Sure Dividend: The Pros & Cons of Dividend Stock Investing

After a strong market rally, tech stocks are again with the grasp of new all-time highs. Other parts of the market aren’t. And many conservative strategies, such as dividend investing, look out of favor as a result.

However, as with any investment strategy, there are pros and cons. Tech stocks can have 50 percent swings up or down in a year. While less volatile, dividend stocks can offer a steadier approach that takes some of the pain out of big market moves.

While hundreds of stocks pay dividends, 68 of them have paid out rising dividends for over 25 years. They’re known as Dividend Aristocrats.

For investors with a long-term horizon, investing in these companies may be a simple strategy. Over the long haul, it’s likely to beat the market over time. And to do so with less volatility.

These companies also avoid one of the potential dangers of dividend investing. That’s investing in a yield trap.

Simply put, a yield trap is a company that pays a high dividend that can’t be covered by earnings from the underlying business. Such a company could see a big dividend cut. It could even eliminate the dividend entirely.

Those looking to invest in dividend stocks should consider a company’s earnings, and how that impacts the payout ratio of their dividend.

To view the full list of pros and cons when dividend investing, click here.