Using Dividends to Amplify Your Portfolio’s Growth
Anyone can invest in a common stock or in a specific business sector through mutual funds. But even within various stocks, have you considered looking into one that provides substantial dividends, which can add to the value of your stock?
Although the stock market has reached new highs this month, no one can predict how long this bull market will last. It is always wise to take a step back and look at how you are invested and whether your portfolio is built to withstand downturns as well. This perspective allows you to consider the longer term, and how to grow your money with an eye towards safety.
At Isakov Planning Group, we advise our clients that there are many options for investing, from bank savings accounts to real estate and complex securities.
Anyone can invest in a common stock or in a specific business sector through mutual funds. But even within various stocks, have you considered looking into one that provides substantial dividends, which can add to the value of your stock?
For example, several stocks pay 4% or more in dividends each year and have a history of doing so during periods of positive growth or reported losses. A company that that gained 5% in share value for the year and pays a 4% dividend yields an effective growth rate of 9%. On the other hand, if that same stock lost 3% in share price, the investor would still see 1% growth. This is part of the reason investors frequently include dividend-paying companies in their portfolios: They pay consistent, solid dividends beyond their history of growth.
This is a very important point for people seeking long-term growth. Dividends may be automatically invested to purchase additional shares, providing faster growth and an added value to your investment.
Another aspect to consider is the share price of these dividend-bearing stocks. If the stock price is relatively high, you may not be able to purchase more than a few shares. For example, say a stock pays a $1.00 dividend per share, it makes sense to own more shares, rather than just a few. Owning 1,000 shares of a stock that pays a dividend of $3.60 per share will result in an annual dividend of $3,600—regardless of what happens to the share price. If the share price was very high, you might only be able to purchase 100 shares, resulting in a far lower annual dividend amount.
Some stocks pay very high dividends (7% or more). These types of investments are worth considering as part of any portfolio that emphasizes growth.
At Isakov Planning Group, we consider all types of investment opportunities as they relate to our client’s long- and short-term financial goals. Contact us for a free, no-obligation consultation to better understand how you can take advantage of high-dividend stocks.