Dividend Investing: Pros and Cons of Investing in Dividend Stocks! πŸ’΅πŸ“ˆ

there are numerous advantages to investing for dividends now I myself

absolutely love investing for dividends! it's so rewarding when you see real

money being deposited into your bank account month after month

quarter after quarter you get the literally watched compounding interest

happen right before your eyes nearly 60 to 70 percent of my holdings are

centered around dividend paying stocks and dividend paying ETFs investing for

dividends is really rewarding but it's important that we know the pros and cons

before we start going down the path of deciding on an actual dividend investing

strategy in this video I hope to go over those pros and cons with you as we cover

what I consider to be the largest pros and cons when it comes to dividend

investing let's get started let's start with the cons first let's get the bad

news out of the way the first con of dividend paying investments is that the

dividend payment is actually it's not guaranteed if the company you're

investing in starts to experience financial hardship the dividend payment

might be reduced suspended or completely cut for an uncertain Abul amount of time

for General Electric and Pease me are all examples of companies that you can

look back in time and see that they've either cut their dividends suspend their

dividends or change your dividends altogether

knowing that your dividend payments might be cut and your income might be

reduced it's very important at least in my opinion when it comes to dividend

investing to make sure you're well diversified the second con of dividend

investing are taxes with the exception of the Roth IRA dividend payments are

usually taxable when received and as you guys know and I'm sure you understand

that as taxes can eat away at an investor's return over time and so it

really does reduce the amount of return you get on your investment because every

year you have to pay taxes on those dividends an investor who's investing

for growth does not have these same kind of problems so let's say they invest in

Amazon well Amazon doesn't pay it it in the right well they investor if they

hold Amazon and watch its value grow the value it compounds that grows completely

tax-free and tell the date they sell it but not on not with dividends we have to

pay tax when it's received the third clown of dividend investing is you might

experience slow growth are very minimal growth on your investments well

established companies that pay dividends might provide little to no capital

appreciation on the underlying investment asset so in other words your

upside potential is a little bit limited of companies that pay dividends are

companies that usually have been around for decades some of them 10 20 30 years

or more this means an investor may be missing out on the potential capital

appreciation upside of newer companies sure it's always great to receive a

three to four percent annual yield on these dividend paying stocks but if

we're giving up the potential of higher capital appreciation on the underlying

asset well then we know our returns are limited and thus our net worth might

grow at a much slower pace okay guys those were the stinky cons of dividend

investing now let's talk about the pros the first pro of dividend investing is

that you will immediately start to receive a return on your investment it

might be monthly it might be quarterly and it might be annually but you're

gonna be able to see real money going into your bank account and that is so

exciting some money that you did not have to go work for it's money that is

working for you if we get to watch compounding interest happen right before

our eyes well maybe you don't with this money

this is fake money but it's sure fun to play with the Knicks pro when it comes

to dividend investing is actually the tax consequences dividend income I don't

know if you guys know this but as the one of the most advantageous tax rates

Nick's a tax exempt income it is the next best type of income you can receive

much better than ordinary wages many companies once you've held them long

enough once you've held in investment usually for a year or more may pay you a

qualified dividend and qualified dividends are taxed at the capital gain

rates capital gain rates I don't know if you guys know this but it can range

anywhere from zero to only twenty four percent at the very very highest rate so

that's a huge savings if you look at wages now let's take ordinary wages for

example if we're if we're in the highest wage bracket for tax purposes we're

easily paying around forty percent but if you make your living with dividends

you're only going to be paying at the very highest about twenty four percent

rate of tax on that income so it's huge tax savings and a great way to make a

living if you can have enough dividends coming in the third probe dividend

investing is that companies that are well established and make good profits

and good earnings tend to raise their dividend payments over time this is a

way that they can return additional value to their shareholders Chevron

Procter & Gamble are two companies that are great examples of this you can go to

Yahoo Finance you can go to history and look at the dividend payment history and

you'll see that their dividends have increased steadily over time you can

look back at Chevron for example less than ten years ago I think their

dividend payment was around 50 cents well now it's over $1 per share and I'll

be honest with you I'd love to see when my income goes up but I did no

additional work to earn it it is great the fourth Pro when it comes

to dividend investing it's probably my very favorite and that is that right

invest for dividends are when I have a dividend investing strategy it saves me

a lot of time and it takes a lot of the worry for me out of investing completely

you see dividend-paying companies like I said earlier are usually well

established company if they've been around for a long time and so knowing

that they are usually less volatile than many of the new smaller

companies are many of these internet companies and so what it what it means

for me is like I mean I feel good knowing I'm investing in a proven brand

name companies like Chevron Procter & Gamble McDonald's Kimberly Clark are all

examples of well-established dividend paying companies I really enjoy this way

of investing because whether or not the markets going up or going down I know

I'm gonna get income either way I'm not so I'm no longer so focused just on the

capital appreciation it's great if I get it it's a bonus if I get it but either

way I know I'm gonna get a return on my investment I'm gonna be happy either way

another thing I like about it is that it saves me a lot of time in research now

if I'm trying to invest for growth or trying to trying to trade stocks like I

used to which I no longer do now but I would take me so much time to try to

research what was going to go up or what was gonna go down next with divin

investing I don't have to worry about that so much anymore I get more control

of my life more control of my time back because I'm not worried about the

capital appreciation side as much now I'm not saying - not before go research

I definitely recommend doing your research before investing in any company

of whether it's for a dividend or not but knowing that I'm invested in a

strong brand name company with a long history makes me feel good

puts me at ease so I'm not stress about what I'm investing in I can focus on my

job I can focus on family and just the other parts of life that are so much

more enjoyable even though I like stock investing and research there's so many

other things that are more enjoyable and been doing that and I'd rather be out

living life than worried about my investments 24/7 and that's why that

fourth Pro is by far my most important Pro of dividend investing for me all

right guys now those are my primary pros and cons when it comes to dividend

investing now what I would like you to do is think about all the things we just

discussed and figure out how that aligns with your investment goals in your

investment strategy does that make sense in your situation think about it alright

guys I know I want to over this information kind of fast so I'm sure you

might have some questions but either way I would love to know what you guys think

about dividend investing strategy do you think it's a good idea for most people a

bad idea what do you guys think what's your what's your take on investing for

dividend rather than always being focused on

capital appreciation I would love to know in the comments section down below

if you guys liked the video let me know by hitting that like button down below

share this information with a friend especially if you have a friend who's

saying hey what do I invest in or what's a way our method to invest share this

video with them because they might prefer dividend investing as an

investment strategy for them hey and if you're brand new to this channel I just

want to take a moment say welcome highly consider subscribing guys because this

channel money in life TV is all about helping people like yourself become

fiscally fit we focus on this channel on teaching finances investing and taxes on

a regular basis alright guys thank you so much for taking time out of your day

to watch this video I really enjoyed spending this time with you here today

on YouTube and no matter wherever you're at out there I hope you have a wonderful

week coming up and I will see you guys in the next video next week and until

then take care and live your life on Paige bye guys peace