Dividend Stocks Can Help You Beat the Bank

Bank savings accounts beat stuffing money under the mattress, but when it comes to interest, not by much. Depending on the type of account, you’ll be lucky to earn 1 percent. (Check out our rates search and you’ll see what I mean.) These days you’re likely to earn more interest by owning shares in a bank than putting your savings in one. For example, Discover Bank was recently paying 0.85 percent on savings accounts. But put your money in their stock instead of their vault and at its recent price of $32, you’ll earn dividends of 1.25 percent.

What’s the difference between dividends from a stock and interest from a bank? For all practical purposes, nothing. Call it dividends, call it interest – it’s simply money you get back for putting money in. While dividends can change – hopefully they go up over time – what you earn is based on what you pay for the stock. For example, in a recent article called The Single Best Tip to Beat High Gas Prices, Stacy suggested investing in companies like ConocoPhillips to hedge high gas prices. When he first bought ConocoPhillips back in 2009, he paid $35 a share. Since this company pays $2.64 a share in dividends, Stacy is now earning 7.5 percent on his investment ($2.64 divided by $35.) But since the stock has doubled since then, buy at today’s price of $77 and you’ll only earn 3.4 percent ($2.64 divided by $77.)

Source: MoneyTalksNews

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