Dividend Investing Will Make You Rich

By: ispeculatornew
Date posted: 02.02.2012 (5:00 am) | Write a Comment  (1 Comment)

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Last week, I discussed dividend investing mainly to argue those that say dividend stocks are a bubble and that dividend investing was just a trend that would eventually fade away are dead wrong. My conclusion was that dividend investing will only grow bigger and more important. In my opinion, that is a good thing. It will encourage companies to be more disciplined with their cash which should be good both for the markets and for the general economy. Company executives generally have a lot of interest in how well their company’s stock performs and that is becoming even more true these days as companies increasingly switch to deferred compensation made through stock and options.

What I Mean

In the past, executives would get a large amount of cash paid every year

Now, these execs get some cash and a lot of interests in the company (shares and options) that will be worth a lot if the stock performs well.

Growing number of investors looking for dividend stocks will help companies that are willing to commit to such payments. Since the execs want the stock to do well, creating, paying and increasing their company’s dividend is a great way to increase their overall compensation.

Dividend Investors Will Tend To Become Much Richer Than Others

I strongly believe that dividend investors will tend to be much better off over their lifetime for a few different reasons:

Better Investing Discipline: Dividend investors have very clear ways to select stocks and determine if they can be kept. That generally helps them be less emotional and more rational about those picks which is a great thing in the end. Also, having a clear model is an important aspect of being a successful investor

Controlled Spending: Ask anyone about getting that brand new tv and few would say they’re not interested. Dividend investors though have a clear view of the downside of such a purchase. Basically, every expense can be looked at from the point of view of a dividend stock. $2000 might get you a nice tv, but it could also mean an annual cash flow of $60 that increases every year for your entire life. This does not mean avoiding to spend but it does mean considering the future lost revenue when spending. And yes, that generally ends up meaning less spending.

Clear Objectives: In most cases, dividend investors are trying to gradually replace the income that they live off by dividend income. That process does not happen overnight but with steady investments and good picks, it does eventually become a possibility. Dividend investors tend to have a rather clear image of where they need to get and far away those objectives are. Why? Because as time goes by, the amount of dividends received every month will evolve and become closer to whatever money you feel is required to live off of. Contrast that to the typical investor that has no idea how much money he will need, how to get there, etc.

In the end:

Dividend Investing = Investing Discipline + Diminished Spending + Clear Objectives
Dividend Investing = $$$$

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1 Comment

  1. Pingback by Weekend Reading 2/4/2012 — Dividend Monk — February 4, 2012 @ 8:28 pm

    […] Dividend Investing Will Make You Rich The Intelligent Speculator posted this article on dividends. If his blog name has been keeping you away from his content, then think again. He provides good articles on dividend stocks mixed in with his speculative tech investments; it’s worth checking out. […]

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