It’s important to note that investing in the stock market is not all about finding shares that are most likely to double or triple in market value over a short period of time. Although that would be nice, it’s very difficult to pick winners solely based on this methodology. That is why there is more to stock market investing than simply trying to pick winners in the rapid growth game. It’s called seeking the stock dividend.
As alluded to above, the main philosophical division among stock market investors is in the decision to invest in a growth stock or dividend stock. A dividend is portion of an organization’s earnings that is paid out to shareholders periodically throughout the year. Most of the time dividends are quoted as a percent of the share price or dividend yield. From the most basic perspective, if an organization pays a $1 dividend and is trading at $10 per share, the dividend yield would be 10%. Dividends are typically paid quarterly.
When picking stocks, you should always remember the dividend. It is certainly possible to invest in stock that is both growth oriented and pays a dividend. However, keep in mind that when a company pays a dividend they are not reinvesting the money in research, development, and future growth. So, ask yourself: “what are dividends and how important are they to my investment strategy?” If all you want to do is eventually sit back and collect dividends, then remember the dividend stock. It’s the gold of stock market investing.