Dividends4Life: Dividend Stocks Can Come Back to Bite You

Low interest rates have put pressure on millions of investors who rely on bank CDs and other safe investments for their income. In response, many of them have replaced some of their former exposure to fixed-income investments with dividend stocks. Although making that move will get you a lot more income than a bank CD will, you need to understand the risks you're taking by boosting your holdings of dividend stocks as your primary source of income.

The best way to understand the risks of dividend stocks is to see actual stories of how investors got hurt by owning them. Let's look at five ways that dividend stocks are far riskier than pure income investments.
1. Dividends can get cut.
2. Dividend-paying companies can see their stock prices fall.
3. Dividend stocks never mature and return your principal.
4. Fixed income can survive bankruptcy when stocks don't.
5. Dividend stocks have expensive valuations right now.

Source: Motley Fool

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