Why Dividend Stocks Dominate My Portfolio

I love my friends. Most are kind, two are funny. Three are generous, and another is shrewd. But my BFF? That friend would be my dividends. Studies have proven stocks that pay dividends outperform stocks that do not pay dividends. What does this mean? Some investors prefer growth stocks over dividend paying stocks. The theory being that a firm that reinvests 100 per cent of income (as opposed to only 90 per cent) into the company grows faster. And over time, this growth would result in a higher stock price. As I said, history has shown these investors to be wrong: dividends have accounted for over 42 per cent of total stock market return since 1930 .

While I support reinvesting your dividends back into stock purchases (called Dividend Reinvestment Plan, or DRIP), there is a tremendous benefit having your new BFF give you money in the form of cash. This benefit would be having access to extra income when needed. Many a wise and wealthy woman is living comfortably today on a pension supplemented by dividend income from stocks she bought in her forties. My proposition to you is that you start to invest. And high-quality dividend stocks with a track record of increasing their dividend payouts are a fantastic place to start.

Source: Huffington Post

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