by Jim Pearce, http://www.investingdaily.com/
— Investing Daily Article of the Week
It is sometimes said that the stock market is divided into two types of companies: growth and income. When the stock market is on a roll, investors want growth. But when it starts to hit the skids, they shift to income.
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Most investors discount the importance of dividends since they tend to be modest in size and add up gradually over a number of years. However, you may be surprised to learn that more than half of the long-term return of the stock market has been in the form of dividends.
That’s because most dividend stocks continue to pay out during good times and bad.
If you reinvest dividends into more stock, you buy more shares when they are cheaper and fewer when they are more expensive.
Over time, the compounding effect of reinvesting dividends can be enormous.
For that reason, many companies offer “DRIPs” (dividend reinvestment plans), which will automatically reinvest your dividends into more shares of stock at little or no cost.
Want to know what our top picks are for dividend stocks going into 2019?
Keep on reading!
Our Top 3 Dividend Stocks
If you’re in a hurry, below are my top picks for dividend stocks as of this writing.
- W. P. Carey: Diversified REIT with a 6% dividend yield.
- Altria Group: A “Dividend Aristocrat” yielding 5%.
- Enterprise Products Partners: A midstream MLP with a 6.5% distribution rate.
Keep on reading to learn about these companies and my thoughts on each.
What’s In This guide
- Our Top 3 Dividend Stocks
- What Are Dividend Stocks?
- How Do You Determine What Qualifies As a Top Dividend Stock?
- W.P. Carey
- Altria Group
- Enterprise Products Partners
- What Else Should You Keep In Mind When Picking The Top Dividend Stocks?
What Are Dividend Stocks?
Dividend stocks are publicly traded companies that share their financial success with shareholders in the form of regular dividend payments. These payments represent a portion of the company’s profits.
Most dividend stocks declare and pay dividends quarterly. Dividend payments are usually made in cash, but sometimes a company will pay a stock dividend which increases the number of shares that you own.
A company’s dividend payment is often referred to as its “dividend yield”, as explained in this video:
A small number of companies enjoy the distinction of being “Dividend Aristocrats“, which means they have increased the amount of their dividend payment every year for at least 25 years.
How Do You Determine What Qualifies As a Top Dividend Stock?
A top dividend stock is one that:
- Does not cut its dividends, even during tough times.
- Increases its dividend periodically as profits increase.
- Offers a DRIP so small investors can enjoy the benefit of compound interest.
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