Common misconceptions about dividends

Amid times of low yields and market instability, in excess of a couple of experts prefer profit stocks. This may seem like a word of wisdom, but sadly, it is regularly in view of misguided judgments and narrative proof. Here are some most common misconceptions about investing in dividend paying companies.

Dividend Investment is better option only for old or retired once:

Profit contributing is truly alluring for seniors, whose objectives are regularly capital protection and salary. But young investors can also get benefit from dividend model even if they invest some of the portion.

Growth stocks gives more returns:

Growth stocks may offer more returns when it comes to price appreciation. Dividend stocks can see returns grow in three ways:

-Rise in price.

-Increase in dividend payment.

-Reinvested dividends option to purchase more stocks.

When we compare growth and dividend stocks, one should compare their potential in terms of total ROI (return on investment). For the dividend stock, it means dividends plus price appreciation.

Dividend paying stocks are the safest stocks:

Investing is always risky no matter how safe it is, the risk of losing money will always present when it comes to investment.

Dividend paying companies restricts their growth:

Growth investors always say that companies paying dividends would be better to reinvesting that money into expansion of own company. Although the suggestion is correct but not in all the cases. Companies that don’t pay dividends give managers to use the profits as per they want. Management often go for the acquisition of another firm. Risky acquisitions outside the company’s main business often promise big results and just as often turn into money pits. Meanwhile, a commitment to paying dividends keeps management honest.

One should only invest in High-yield stocks:

Never judge a stock by considering only yield. Yield is a valuable measure of how much return you’re getting for each of your investment, but it alone cannot decide the true value of the stock. You also need to look at the share price.

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