In this week’s video, we’re giving a fresh perspective to the seemingly ordinary topic of dividends. While many investors typically view dividend stocks solely for the consistent cash flow they offer, Ed explains why dividends hold greater significance.
He highlights the added value of dividends and discusses the advantages of holding stocks with high dividend payouts, especially for those with a long-term investment horizon.
- Dividends represent the surplus cash that companies distribute to shareholders, serving as a non-mandatory incentive for investors to maintain their financial stake in the company.
- Typically, dividend-paying stocks are associated with established large companies, as highlighted in the video. These companies have reached a stage where not all of their earnings need to be allocated to expansion. Additionally, entities like BDCs, REITs, Senior Rate Floating Notes, and others can also offer dividends.
- Dividend-paying stocks possess an added advantage—they demonstrate resilience to market sentiment. Often, they are the last to be liquidated in investment portfolios during downturns because of their immediate cash payouts, providing a potential buffer against market volatility.
If you’d like to learn more about our approach to hedging against inflation, designing portfolios crafted for diversity, and more, please reach out Jordan McFarland at email@example.com.