Never own stocks that doesn’t pay dividends
Welcome to the world of stocks and investing! As exciting as it may seem, the stock market is not all sunshine and rainbows. There are numerous factors to consider before investing in a particular stock, and one of the most crucial ones is whether the stock pays dividends or not.
Never own stocks that doesn’t pay dividends
What dividends are
For those of you who are new to the world of investing, let’s first define what dividends are. Simply put, dividends are a portion of a company’s profits that are distributed to its shareholders. Companies usually pay out dividends quarterly, and the amount of the dividend depends on the company’s profitability.
Can be a recipe for disaster
Now, you might be thinking, “Why should I care if a stock pays dividends or not? I just want to make money!” Well, my friend, let me tell you why owning stocks that don’t pay dividends can be a recipe for disaster.
Example that doesn’t pay dividends
Imagine you invest $10,000 in a company that doesn’t pay dividends. You’re hoping that the stock price will increase, and you can sell your shares for a profit. But what happens if the stock price doesn’t increase? What happens if the company goes bankrupt, and the stock price drops to zero? You’re left with nothing. Zilch. Nada
Example that pay dividends
On the other hand, let’s say you invest $10,000 in a company that pays a 3% dividend yield. That means the company will pay you $300 every year, regardless of whether the stock price goes up or down. And if the stock price does go up, you’ll make even more money when you sell your shares.
Missing out
Now, I know what you’re thinking. “But wait, doesn’t owning stocks that pay dividends mean I’m missing out on potential growth? What if the company reinvests its profits instead of paying out dividends?”
A valid concern
That’s a valid concern, but let me tell you something. Companies that consistently pay dividends tend to be more stable and financially sound than companies that don’t.
Think about it. If a company is making enough money to pay dividends to its shareholders, it’s probably doing something right. And if the company is doing something right, chances are it will continue to do so in the future.
But don’t just take my word for it. Let’s look at some real-life examples.
Coca-Cola example
Take Coca-Cola, for instance. Coca-Cola has been paying dividends for over 100 years, and it’s considered one of the most reliable dividend stocks out there. In fact, the company has increased its dividend every year for the past 59 years! That’s some serious dedication to its shareholders.
Procter & Gamble example
Or how about Procter & Gamble? Procter & Gamble has been paying dividends for over 130 years and has increased its dividend every year for the past 65 years. That’s some serious longevity.
Now, I know what you’re thinking. “But those are just two examples. How do I know if a company pays dividends or not?”
Research
Well, my friend, that’s where some good old-fashioned research comes in. You can use websites like Yahoo Finance or Google Finance to find out if a company pays dividends and how much it pays. You can also look at a company’s annual report or financial statements to get more information.
Conclusion
In conclusion, owning stocks that don’t pay dividends can be a risky move. Sure, you might make a quick buck if the stock price goes up, but you’re also putting yourself at risk if the stock price goes down.
On the other hand, owning stocks that pay dividends can provide you with a steady stream of income, even if the stock price doesn’t go up. And if the company continues to pay dividends year after year, you can rest assured that it’s a financially sound and stable investment.
So, the next time you’re thinking about investing in the stock market, remember this: Never own stocks that doesn’t pay dividends
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