Don't Under Estimate Dividend Paying Stocks

After reading Robert Kiyosaki’s “Rich Dad, Poor Dad” book, I understood that I need to educate myself continuous to gain financial knowledge that will help me in my journey towards financial freedom.

I have been investing into stocks infrequently, mostly based on recommendations from friends and relatives.  My objective from stock investments has been always been for capital gain.  In fact, that is the only way that I know for stock investments.  Buy at a low price and then selling at a higher price for a profit.  I knew that you can “short” on a stock and profit if the price is falling, but with the limited knowledge I had, I just want to stick to the most simplistic form, which is playing for the price of the stock to go up.

Then I came across an article talking about investing into stocks that has good dividend as a strategy.  This is an eye opener for me.  I have never thought that dividend playing stocks can make a difference in my quest for financial freedom. 

The strategy to use dividend paying stocks to build long term wealth simply requires these 2 steps:

  1. Buy the best dividend-paying stocks, and
  2. Reinvest the dividends.

For example, here’s the difference reinvesting dividends can make.

Reinvest dividends

If you had invested $10,000 in the large-cap companies back in 1980, you could sell them today for about $130,000. Not too shabby. 

Had you reinvested the dividends, you’d be sitting on more than $400,000. And that’s assuming you didn’t invest another dollar since — just imagine if you had been investing even a modest amount along the way.

What a difference. Dividends really do matter. Stocks have done well — no matter how you slice it. You can see that clearly from the chart. You can also see that dividends can make the difference between merely doing well and quietly amassing a fortune.

I am glad that I have learn something new; new financial knowledge that could help me in my wealth building.