Dividend investing is a simple concept.
A dividend is a portion of a company’s profits that are paid out to its shareholders. SIMPLE
When you purchase the best businesses that offer dividends you increase your wealth and limit your risk dramatically.
Imagine that you are a real estate guru.
You own two properties that each generate $100 for you every single month, for a total of $200. That equates to $2400/year.
You’re not too concerned about the actual value of these homes because you’ve had renters in both properties for the last decade without a hiccup. Also, you have been able to raise the rent every single year without any complaints.
Now, seeing that $2400 a year isn’t close to being enough to quit your day job, you decide to continue working your 9-5 job. Instead of using that extra $200 every month to make unneccesary purchases, you choose to reinvest that $2400 into additional properties along with leftover money you have from your 9-5 job every month.
Before you know it, you have six properties that are all generating positive income for you every single month.
This is the heart of dividend investing in it’s purest form! But instead of buying houses you are buying dividend paying stocks.
Pros of dividend investing:
- You don’t have to worry about finding a buyer for your stocks
- There is no 6% commission on the total sale of your stock
- If you buy the best businesses, chances are you won’t have to worry about not collecting your dividend
- The best businesses raise their dividend every year!
Cons of dividend investing:
- You have to purchase shares with 100% cash
- No tax break for owning dividend stocks