Reinvesting dividends can pay off - Ahwatukee Foothills News: Money

default avatar
Welcome to the site! Login or Signup below.
|
||
Logout|My Dashboard

Reinvesting dividends can pay off

Print
Font Size:
Default font size
Larger font size

Related Stories

Posted: Friday, March 15, 2013 9:49 am

When you invest in stocks, you want their price to go up. But of course, you can’t control the rise and fall of stock prices. However, there is a key element of investing that you can control — the number of shares you own. And in the long run, share ownership may be more important than rising stock prices in determining your long-term investment success.

Of course, you might think that the advice of “buy more shares” is easier said than done. After all, not everyone can easily find a lot of extra money to invest. But you don’t need access to vast wealth to increase your share ownership — you just need to consistently reinvest your stock dividends.

Just how important are reinvested dividends to wealth accumulation, as compared to capital gains (the increase in stock prices)? Over the 135-year period from 1871 through 2003, owning stocks and reinvesting the dividends produced 97 percent of all stock market returns, with only 3 percent coming from capital gains, according to a major study done by Dr. Jeremy Siegel, one of the world’s leading researchers on stock market performance. Other studies have also pointed to the importance of dividends as a component of total returns.

What are the implications of this disparity between the effectiveness of dividend reinvestment versus that of capital gains? First of all, it suggests that you may not want to spend an undue amount of time and effort in chasing after “hot” stocks, hoping for big capital gains. For one thing, by the time you buy these stocks, they may already be cooling off, but even more importantly, your focus on achieving large capital gains may not be the best use of your financial resources.

Ultimately, the power of dividend reinvestment means, not surprisingly, that you may be able to help yourself if you look for quality dividend-paying stocks — and then reinvest the dividends, month after month and year after year.

With just a little research, you can find stocks that have paid — and even increased — dividends for many years in a row (Keep in mind, though, that not all stocks will pay dividends, and even those that do can reduce or discontinue them at any time. Dividend reinvestment does not ensure a profit or protect against loss). So, to help boost your share ownership, consider reinvesting the dividends back into the stock, rather than taking them as cash payments. If you do choose to reinvest your dividends, though, you will need to look to other types of investments to provide you with income, assuming you need some income from your portfolio, which may become more necessary during your retirement years. Your financial advisor can help you determine the appropriate investments to help provide this income.

But in any case, if you can do without the current income provided by dividends, give careful consideration to reinvesting them. Dividend reinvestment is not a glamorous investment strategy, and it won’t help you “get rich quick,” but it can help you make steady progress toward your long-term financial goals — and that’s a key dividend in itself.

• This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Kim DeVoss, CFP. Reach her at (480) 785-4751 or Kim.DeVoss@edwardjones.com.

More about

More about

More about

  • Discuss

Kerry’s Blunt Words for Israel Denounced by Lawmakers in Both Parties

A bipartisan chorus of lawmakers, upset with President Obama’s decision last week to allow the passage of a United Nations resolution condemni…

Published: December 31, 2016 - 10:14 am @ http://www.nytimes.com/2016/12/28/us/politics/john…

Gov. Brown Appoints New Public Utility Commissioners to Replace Florio and Sandoval

Martha Guzman Aceves and Clifford Rechtschaffen both come from the governor’s office with strong environmental protection backgrounds. Martha …

Published: December 31, 2016 - 10:14 am @ https://www.greentechmedia.com/articles/read/gov.-…

Obama preparing to penalize Russia for hacking

WASHINGTON — The Obama administration is preparing to penalize Russia over the hacking of Democratic officials during this year's presidential…

Published: December 31, 2016 - 10:16 am @ http://www.usatoday.com/story/news/politics/2016/1…

Presidential vote in congressional districts points to Democratic risks in 2018

Democrats started the 2016 election cycle with pessimism about their chances of taking back the House of Representatives. For a few moments th…

Published: December 31, 2016 - 10:13 am @ https://www.washingtonpost.com/news/post-politics/…

Mail truck tips on Mesa street

MESA, Ariz. - A mail truck ended up on its side in a crash Wednesday. Mesa police say a single-vehicle collision left the United States Postal…

Published: December 31, 2016 - 10:12 am @ http://www.12news.com/news/local/valley/mail-truck…

Reports of mall disturbances light up social media

A flurry of reports of mall melees and disturbances rippled across social media Monday on a day Americans swarmed shopping hubs for post-holid…

Published: December 31, 2016 - 9:51 am @ http://www.usatoday.com/story/news/nation/2016/12/…

Star New Brunswick cyclist Ellen Watters dies from crash injuries

Ellen Watters, a Canadian competitive cyclist critically injured in a collision with a car while on a training ride in Sussex, N.B., Dec. 23, …

Published: December 31, 2016 - 9:14 am @ http://www.cbc.ca/news/canada/new-brunswick/ellen-…

Graham, McCain want Russia sanctions after election hacking

Top Republican senators said Wednesday that the incoming Congress and President-elect Donald Trump should impose new and tougher sanctions on …

Published: December 31, 2016 - 9:13 am @ http://www.foxnews.com/politics/2016/12/28/graham-…

Immigration Is the Only Hope for States That Helped Trump

The decline of manufacturing does not explain the decline of Wisconsin. Photographer: Daniel Acker/BloombergFacebook Twitter Email Print Share…

Published: December 31, 2016 - 7:36 am @ https://www.bloomberg.com/view/articles/2016-12-28…

Creator of the Red Solo Cup dies at 84

FOX 32 NEWS - The creator of the Red Solo Cup died on Wednesday, December 21, 2016 at the age of 84. Robert Leo Hulseman lived in Northfield, …

Published: December 31, 2016 - 7:07 am @ http://www.fox4news.com/trending/225996868-story

Facebook

ahwatukee.com on Facebook

Twitter

ahwatukee.com on Twitter

RSS

Subscribe to ahwatukee.com via RSS

RSS Feeds

Spacer4px

Most Popular

Online poll

Loading…