Most investor’s greatest fear is taking a financial loss. Dividend investing can be one of the easiest and most reliable ways to achieve long term growth. In fact, any dividend paying stock holding actually grows in two different ways. First, the fluctuations of the stock market, and second, the periodic payouts offered by the company.
Nearly all dividend paying companies are large organizations with a long-standing history of increased value. In fact, nearly all major banks offer dividend payouts, as well as many natural resource organizations. This protects you from any major losses in the long-term.
The real power of dividend investing comes with the compound growth when re-investing your payouts. Eventually you actually own shares that were paid for by simply owning your original shares.
For example, if you buy 100 shares of Company A for $10, and they pay a quarterly dividend of 1 percent, you would be able to use the earnings to purchase one additional share of that stock. Without any further investments, your next dividend payout would result in an additional one share, plus a fraction. Over the long term, this eventually means you will have many more shares, resulting in much larger payouts.
As you can see this is not a get rich quick investing strategy since this will take many years to create a substantial amount of money. This kind of investing is meant to be used over a long time, usually twenty years or more. The reason that this type of investing is important is because of it low risk and ability to always make money. As with all investing though this should not be your only investment, as the saying goes “never put all of your eggs in one basket”. This is true even to this investment, this should only be one part of your portfolio.