Dividend investing focuses on building a portfolio of companies that consistently return profits to shareholders in the form of dividend payments - offering both steady income and long-term capital growth.
This strategy involves identifying financially stable companies with a strong history of paying dividends - often referred to as "dividend aristocrats." These companies distribute a portion of their earnings to shareholders regularly, which can be reinvested or used as income.
Dividend investors often hold these stocks long-term, benefiting from both the dividend yield and the potential appreciation of the stock itself. Over time, dividend reinvestment can compound wealth significantly, especially in tax-advantaged accounts.
Dividend investing is ideal for conservative investors, retirees, and anyone seeking income generation with lower volatility. It's also great for long-term investors looking to build wealth through reinvested dividends and compounding.
Known as the father of value investing, Graham emphasized the power of dividends in assessing a company's long-term value. Many of his students, including Warren Buffett, integrated dividend discipline into their strategies.
Want to dive deeper into the theory behind Dividend investing? Check out this:
Investopedia article on Dividend investing