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
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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