Dividend Investing: Pros and Cons of Investing in Dividend Stocks! πŸ’΅πŸ“ˆ



there are numerous advantages to investing for dividends now I myself absolutely love investing for dividends it's so rewarding when you see real money being deposited into your bank account month after month quarter after quarter you get the literally watched compounding interest happen right before your eyes nearly 60 to 70 percent of my holdings are centered around dividend paying stocks and dividend paying ETFs investing for dividends is really rewarding but it's important that we know the pros and cons before we start going down the path of deciding on an actual dividend investing strategy in this video I hope to go over those pros and cons with you as we cover what I consider to be the largest pros and cons when it comes to dividend investing let's get started let's start with the cons first let's get the bad news out of the way the first con of dividend paying investments is that the dividend payment is actually it's not guaranteed if the company you're investing in starts to experience financial hardship the dividend payment might be reduced suspended or completely cut for an uncertain Abul amount of time for General Electric and Pease me are all examples of companies that you can look back in time and see that they've either cut their dividends suspend their dividends or change your dividends altogether knowing that your dividend payments might be cut and your income might be reduced it's very important at least in my opinion when it comes to dividend investing to make sure you're well diversified the second con of dividend investing are taxes with the exception of the Roth IRA dividend payments are usually taxable when received and as you guys know and I'm sure you understand that as taxes can eat away at an investor's return over time and so it really does reduce the amount of return you get on your investment because every year you have to pay taxes on those dividends an investor who's investing for growth does not have these same kind of problems so let's say they invest in Amazon well Amazon doesn't pay it it in the right well they investor if they hold Amazon and watch its value grow the value it compounds that grows completely tax-free and tell the date they sell it but not on not with dividends we have to pay tax when it's received the third clown of dividend investing is you might experience slow growth are very minimal growth on your investments well established companies that pay dividends might provide little to no capital appreciation on the underlying investment asset so in other words your upside potential is a little bit limited of companies that pay dividends are companies that usually have been around for decades some of them 10 20 30 years or more this means an investor may be missing out on the potential capital appreciation upside of newer companies sure it's always great to receive a three to four percent annual yield on these dividend paying stocks but if we're giving up the potential of higher capital appreciation on the underlying asset well then we know our returns are limited and thus our net worth might grow at a much slower pace okay guys those were the stinky cons of dividend investing now let's talk about the pros the first pro of dividend investing is that you will immediately start to receive a return on your investment it might be monthly it might be quarterly and it might be annually but you're gonna be able to see real money going into your bank account and that is so exciting some money that you did not have to go work for it's money that is working for you if we get to watch compounding interest happen right before our eyes well maybe you don't with this money this is fake money but it's sure fun to play with the Knicks pro when it comes to dividend investing is actually the tax consequences dividend income I don't know if you guys know this but as the one of the most advantageous tax rates Nick's a tax exempt income it is the next best type of income you can receive much better than ordinary wages many companies once you've held them long enough once you've held in investment usually for a year or more may pay you a qualified dividend and qualified dividends are taxed at the capital gain rates capital gain rates I don't know if you guys know this but it can range anywhere from zero to only twenty four percent at the very very highest rate so that's a huge savings if you look at wages now let's take ordinary wages for example if we're if we're in the highest wage bracket for tax purposes we're easily paying around forty percent but if you make your living with dividends you're only going to be paying at the very highest about twenty four percent rate of tax on that income so it's huge tax savings and a great way to make a living if you can have enough dividends coming in the third probe dividend investing is that companies that are well established and make good profits and good earnings tend to raise their dividend payments over time this is a way that they can return additional value to their shareholders Chevron Procter & Gamble are two companies that are great examples of this you can go to Yahoo Finance you can go to history and look at the dividend payment history and you'll see that their dividends have increased steadily over time you can look back at Chevron for example less than ten years ago I think their dividend payment was around 50 cents well now it's over $1 per share and I'll be honest with you I'd love to see when my income goes up but I did no additional work to earn it it is great the fourth Pro when it comes to dividend investing it's probably my very favorite and that is that right invest for dividends are when I have a dividend investing strategy it saves me a lot of time and it takes a lot of the worry for me out of investing completely you see dividend-paying companies like I said earlier are usually well established company if they've been around for a long time and so knowing that they are usually less volatile than many of the new smaller companies are many of these internet companies and so what it what it means for me is like I mean I feel good knowing I'm investing in a proven brand name companies like Chevron Procter & Gamble McDonald's Kimberly Clark are all examples of well-established dividend paying companies I really enjoy this way of investing because whether or not the markets going up or going down I know I'm gonna get income either way I'm not so I'm no longer so focused just on the capital appreciation it's great if I get it it's a bonus if I get it but either way I know I'm gonna get a return on my investment I'm gonna be happy either way another thing I like about it is that it saves me a lot of time in research now if I'm trying to invest for growth or trying to trying to trade stocks like I used to which I no longer do now but I would take me so much time to try to research what was going to go up or what was gonna go down next with divin investing I don't have to worry about that so much anymore I get more control of my life more control of my time back because I'm not worried about the capital appreciation side as much now I'm not saying – not before go research I definitely recommend doing your research before investing in any company of whether it's for a dividend or not but knowing that I'm invested in a strong brand name company with a long history makes me feel good puts me at ease so I'm not stress about what I'm investing in I can focus on my job I can focus on family and just the other parts of life that are so much more enjoyable even though I like stock investing and research there's so many other things that are more enjoyable and been doing that and I'd rather be out living life than worried about my investments 24/7 and that's why that fourth Pro is by far my most important Pro of dividend investing for me all right guys now those are my primary pros and cons when it comes to dividend investing now what I would like you to do is think about all the things we just discussed and figure out how that aligns with your investment goals in your investment strategy does that make sense in your situation think about it alright guys I know I want to over this information kind of fast so I'm sure you might have some questions but either way I would love to know what you guys think about dividend investing strategy do you think it's a good idea for most people a bad idea what do you guys think what's your what's your take on investing for dividend rather than always being focused on capital appreciation I would love to know in the comments section down below if you guys liked the video let me know by hitting that like button down below share this information with a friend especially if you have a friend who's saying hey what do I invest in or what's a way our method to invest share this video with them because they might prefer dividend investing as an investment strategy for them hey and if you're brand new to this channel I just want to take a moment say welcome highly consider subscribing guys because this channel money in life TV is all about helping people like yourself become fiscally fit we focus on this channel on teaching finances investing and taxes on a regular basis alright guys thank you so much for taking time out of your day to watch this video I really enjoyed spending this time with you here today on YouTube and no matter wherever you're at out there I hope you have a wonderful week coming up and I will see you guys in the next video next week and until then take care and live your life on Paige bye guys peace

