Advantages of dividend-paying stocks that only few have understood.

“The longer you wait, the bigger your estate.”

A short thread :-

1. Exponential double benefit

A small jump in inflation will destroy the purchasing power of fixed deposit investors in the long run.

Secondly, fixed income investments don’t grow exponentially

Lets take an example :-

Example: Rs.1000 invested in fixed deposit at 7% still gives 7% after 10 years. i.e. Rs.70 as interest, nothing more.

On the other hand, Rs.1000 invested in a stock that has a dividend yield of just 2% would give Rs.20 as dividend in 1st year.

However...

After 10 years, assuming the company grew at 15% CAGR, new price of stock is Rs.4045.

AND, on top of that, you get a dividend of 2% which is now Rs.81.

Even if the company retains the same div yield, it’ll get even bigger with time.

The longer you wait, the bigger your estate.

Dividend stocks provide the ability to receive income that increases & maintains the purchasing power of your principle "AND" income. Not many get it; hence not many invest for it.

2. Capital Preservation
Good dividend paying companies are more mature & stable than most other company.
In fact, these stocks holdup better in bear market than more speculative stocks.
Because at the end of the day,
If the stock doesn’t make profits & pay you, it’s a speculation

3.Most important: Income stream

If you want to reduce your financial stress, you must have multiple sources of income they say.

Hence, if you buy quality dividend paying stocks for long-term, every stock will be a different source of income for you.

How good is a cow that gives more milk every year,
Also becomes stronger so you can even sell it at higher price?

I post interesting & knowledgeable threads like this every week.

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