Using Dividend Stocks To Unlock Regular And Passive Income Benefits

While investing in the stock market generally carries higher risk, you can offset it with a passive income generated through dividend stocks. These belong to the companies that often share a part of their profits with their shareholders.

Dividend stocks are shares of public companies that distribute a portion of their earnings to shareholders. This share is called dividends, which can be a fund transfer or in the form of additional shares. 

Shareholders receive them on a regular basis, be it quarterly or annually. This is profitable for investors as they earn long-term returns. By investing in companies that are well-established, you can significantly reduce the risk of volatility.

Before investing in dividend stocks, knowing the dividends of the company is important. This is a vital metric to assess the performance of the company in which you're putting your money. 

The formula for calculating dividend yield is: (Annual dividends per share / current market value per share) X 100

To simplify matters, you can use online dividend yield calculators to get accurate results and compare multiple stocks. 

Here are a few reasons why dividend stocks are a smart choice for long-term investment: 

• They are a great source of passive income compared to a fixed deposit and other savings schemes

• Since the investments are made in low-volatile companies, there is low risk

• There is always an option to reinvest dividends for consistent returns

• They offer the benefit of capital appreciation as well as fixed-income benefits 

• They protect against inflation

The following dividend investing strategies can help you reap more benefits:

• Consider all the transaction costs associated and tax implications

• Consider the market volatility risk when choosing stocks 

• Review the performances of the past dividends paid 

• Spread your investments across multiple stocks in different sectors  

• Utilise Dividend Reinvestment Plans (DRIPs) to automatically reinvest dividends

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