I hear a lot of opinions on investing in dividend stocks verses growth stocks. This is just my opinion and how I do my searches for new stocks to add to my portfolio.
As always, I don’t advise you to follow my advice or even my strategy. Not everything works for every person and you have to make your own decisions.
When I started this investment journey almost 2 years ago, I thought that my strategy would be to get all dividend paying stocks. After all, if I got enough of them, I could just let the dividends come in and pay all my bills. I was so wrong!
I guess I got excited by those click bait headlines that said things like “Buy these 3 stocks and retire on your dividends!” I figured this would be easy.
Then, once I got started, I found out the evil truth. You can retire on your dividends if you have 100,000 shares of a stock. Which probably will cost you 1 million dollars. Which is possible if you start when you are twenty years old and relentlessly invest in the stock for 40 years.
This is because, stocks that pay 50 cents a quarter will generally be the stocks that cost 200 dollars a share.
But I’m already 70 years old, and don’t want to use a million dollars to set up payments of 60,000 dollars a year.
From what I am told, dividend stocks typically do not increase the stock value very quickly. This is because the company uses their profits to pay the stockholders these dividends instead of Research and Development or creating new products to increase their revenue.
Now on the other hand, you can get growth stocks which don’t pay dividends, but you will see the market value of your stock going up more quickly. It’s not money in your pocket though, unless you sell the stock.
I still when I consider a new stock, look at the dividend rate, and the dividend ex-date as one factor of the decision. It used to be a more primary for me than it is now. But I have many other reasons that I choose a stock than whether it is or isn’t a dividend stock.
