Dividend stocks provide stability to investors’ portfolios during the volatile periods in the stock market.
The stability of these stocks has proven the importance of dividends to investors time and again.
Dividends also provide an incentive for companies to increase their earnings, so they can pay an even higher dividend next year. This attracts more investors, which takes the company’s share price higher.
This is why, all else being equal, dividend-paying stocks tend to deliver higher returns than non-dividend-paying stocks over the long term.
Even the father of value investing Benjamin Graham agreed when he said: ‘The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies.’