Why Invest in Dividend Stocks?

From 1926 through 2013, dividends have represented nearly 43% of the returns generated by the stock market, as represented by the S&P 500 index.
Stocks of companies that grow and initiate new dividend payments, [such as those the Fund seeks to own] outpaced other alternatives. What makes these results even more compelling is that stocks with growing dividends have not only outperformed, but have done so with less risk.

The Street comes to the rescue! The publication lists their ten most undervalued dividend stocks.

Dividend stocks often fall off the radars of investors looking for total returns but dividend paying stocks greatly outperformed non-dividend paying stocks from the period from 1972 through 2013. The compound annual growth rate of dividend paying stocks and non-dividend stocks from 1972 through 2013:

Dividend Paying Stocks: 9.3% per year
Non-Dividend Stocks: 2.3% per year

Dividend paying stocks have been a better investment than non-dividend paying stocks over the past 40 years. Investing in dividend stocks is not the only strategy that has a long history of outperformance. Value investing has also significantly outperformed the market over long periods. Stocks with the lowest 10% of price-to-book ratios have outperformed stocks with the highest 10% of price-to-book ratios substantially from 1926 through 2013 (an 87-year study). The compound annual growth rate results:

Lowest 10% price-to-book ratio stocks: 12.6% per year
*Highest 10% price-to-book ratio stocks: 8.6% per year

Disney (DIS), Starbucks (SBUX), and TJX (TJX) (parent company of T.J. Maxx) show that investing in businesses with increasing dividends and healthy fundamentals can be the key to outperforming the markets in the long term.The importance of dividend growth: According data from Goldman Sachs, dividend stocks tend to outperform their nondividend-paying counterparts by a considerable margin over time. A $10,000 investment in nondividend stocks in 1972 would have turned into $26,417 by 2013, while investing the same amount in dividend-paying stocks would have resulted in $413,073.

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Profitable Investing Tips

Profitable Investing Tips

ProfitableInvestingTips.com is an informational website for men and women who want to discover trading & investing products and strategies and how to use them.

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