Why Dividend stocks is important in every Investment Portfolio?

why dividend stocks is important in every investment portfolio?

Retail investors are always chasing the next big returns from high-growth stocks to speculative crypto. However, with the current economic downturn and the speculation of a long bear market. Dividend-paying stocks are gaining popularity yet again. Companies such as Coca-cola, Walmart, and other popular dividend-paying stocks have raised their dividend-payout just this year.

What are Dividend Stocks

Dividend stocks are investments in a company that gives out a distribution of part of the company’s earnings. Dividends are mostly given out quarterly (once every 3months) but they may also be paid out monthly or yearly. Paying dividends enables businesses to distribute their profits to shareholders, which helps investors feel appreciated for their continued support through better returns and encourages them to keep holding the stocks.

Why do People Invest in them?

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People invest and grow a dividend portfolio to receive a regular income stream from their investments. This income is in addition to your portfolio’s growth when its stocks or other investments increase in value.

Apart from that, investors invest in dividend stocks as they are considered a safe haven asset during recessionary times. When there is a severe economic downturn, firms frequently reduce their dividends, but not in response to a market correction. Since dividends are independent of stock price, changes in the market or the price of a stock by themselves have no impact on a company’s dividend payments.

Lastly, since dividends have lower volatility, it helps to build slow and safer growth in an investor’s investment portfolio. With lower volatility, an investor need not control his/her emotion whenever things go south. It makes investing stress-free.

What Dividend stocks are great to have in an Investment Portfolio?

Having a wide area of different sectors of business can help further diversify risk and produce a more stable income. However, not all of these stocks make for excellent investments, and many buyers are unsure of where to begin. In light of this, we have compiled a list of dividend-paying stocks as well as some of the key characteristics of the best dividend stocks. Most of these companies you would have heard, if not, you many be living under a rock.

1) Coca-Cola

One of the most well-known soft drink brands in the world is Coca-Cola. In actuality, the business recently commemorated its 135th birthday. It is ranked as the sixth most powerful brand in the world by Forbes. With an annual dividend yield of 2.86%, paying out $0.44 per stock (July 2022 the value of the stock is $61.59USD).

Coca-Cola is a true Dividend Aristocrat. To be considered an Aristocrat, a company has to commit to commit in paying and raising their dividend for at least 25 years running. In fact, Coca-Cola has increased its payout each year for the last 59 years. So rest assured, you will be getting your dividend every quarter!

2) Johnson & Johnson

The excellent brands Johnson & Johnson owns produce goods that people need, particularly healthcare products. Johnson & Johnson has a sizable and consistently profitable pharmaceuticals and medical device business in addition to its well-known consumer brands like Band-Aid, Neutrogena, Tylenol, Zyrtec, Benadryl, and Johnson’s (among others), which together have allowed the company to increase its dividend for 60 years in a row.

3) Target

Target has repeatedly shown that it doesn’t need to compete on price to succeed in the cutthroat world of discount retailing. With some of the highest gross and operating margins in retailing, it has consistently demonstrated that it is more profitable than its competitors. The company has kept sales and profits growing at a respectable rate by concentrating on growing its e-commerce business and expanding its in-store offerings.

4) Starbucks

Love drinking at Starbucks? The company was devastated by the coronavirus pandemic, which forced temporary closures at thousands of its locations around the world. Sales therefore experienced a double-digit decline in 2020. Thankfully, the development of several efficient vaccines has prompted a cautious reopening of international markets. The fad is assisting in increasing sales and bringing back customers to Starbucks locations.

The total addressable coffee market is expected to grow to $400 billion in the next three years, at a compound annual growth rate of about 8.5 percent, according to Starbucks management.

How you can start investing in Dividend stocks?

If you are still unsure of what type of dividend investment to make. You can still invest in an ETF (Exchange-Traded Fund), which is a stock that invests in a selection of stocks from various industries and is actively managed by a large percentage of investment advisers who are registered with the SEC. These ETFs, which are at the top of our list, are SCHD or VYM.

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