Why Dividends are Essential

The ultimate goal of my strategy in stock investing is to create enough passive income to life comfortably and be financially free. I’m a firm believer in only buying stocks that pay a good dividend. The effects of compound interest, share price increase, dividend increases, and DRIP (Dividend Reinvestment Plan) are astronomical for gaining wealth over a long period of time. Whether the market is up or down does not matter, you will still be receiving a dividend from the company stock you own (unless they quit paying a dividend). Investing in a margin of safety is key to ensuring you are picking safe and consistent companies. There’s always risk regardless, but you can mitigate that risk with proper research and diversification. Creating a dividend fortress can protect you against a market crash like the one we face today. The share price might go down, but it doesn’t matter. You only lose money if you sell. Value investing is a great strategy for any bear and bull market. If you’re not buying in the good times and bad you are not earning that dividend income. After all this compounding takes place it will have a snowball effect and keep growing your portfolio. Eventually you’ll get to the point where the dividends can fund your lifestyle, especially if you live modestly.

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