Buying Stable Dividend Stocks
Dividend Investing has become a popular way of getting an income from the stock market. One strategy people use to invest into dividends is to buy already well establish companies that are paying out a dividend.
A lot of people will buy Microsoft simply because it’s a dividend paying stock which will almost certaintly be around for many decades to come. And while that might be a nice idea if you already have a lot of money and just want to put it somewhere that is paying you a no hassle income, there are better ways to grow your money.
The major problem of investing into well established companies like these is just that, they are already well established. All the major profit that was to be made in them was made 30 years ago. Microsoft and Coke are two examples of companies who get a lot of investors, yet they have been trading at the same trading range for a very long time. There are simply better places to put your money if you want it to appreciate.
Even with the dividends that they have paid out I doubt they have made any investor very happy lately. I doubt they have even help an investor to match the market let alone beat it. These companies may pay dividends, but unless you are investing millions of dollars into them, chances are it isn’t something you will be able to live off of.
So, what is a better way of investing for the long term? Well for long term investing the most powerful method is finding strong companies that are undervalued and likely to come up. This strategy is called value investing and looks at different fundamental factors such as the PE Ratio as well as the Debt to Capital Ratio to get an overall feel for the company’s fundamentals.
This way you can tell how strong the company is and how fair the price of the stock is. What is the companies true value and where is the price of the stock compared to that? Knowing this can be important.
This strategy allows you to get into stocks that are likely to grow and if they pay dividends those are likely to grow as well. Value investing may take more reasearch then simply buying already well established companies, but can be much more powerful as well.
