The bulls and bears of the stock market are both tempting and intimidating for investors. Speculators are fascinated by the market’s potential to generate quick profits, while cautious investors often shy away out of fear of losses. However, the stock market isn’t solely about speculative gains or market crashes—it’s a platform where committed companies raise funds for growth, and serious investors can create wealth for themselves, the companies, and the nation. The key to wise investing is empowering yourself with information. You need to understand the company you invest in, examining both its past records and future plans.
Regardless of what Wall Street gurus predict or what economic indicators like the Dow Jones Average say, one simple, foolproof way to gauge a company’s performance is by tracking the dividends it pays to shareholders each year. If the dividend rates have been rising steadily, you know you have a safe bet. To maximize the benefits from such companies, it’s smart to reinvest your dividends. Instead of adding dividends to your savings, use them to purchase more shares of the same company. This way, your dividend income grows over time as more shares are added to your portfolio.
With an assured investment plan like this in place, speculators begin to think beyond short-term gains, while those afraid of risks gain confidence.
Why Companies That Increase Dividends Are Good for Investment
- Your Shareholding and Dividend Income Increase
As you accumulate more shares, your income grows with the rising dividend payouts. - Income Growth Despite Stock Prices
You no longer rely on market conditions for income. Regardless of share price fluctuations, you continue receiving dividends. Even if the market price drops, it can be advantageous since you can buy more shares at a lower cost. - Protection Against Inflation
With dividends increasing yearly, your income grows to offset inflation. This is particularly beneficial for retirees who rely on a steady cash flow. At this stage, you can use the dividend as a pension rather than reinvesting. - Start Young
This investment strategy helps mitigate the impact of market fluctuations, making a lower stock market an opportunity to buy more shares and increase dividends. It’s best to start early in life, building wealth gradually over the years, ensuring a steady income during retirement.
Remember, the success of this investment strategy largely depends on choosing a company with a track record of increasing dividends. You can determine this by calculating the dividend yield—dividing the annual dividend per share by the price per share. While no investment is completely risk-free, keeping an eye on the dividend yield helps you know when it’s time to reevaluate or exit your investment.
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