Its Released

  • Business
    BusinessShow More
    What to Consider When Selecting Fixtures to Match Different Architectural Styles
    What to Consider When Selecting Fixtures to Match Different Architectural Styles
    Business
    Why ComfoRest King Size Ottoman Bed Sets Are Redefining Comfort
    Business
    Blackcat Firm Guide: Accessing European IBAN Accounts at No Cost
    Business
    The Rise of Dentistry in Glasgow: Why Teeth Whitening Leads the Way
    Business
    Levitt Goodman
    Levitt Goodman: Redefining Innovative and Sustainable Architecture
    Business
  • Tech
    TechShow More
    What Cities Use the 216 Area Code?
    What Cities Use the 216 Area Code?
    Tech
    ywmlfz 48w cordless
    ywmlfz 48w cordless
    Tech
    Gas Heaters
    Gas Heaters Explained: Efficient and Cost-Effective Heating Solutions
    Tech
    Title: Boosting E-Commerce Performance with Enterprise Server SSDs
    Boosting E-Commerce Performance with Enterprise Server SSDs
    Tech
    Electric Bike
    What is an Electric Bike? A Complete Guide to eBikes in 2025
    Tech
  • Software
    SoftwareShow More
    Purchasing the Original Licensed Software: Everything You Need to Know
    Purchasing the Original Licensed Software: Everything You Need to Know
    Software
    spotify - web player: music for everyone
    spotify – web player: music for everyone
    Software
    What Role Will AI Face Swaps Play in Virtual Reality Environments?
    What Role Will AI Face Swaps Play in Virtual Reality Environments?
    Software
    DaVinci Resolve Studio: The Professional Video Editor That Actually Respects Your Wallet
    DaVinci Resolve Studio: The Professional Video Editor That Actually Respects Your Wallet
    Software
    Unlocking Imginn Your Complete Guide to This Innovative Tool
    Unlocking Imginn Your Complete Guide to This Innovative Tool
    Software
  • News
    NewsShow More
    When Does lilapalooza Take Place? Key Dates and Details
    When Does lilapalooza Take Place? Key Dates and Details
    News
    SG Newsletter: Your Source for Updates
    SG Newsletter: Your Source for Updates
    News
    Everything You Need to Know About Tecnoregio News
    Everything You Need to Know About Tecnoregio News
    News
    altoona mirror
    altoona mirror
    News
    From Application to Approval: Stashpatrick Breakdown of Lender Review Steps
    News
  • Lifestyle
    • Food
    LifestyleShow More
    lena the plug jason luv
    lena the plug jason luv
    Lifestyle
    6 Ways Custom Touches Can Bring Warmth Into the Home
    6 Ways Custom Touches Can Bring Warmth Into the Home
    Lifestyle
    How to Perform Cils Lifting
    How to Perform Cils Lifting: A Comprehensive Guide
    Lifestyle
    Everything You Need to Know About lepbound
    Everything You Need to Know About lepbound
    Lifestyle
    Everything You Need to Know eyebrow brush
    Everything You Need to Know eyebrow brush
    Lifestyle
  • Blogs
    BlogsShow More
    Benefits of Using Custom Mall Kiosks for Retail Business
    Blogs
    The Ultimate Ambani Book Guide: From Struggles to Empire Building
    Blogs Education
    dropshipping books
    Dropshipping Books Every Entrepreneur Should Read to Succeed
    Blogs
    shipstation login
    ShipStation Login: Secure Your Shipping Account with These Easy Steps
    Blogs
    fortnite quotes
    Game On: Fortnite Quotes to Live By in Every Match
    Blogs
  • Entertainment
    EntertainmentShow More
    The Ultimate Guide to Navigating CrackedStream
    The Ultimate Guide to Navigating CrackedStream
    Entertainment
    Everything You Need to Know About iyftv
    Everything You Need to Know About iyftv
    Entertainment
    Everything You Need to Know 123anime
    Everything You Need to Know 123anime
    Entertainment
    tears on a withered flower chapter 21
    tears on a withered flower chapter 21
    Entertainment
    zach top tickets denver
    zach top tickets denver
    Entertainment
  • Travel
    TravelShow More
    How to Find the Best Luxury Motorhome Rental for Your Adventure
    How to Find the Best Luxury Motorhome Rental for Your Adventure
    Travel
    Online Driver Update: Best Tools for Creatives
    Online Driver Update: Best Tools for Creatives
    Travel
    Egypt Packing List: What You Actually Need for a Trouble-Free Trip
    Egypt Packing List: What You Actually Need for a Trouble-Free Trip
    Travel
    the traveler hired the wrong tour guide
    the traveler hired the wrong tour guide
    Travel
    Travel: Exploring the World, Expanding the Mind
    Travel: Exploring the World, Expanding the Mind
    Travel
  • Contact us
Font ResizerAa
Font ResizerAa

