What's So Great About Dividends?

The Big Book of Bad Investing Advice has many all-time greats, such as “Stocks have reached what looks like a permanently high plateau,” uttered in 1929 by Irving Fisher, a good economist with wretched timing. Probably the worst investment advice — after “Put all your money into Pets.com” — is “Dividends don’t matter.” They do. And even if some dividend-paying stocks are expensive, there are plenty that still represent good value.

Dividends are cash payouts from a company’s earnings. Throughout most of the 19th century, the dividend was considered the main reason to buy a stock. And even in the 20th and 21st centuries, dividends have been an enormous source of total returns from stocks. If you’re looking for dividend-paying stocks, these two rules of thumb will help: 1. High yield isn’t such a good thing, 2. Dividend hikes are good things.

Source: Courier-Journal.com

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