Dividend Paying Stocks and why Investors Love it
Last year, Warren Buffet didn’t talk about how high his stock prices went up but rather, he talked about his dividend and how it made him more money. In the same as did John Rockefeller talk about his stock dividends and how he loved it.
What are dividends?
Profits made by companies which are currently not used and at such distributed to shareholders in form of shares depending on the total amount of shares owned. It is no doubt that companies with shares are preferable for investing compared to companies without shares, little wonder companies who pay dividend on stocks make up the S&P 500 companies.
Dividends
Unlike the buy low sell high, dividend is a more stable income which is paid to shareholders. In most cases we see dividend as extra cash owned by companies distributed to shareholders to make them happy but in so many cases, the company could put the money back into its infrastructure or operation and make more money but most times, the company do not see the money valuable if invested into the operation of the company because the company is big enough (blue chip) that they will not feel the impact of such amount of money in its operations.
Why will companies not need this money for operations and infrastructure?
Without no doubt, most corporations have signed contracts and deals with governments to assist with one form of utility or the other, in the case of some companies, it could be light, road or any other thing and with that get tax relieves or get paid by the government which could serve as a stream of income to the company or used as dividend.
When companies have financial issues, it is in the discretion of the company’s boards to cut off dividends being paid to shareholders but let’s not forget that a company with financial issues will surely have its stocks affected and the hit becomes worse if there is an announcement about cutting down dividend, thanks to the market thought.
Dividend is a good way to make income while investing in shares, it also serves to increase one’s investment portfolio.
