Why I’d buy dividend shares now to capitalise on a stock market recovery

first_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Our 6 ‘Best Buys Now’ Shares Peter Stephens | Thursday, 18th February, 2021 “This Stock Could Be Like Buying Amazon in 1997” Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Simply click below to discover how you can take advantage of this. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee.center_img Why I’d buy dividend shares now to capitalise on a stock market recovery I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Enter Your Email Address As well as providing a generous passive income, dividend shares could well deliver impressive capital growth in a stock market recovery.Their high yields could become increasingly appealing to income investors with limited options among other mainstream assets. Furthermore, the low valuations of many income shares could mean they offer good value for money and significant scope for gains over the long run.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…A large proportion of the stock market’s past total returns having been generated from the reinvestment of dividends. This means buying income shares could be a sound means of outperforming the index.The increasing popularity of dividend sharesWhile dividend shares have always been a means of obtaining a passive income, they could now prove to be the best option by some distance for many investors. That’s not only because many dividend stocks have high yields, but also because income returns available elsewhere are relatively low.Loose monetary policies have been pursued over the past 10+ years and interest rates have fallen across major economies following the 2020 market crash. This mean the returns on cash and bonds are extremely disappointing.For many people, they’re too low to even consider when it comes to obtaining an income from their capital. As such, they may be pushed towards dividend stocks in order to generate a worthwhile passive income.This situation may mean that demand for dividend shares increases over the coming years. Certainly, interest rates will rise at some point. However, that could be many months, or even many years, away. The result of this could be rising demand for income shares that pushes their prices higher.Total return potentialAs mentioned, many income shares appear to offer good value for money at the present time. Since the 2020 market crash, many investors have focused on growth stocks, rather than dividend shares. This could mean there is scope for large capital gains from a portfolio of income shares that enables them to outperform the wider stock market.The historic returns of indexes such as the FTSE 100 shows that a large proportion of total returns have been derived from the reinvestment of dividends. As such, investors who don’t need, or desire, an income in the short run could buy income stocks and reinvest the shareholder returns received. This may enable them to earn a relatively high return in the coming years.Clearly, it’s important to diversify across a wide range of dividend shares. Many of them are solid businesses with sound financial positions. But the uncertain outlook for the economy may hold back their performances in the short run. However, buying a range of them could produce higher returns, as well as lower risks, to benefit from a long-term stock market rally. See all posts by Peter Stephenslast_img

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