There are many advantages to investing in a stock that pays dividends. We’ll briefly take a look at some of the most well known benefits
Income
Most people are initially attracted to dividend stocks for the cash. Everyone likes to get paid, and everyone likes know that even if the stock stays flat they will be making money. Dividends can provide passive income, retirement income or just regular income. In many cases you will also have the option to reinvest the dividend and buy more shares. When you reinvest the dividend and increase your shares, your shares will continue to grow and continue to pay you more dividends each year.
Performance
In general stocks that pay dividends outperform stocks that do not pay dividends. A lot of research has been done to prove that dividend stocks outperform non dividend payers and the S&P as a whole over a long period of time (think 20 years). Dividend stocks tend to be less risky as well making them solid investment choices.
Taxes
Dividends are not taxed like normal income. The current tax rate on dividends was recently extended to stay at 15%. Keeping more of the money you make from dividends makes them more appealing.
