Dividends4Life: Why Dividend Stocks Are A Good Defense In A Choppy Market

Markets go up and markets go down, but long-term investors know they’re best off ignoring the noise and sticking to their strategy. Plus, the dividend stocks in your portfolio are already helping to protect you against market turmoil. No, they won’t be immune if everything plummets at once. But dividend stocks are historically less volatile than non-dividend stocks, and as long as companies continue to meet payouts, you’re building a good cash cushion for rough waters.

“For long-term investors, dividends can make up approximately 40-50% of your total return, if you re-invest,” says Jim Swanson, MFS Chief Investment Strategist. ”Knowing that, you can remain calm during erratic market periods,” he says. Dividends are also 70% less volatile than earnings over time, notes Swanson, so often remain stable even as companies face external pressures and headwinds. No one wants to have to tell shareholders they are decreasing or eliminating a dividend.

Source: Forbes

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