Let me get right down to it: Dividend investing is a superior way to build wealth in the stock market. Here are five reasons you should put dividends to work in your portfolio:
1. Bear market protection. This one is fresh on investors' minds because the market is swooning. Perhaps the best benefit of dividend-paying stocks is that they tend not to fall as far as non-dividend-paying stocks in a bear market. But the fact that the dividend payments continue to roll in during market downturns -- which are the absolute best times to be adding new money -- is what really makes the difference.
2. Less volatility. Companies with serious commitments to their dividends can be unbelievably boring. That's a good thing. The healthy yields paid by companies such as Citigroup
3. Better transparency. One of the painful truths of investing is that I could take three Fools here in HQ and ask for an estimate on the valuation of a fairly simple company such as Automatic Data Processing
4. Historically, dividends matter. A lot. Fellow Fool Shannon Zimmerman highlighted just how much -- from 1926 to 2004, 41% of the return in the S&P 500 came from dividends. That seems hard to believe today, now that the yield on the S&P 500 is less than 2%, but it's true. With the effects of reinvesting and compounding accounted for, the returns are simply staggering.
5. Market-beating results. Although it intuitively makes sense that Washington Mutual
Foolish final thoughts
Those are just five reasons why dividend investing makes sense -- and why it can help you beat the market. If you think of others, feel free to email me at the address below. And if you want to get started buying the market's best dividend-paying stocks, consider our Motley Fool Income Investor service, where we've recommended more than 50 dividend dazzlers to date. You can view all our picks for free with a 30-day trial. Click here to learn more.
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