduce risk exposure, supercharge your investment growth, or develop a more mature high yield stock portfolio investing style, raising the yield on your dividend portfolio could be the answer you've been looking for. Talk to an independent broker today to learn more.