50 thoughts on “Dividend Investing: Pros and Cons of Investing in Dividend Stocks! πŸ’΅πŸ“ˆ

  1. Should have had a bonus segment about buying muni/funds bonds. The tax advantages of those. Remember if you live in that state where you buy those municipal the dividends are tax free. Not the capital gains. They also always pay since they are forced to by law.

  2. Actually one other thing I wanted to know…….if you own the stock 5 days prior to the dividend supposedly you're supposed to get the dividend but do they give you the entire amount? in other words people that have owned the stock for the whole quarter do they get the full amount of the dividend while other people who only owned it 5 days prior to the dividend do they only get a portion of it or do they still get the full amount of the dividend?

  3. Hi Mike, a brilliant video, may I just emphasise (can you tell by the spelling I'm from the UK lol) your point, and that is, Research, Research. Research, but the extra dividends that are paid, are worth the effort. For anyone viewing this from UK, a Shares ISA is similar to a Roth IRA, the UK ISAs are not subject to tax, on the dividends only Capital Gains when you eventually sell out the ISA.

  4. I think people who believe dividend investing is bad because you have to paid taxes is stupid. You can't compare dividend to capital gains. Is Apple to Orange. Capital gains is good but if they drop to 0 or bankrupt you lose everything lol. I believe dividend is like a job or business or even real estate. You get a replacement form of incomes. You get a cash flow. In what countries today you don't pay taxes lmao

  5. Would you recommend for younger people (I am 20) to invest more heavily in dividend stocks or growth stocks? I ended up investing in a global real estate index fund, international index fund, small cap index fund, US large cap growth index fund, US large cap value index fund, and 2 marijuana companies (aurora cannabis and canopy growth). All the index funds are through schwab btw. I don't have anything invested in companies that pay dividends. Is that a mistake? Still pretty new to investing. Oh and this is all in a roth ira. Btw great channel! Looking to become an accountant and found you that way. Keep up the good work!

  6. As benjamin graham said an intelligent investor is an investor not a speculator.. I see no flaws in dividend stocks. No matter what stocks you buy you still have to pay taxes eventually. If you pick a good company most of the time the dividend is safe. And choosing undervalued stocks and practicing dollar cost averaging you can receive extreme capital appreciation.

  7. I work at a grocery store and plop $3 into Robinhood and $2 into Acorns Later. It would be the dream if I could get $1000 a month in dividends.

  8. DRIP your dividend not take out the cash in your account that way it is compounding shares until you decide to retire. Simple when one of the dividend companies in your portfolio stop increasing the dividend sell it immediately and replace it with another company.

  9. Personally, I would say dividend investing is better for those who are older, more established, and/or close to financial freedom. The growth aspect that is lacking in solid dividend stocks is extremely important to the early years, as are the tax benefits of tax advantaged growth. 3% is a pretty low roi but is fine if you're just looking to stablize and get your financially free budget in check.

  10. Good informative video and clearly stated. Dividend paying stocks are a great way to earn income with little effort, mainly research. I think AT&T, Verizon are solid dividend paying stocks. One riskier one, but a good one, is MORL with big dividend.

  11. "Capital appreciation" is a speculative game. With a dividend or bond even if the market turns down, you will most likely still get your dividend payments. I'm in Kevin O'Leary's camp. Buy dividend paying stocks. Avoid overvalued bubble stocks like Amazon.

  12. Hey Mike! Awesome video! I completely agree, there are pros and cons to everything. I think the main way around them is to have the best in both worlds and diversify. Like you said, Having growth and income is a good way too. DRIPs are amazing for the long term, don't have to worry about them while they make you rich πŸ˜‰

  13. Nothing on preferred shares and the dividends they offer? Preferred equities are a good alternative blue-chip common equity and corporate bonds since they always pay (or accrue, at the very least) dividends and they are higher in the claim on assets hierarchy than common equity is. Plus their dividends tend to be qualified so they are taxed at a lower rate.

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