Its Released

Search
banner
Create an Amazing Newspaper
Discover thousands of options, easy to customize layouts, one-click to import demo and much more.
Learn More

Stay Updated

Get the latest headlines, discounts for the military community, and guides to maximizing your benefits
Subscribe

Explore

  • Photo of The Day
  • Opinion
  • Today's Epaper
  • Trending News
  • Weekly Newsletter
  • Special Deals
Made by ThemeRuby using the Foxiz theme Powered by WordPress

The pros and cons of dividend investing

Admin By Admin September 15, 2024 4 Min Read
Share
The pros and cons of dividend investing

Seeking to add a relatively stable asset to your investment portfolio? Consider purchasing stocks in companies that pay dividends – portions of profit shared with stakeholders on a set basis, usually quarterly. These regular returns can help shore up your savings, but like any investment strategy, there are pros and cons to putting your money into dividend stocks.

The pros of dividend investing

Steady income stream

One of the primary attractions of dividend investing is the ability to generate a consistent passive income which offsets the unpredictability of returns from more volatile assets. You should opt for companies with a history of reliable payments such as those within the FTSE 100 index for peace of mind.

Potential for reinvestment

Dividends have the flexibility to be used for long-term growth rather than as a regular income stream. You can choose to use your dividend payments to automatically purchase additional shares, compounding your returns over time. This is known as a Dividend Reinvestment Plan. Historical data has shown that dividend-paying stocks often outperform non-dividend-paying stocks over the long term, partly due to the power of compounding.

Tax benefits

For UK residents, dividends can be quite tax-efficient. The UK government offers a Dividend Allowance which allows individuals to earn up to £500 in dividend income tax-free (as of April 2024). Beyond this allowance, dividends are taxed at rates lower than regular income for basic-rate taxpayers.

Moreover, you don’t pay tax on dividends from shares in an ISA (Individual Savings Account) or SIPP (Self-Invested Personal Pension).

The cons of dividend investing

Dividend cuts

While dividends can provide a steady income, this is not a guarantee. Companies can reduce the value of the payments or eliminate dividends completely. Dividend cuts are common during periods of financial difficulty when the company needs to keep back more profit to stay afloat, as seen during the COVID-19 pandemic when many UK firms slashed payouts to preserve cash.

Furthermore, dividend-paying stocks can be volatile just like standard stocks, especially in companies in sectors sensitive to economic cycles and world events like energy or finance.

Limited asset growth

High-dividend-paying companies often have lower growth potential compared to those that reinvest profits into expanding their operations. This trade-off means that while you may receive regular income, the share price appreciation might be more modest.

For example, growth-focused companies in sectors like technology or biotech typically reinvest profits to fuel innovation, often resulting in higher long-term capital gains but poor dividends.

How to invest in dividends

To begin dividend investing, start by selecting the right stocks. Look for companies with a strong history of dividend payments, a sustainable payout ratio, and healthy financials. Check the sector and evaluate whether they’re more likely to invest in growth or their stakeholders.

You can use an online investment platform for stock trading to access real-time market data, make buying and selling decisions quickly and efficiently and monitor your assets in one place. As well as using these tools to monitor the markets, keep up with the latest financial news, looking out for anything which might devalue or endanger your dividend payments.

UK-based dividend-focused mutual funds and ETFs can offer diversification and reduce the risk associated with individual stock selection. Remember to regularly review your portfolio to maintain a healthy balance between income and growth.

Share This Article
Facebook Twitter Copy Link Print
Previous Article A Traveler's Guide to Lwedninja A Traveler’s Guide to Lwedninja
Next Article How to Buy Cryptocurrency with a European Bank Card How to Buy Cryptocurrency with a European Bank Card

Sign up for our Daily newsletter

Subscribe

You Might Also Like

How the UK Economy Compares Encyclopedically in 2025: GDP, Growth, and Trading Opportunities

How the UK Economy Compares Encyclopedically in 2025: GDP, Growth, and Trading Opportunities

Trading
profitable intraday trading advice 66unblockedgames.com

profitable intraday trading advice 66unblockedgames.com

Trading
Step-by-Step Guide to Understanding Starhoonga

Step-by-Step Guide to Understanding Starhoonga

Trading
trade 13.0 serax

trade 13.0 serax

Trading
Welcome Back!

Sign in to your account

Lost your password?