
Today I have a very special post for readers. Jeremy from TheDividendGuyBlog agreed to put together a post regarding the power of dividends in a tough market like the one we are currently in. Jeremy runs a great blog that I personally read quite often. He takes in-depth looks at just how much dividends do for an investment portfolio, and the results are truly astounding. I encourage you to to check out his blog and subscribe to the feed as well.
The Impact of Dividends in a Choppy Market
One look at this chart below and it is easy to see that since September of '07 the market has been in a steady decline. When markets act like this, it can be difficult for an investor to remain unemotional; to not sell into the fear and desperation portrayed by modern media.
With the right dividend stocks, an investor can make market declines easier to bear as they are rewarded with dividend payments which can be reinvested. These dividends are put back to work in the market at lower prices which over time can significantly add to an investor's return. Consider the following graphic, which highlights the impact reinvested dividends have on cumulative returns. The
Before I finish up, you will notice that I said, "the right dividend stocks". Dividend paying companies can run into trouble just as many other stocks can. Have a look at Citigroup as an example of a dividend stock in trouble. With a dividend cut and no dividend increase in sight, this dividend stock is going to hurt many portfolios for awhile to come. The only buffer to this is a broad asset allocation and sector representation in your own portfolio. Do not let your future goals hinge on too few assets!






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