I’m a huge fan of dividend investing. The reasons to buy stocks that pay dividends is pretty simple: dividend investing gives you a fairly consistent income from your investments, and you don’t have to sell off your assets to cash in on the value of your investments. I’ll explain more in detail below.
But first, let’s cover some of the basics… what is a dividend anyway? A dividend is essentially when you can reap the profits of the company that you partially own. This means if you own $1,000,000 in stocks, and the company pays a 3% dividend, you get $30,000 in cash if you so choose.
You can retire with dividend stocks with much more ease than other types of stocks. The reasons are fairly simple:
a) Passive Income. It’s mostly passive. Basically, you own a certain amount of stocks, and the money will automatically flow to your bank account from those stocks. You don’t have to do anything once you actually own the stocks. The advantages here are obvious. It means you can retire once your dividend income can replace your regular income, plus some.
b) Consistent Assets. You don’t have to sell off your stocks to get retirement money. This is obviously a good thing. If you aren’t getting a dividend income, that means the only way to get your money back is to start selling the stocks — that means you’ll run out eventually. That’s risky, your net worth will steadily decrease, and it’s just not worth it.
c) Automatic Growth. You can have your dividends set to automatically reinvest back into the company. This means your number of shares automatically increases regardless of the rest of your financial life. This kind of automatic retirement compounding investing is hard to resist.
Like I said before: I’m a huge, huge fan of dividend investing, and want to encourage you to buy stocks that pay dividends. Nothing else makes nearly as much sense.