Is investing in dividend stocks a good idea?

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. Simply click below to discover how you can take advantage of this. If you’re not comfortable picking individual dividend stocks yourself, you could invest in a fund that pays dividends.  Is investing in dividend stocks a good idea? In conclusion, investing in stocks can be a very effective way of building wealth over the long run. When you consider the low interest rates offered on savings accounts right now, I think investing in shares that pay dividends is a smart idea.  Be cautious with companies that have really high dividend yields (7%+). This can be a sign that the company is in trouble. Edward Sheldon, CFA | Thursday, 16th January, 2020 Image source: Getty Images. “This Stock Could Be Like Buying Amazon in 1997” See all posts by Edward Sheldon, CFA Dividend yield isn’t the only thing to focus on. A company with a lower yield that is growing its dividend payout at a fast pace could turn out to be a better investment than a company with a high yield, growing its payout at a slow pace. center_img 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. Focus on companies that are growing their dividends. Studies have shown that these companies tend to produce the highest total returns (dividends and capital appreciation) over time. 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. Always make sure you diversify your capital over many different companies. This will help reduce your risk. Enter Your Email Address Our 6 ‘Best Buys Now’ Shares Edward Sheldon owns shares in GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. In the current low-interest-rate environment, in which savings accounts are paying minimal interest, many people are looking for new ways to boost their wealth. Dividend stocks, which often offer yields of 5% or higher, have become popular.Is investing in dividend stocks a good idea though? Let’s take a look at some of the advantages and disadvantages of investing for dividends. 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…AdvantagesDividend stocks certainly offer investors many benefits.For starters, with such shares, you have two potential sources of profit. You can profit from both the dividends you receive and any capital gains from rising share prices.For example, consider the popular share GlaxoSmithKline. Over the last year, it’s paid a dividend of about 5%. However, its share price has also risen around 23%. That means that if you’d bought the shares one year ago, your total gain for the year would have been around 28%, which is a fantastic return.Another advantage of these stocks is that they allow you to compound your investment returns, which is the key to building wealth. For example, had you taken your GlaxoSmithKline dividends and reinvested them, you’d receive more dividends in the future.Additionally, investing in dividend stocks is a very easy way to build a passive income. When you own them, you get paid on a regular basis for doing absolutely nothing.Finally, companies that pay dividends are generally well established businesses that have reliable earnings and financial strength. As a result, their share prices tend to be a bit less volatile than the share prices of growth companies during periods of stock market turbulence.DisadvantagesOf course, like any investment, they have their disadvantages.First, you can lose money if share prices fall. Unlike when you put your money in a savings account, your capital is at risk.Second, the share prices of stocks fluctuate from day to day. This means that the value of your investment will rise and fall constantly. You need to be comfortable with these fluctuations.Third, dividend stocks are a long-term investment. They’re not suitable for those who are saving for short-term goals.5 dividend stock investing tipsIf you’ve considered the advantages and disadvantages above, and concluded that investing in dividend stocks could be a good idea, here are some quick tips: Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!last_img


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