Retirement Planning with Dividend Stocks

On the 58th episode of the Retirement Explained show, we’re discussing what dividend stocks are and why they’re important. Dividend stocks have a place in most investment strategies and retirement portfolios and today’s episode will showcase why they’re such a great and important investment vehicle.

What is a dividend?

A dividend is a form of profit sharing that happens when a company dives out some of the extra profit to the owners of the stock of the company.

If you own a share of stock in a company, you’re technically a part owner and some companies (like Proctor and Gamble) pay extra profits to the share holders (owners) and pride themselves on doing so.

Why Do People Invest in Dividend Stocks?

People invest in dividend stocks for a couple of important reasons. They (unlike non-dividend paying stocks) can provide a stream of income to those who invest in them, they’re a bit safer than stocks that don’t pay a dividend because they’re typically are less volatile.

People also invest in dividend stocks because if you don’t take the dividend as income and you reinvest it into the stock (thereby buying more of the stock with the extra dividend payments), you can experience compounded growth of your investment, which can lead to greater returns.

-Brian