Pros and cons of dividend stocks

Dividend stocks are shares of companies that pay dividends, which are the investor's cut of the profits that companies earn. Dividends are distributed to the owners of the company, the shareholders, with each holder of common stock entitled to a payment proportionate to his or her ownership in the enterprise.

When an investor receives a dividend, he or she receives actual cash that cannot be lost in the market or the economy. When companies retain money that could be used to pay a dividend, they may or may not do well with it. The investor may receive more money down the road because the company has done well with the money they have kept. On the other hand, the company may fritter the money away (it happens), or lose it in a prolonged downturn or sudden disaster. A dividend payment eliminates some of a stockholder's uncertainty. Actual cash is a sure thing.

Source: Helium

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