Dividend paying stocks provide income to investors and may offer a mix of features that warrant a place in their portfolios. Dividend paying stocks may be purchased or through a mutual fund. The most basic feature they offer is simple and already stated -- they pay dividends regularly and may pay regardless of market conditions. However, this doesn’t mean that dividends cannot be increased, decreased, or eliminated at any time.
The potential long-term benefits of dividends and their reinvestment are compelling: Dividends are a sign of corporate financial health. Management is confident enough of the company’s future cash flow to pay them. Long-term dividend payouts can indicate a mature, strong company. Play a factor in total return. Dividends reinvestments help contribute to greater total return over the long term. The longer the period in which dividends are reinvested the greater the spread between price return and dividend reinvested total return.
Source: wmur.com
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