Dividends4Life: Reasons to Buy Dividend Stocks

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Reasons to Buy Dividend Stocks

Posted by D4L | Wednesday, October 06, 2010 | | 0 comments »

Market risk is weighing on the minds of many investors these days. And who could blame them, given the market's twists and turns over the past few years? While stocks are always going to be riskier than bonds, it's possible to invest more conservatively in the stock market by buying dividend-paying stocks, which can provide a cushion for investors during tough times. Here are six reasons to consider adding dividend-paying stocks to your portfolio.

These stocks pay a cash return (usually quarterly) regardless of whether their share price is up or down. "Dividends can rise and fall with economic conditions," says Josh Peters, editor of Morningstar's DividendInvestor newsletter. "But in general, if the market drops 200 points tomorrow, chances are that a portfolio of dividend-paying stocks is going to have the same income if the market were to go up 200 points." (Dividend payments aren't guaranteed, but many companies have a history of raising or at least holding their dividend steady over time.) Peters says that generally, a company will set its dividend at a level that can be consistently maintained for an indefinite period of time. And when a company raises its dividend, it's an indication that the firm believes it can fulfill that pledge over a long period of time, he says.

Source: U.S. News and World Report

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