Dividend investing focuses on buying stocks that pay regular cash dividends. This strategy can provide steady income while still offering potential for capital appreciation.
What Are Dividends?
Dividends are distributions of a company's profits to shareholders. They are typically paid quarterly and can be in cash or additional shares. Companies that pay consistent dividends are often well-established with stable earnings.
Key Metrics
- Dividend yield: Annual dividend divided by stock price
- Dividend payout ratio: Percentage of earnings paid as dividends
- Dividend growth: History of increasing dividend payments
Benefits of Dividend Investing
- Regular income stream regardless of market conditions
- Potential for dividend growth over time
- Reinvesting dividends accelerates compound growth
- Dividend stocks are often less volatile than growth stocks
