Why Dividend Investing Is The Safer Bet

Stock Market Woes

I'm sure it is no surprise to anyone that the stock market is off to a terrible start this year. The surplus of oil in the market has caused much uncertainty in traders. Many are worried that the current price of the oil dictates the total health of the economy. I feel it is rather silly that traders have been so fearful just because of a commodity. This is the perfect time to pick up shares of some of your favorite companies. Traders are fearful and are selling off their shares due to their emotions. If I had more money to invest, I would be purchasing all these shares up at the current sales price. One of my favorite quotes is "The time to buy is when there's blood in the streets." (Baron Rothschild, 18th Century) By the way, Rothschild is one of the richest families in the world. They actually started the whole banking system we know and love today.

The Safety of Dividends

Dividends are one of the safest ways to earn money without as a much fear. The whole point of dividends is to invest in good, solid blue chip companies. This means companies like (KO) Coca-Cola, (WMT) Wal-mart and (GM) General Motors to name a few. The reason why these are safe is because these are companies that have been around for awhile and are already established. They have consistent revenues, EPS growth, dividend growth and free cash flow. These companies have been giving out dividends for ever and chances are they are not about to cut them anytime soon. A dividend investor does not have to worry about the woes and the volatility of the market like day traders do. A lot of dividend investors do not worry about what entry point they take up a position on a stock. I feel like this is a silly way to think as, I want to receive the best bang for my buck. The only time it would be worth it to take any possible entry position on a company is if one's trying to get into a company before a dividend cut off. One difference between me and others is, I like to time my entry points using technical analysis and charts. I want to receive the best bang for my buck and secure a higher portfolio value.

Tax advantageous

Dividends are also a very nice choice for investors due to the fact that the tax rate on all dividend gains is a meager 15%. The tax advantage is lowered even more, to a 5% on all gains for an investor that may find themselves in the 10-15% tax bracket.

Keeping Equity Intact

Another key benefit to note for dividends, is when one retires. The typical retiree that has all of their money in a 401k would have to sell, or reduce their number of shares in a company to be able to withdraw upon the money they need to survive upon. With dividend investing, the retiree would not need to reduce the number of shares they own in a company to be able to survive upon. All they need to do is wait for their dividend income to deposited into their accounts. This is one of the greatest aspects about dividends. A retiree can rest assured (if they have chosen solid dividend yielding blue-chip stocks) that they will receive their payment, and not have to worry about how much they are spending throughout their retirement. 

Investing In Your Own Raise

Who doesn't like raises? I think it would be safe to say that everyone loves a good raise. That is exactly how I view my dividend income. Essentially, every time I increase the amount of money I earn in dividends each year I'm contributing to my own raise. Although my dividend income increase has only hit $188 this year, when my Dividend income has reached a thousand dollars I will have added on to the amount of money I earn year.  This is one of the benefits I can't wait to enjoy once I have built up my dividend income portfolio!

Conclusion

Although nothing is guaranteed in life, I believe dividend income investing is one of the safest bets on the market.  I will one day be able to retire upon the dividend income this portfolio provides for me. I will have finally found a way out of the daily grind that we have been led to believe that we must partake in until we can longer function at our jobs.

 

 

Image courtesy of Stuart Miles at FreeDigitalPhotos.net