GenExDividend Investor: Best Ways to Grow Your Dividend Snowball
Buying and holding dividend stocks can pay out well over time. But with the use of a few simple strategies, investors can get the most out of the income that comes in from their dividend payments.
Studies show that half of an investor’s returns can come from dividends that are reinvested over the decades. So maximizing the value of a dividend investment portfolio can improve returns substantially, particularly when measured over an investment lifetime.
When it comes to dividends, a company’s board of directors elects what dividend to pay out, if any. For most companies, reinvesting into new growth opportunities is crucial.
That’s why many companies don’t pay dividends. And why those that do have first become large companies that generate more cash than they need to operate.
Investors who buy dividend-paying companies can use the cash from those payments rather than having to sell off shares for retirement income.
Dividend investing also focuses on the fact that great returns can take time. While a trade can work in the short-term, many who have made big short-term gains have lost it trying to replicate that success.
Finally, diversification is key. While many investors can get lucky with a concentrated bet now and then, that can also lead to substantial losses if the trade goes out of favor. Having a variety of investments provides safety from any one position having trouble.