The way we look at it, if you’re going to own something you might as well get paid for owning it. The more things in life that can produce cash flow, the closer you will be to subsidizing your income as we prepare for retirement. Take real estate for example – you own a piece of land, you have the option to rent it out, and not only does your property have the potential to appreciate; you get paid while you own it through rental income. Any viable investment should produce some sort of income. That income values you, the investor, for putting your hard earned money into it. In fact, many of you are getting paid on your investments right now, without even realizing it. The way you get paid to invest is through earning dividends.
What Is A Dividend?
A dividend is simply a payment that a company makes to its shareholders from the net income it makes in a given year.
Dividends are a way to keep investors happy, keep consumer confidence high, and share the profits of a company.
It’s important to understand that not all companies pay a dividend. Also of note, is that each company decides how much to pay out each year in total and they can increase or even decrease that amount when they see fit.
That being said, dividends are a KEY tool in reinvesting into your investment portfolio to see your dollar work for you. Here is why:
The Power of Dividend Income
At the end of the day, you have two choices when it comes to your dividend income. You can either keep the cash or reinvest the money.
When you are able to reinvest back your dividends, this is the power of dividend income,. Reinvesting your dividends will allow you to buy more shares without putting any money from your pocket into your investment allowing you to keep collecting larger dividends, furthermore, growing your mutual fund portfolio.
In conclusion, dividends are a way to see your investment grow at a more rapid rate. At the end of the day we want our investments to work for us and dividend income is just one of many ways for that to happen. So until we retire, let’s get paid while we wait.