Dividends Build Wealth Even In Down Markets

There have been numerous articles written regarding the importance of dividends and their impact on a retirement portfolio. Most of the information on dividends as it relates to retirees pertains to dividends as income. I believe that this narrow focus does not tell the true story of the long- term value of dividends. Dividend-yielding stocks build wealth in both up and down markets. It's always fun to see wealth increase as prices climb in up markets but unless the shares are sold it's not a realized increase.

The true and under-appreciated value of owning dividend stocks is the increase in share ownership over an extended time period. As dividends are paid out and reinvested, the share quantity increases and over time, this is the real wealth builder. This mechanism also lets the retired or conservative investor relax during down markets since you are effectively buying low priced shares in a company you have conviction in. Unless it’s an expense-driven requirement, dividends should always be reinvested.

Source: Seeking Alpha

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