A dividend stock that pays allocates it's earning directly to the investor as hard cash payment. Mainly the payment is done on a quarterly basis or monthly. Depending on the valuation of the company the stock of that particular company will keep on fluctuating, unlike the bond issuance interest payout. Dividend stocks have an immediate cash flow gotten from investments. Bonds are traditionally known for being good in investment as an income, but a much more lucrative investment is in the stock that guarantees a dividend payout. It generates an income to whoever opts to invest in it. The investor only needs to be patient as the value of the stock fluctuates over time.
A well-performing company will have a reassured consistent dividend if it has a regular earning in its operation. Investors will rely on the historical performance of a company to ascertain its viability. A company that has a long dividend history will have reliable dividend payout thus ensure a predictable cash flow. The dividends of such companies tend not to be volatile as they will be in demand. If investors demand such stocks is evident, then you as a first-time investor will rest be assured that your money is safe when invested in such stocks. Learn more info. here about dividend stocks.
As an investor who receives consistent dividends, what it means is that you will be earning in double forms. That is as income and capital appreciation. The value of the best stocks under 1 will appreciate the same time you are getting a cash dividend from it. Another strategy of which a good payout on Dividend Company has in its reinvestment. Either you can receive the cash earned in such an investment or you can be advised to reinvest the same cash so as to improve in the future payout.
A reinvested dividend gets a good compound interest that hastens the investment growth.
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Governments do encourage such companies with a good payout on their stocks through special incentive on taxation. The only qualified dividend is issued with special tax rates. The tax breaks can be a boost to the investor to reinvest more in such a company that is performing well. It becomes a win-win situation for both the government and the company. More people are employed in such well to do company. The government, on the other hand, gets better tax returns in a well laid long-term strategy.