Dividends are payments made by a corporation to its shareholders. It is the portion of corporate profits paid out to stockholders. Think of it like a profit sharing program. You own a part of the company, and based upon profits, they pay a percentage to shareholders for investing.
Companies who pay dividends are often looked upon as a great investment. Dividends, whether paid monthly quarterly afford the stockholder the opportunity to take their profit in cash or reinvest it into the company. DRIPS, or dividend reinvestment plans have many benefits:
*ROI (Return on Investment) can be directly reinvested and compound more quickly.
*If reinvested, there is no need to pay brokerage fees because the company reinvests for you (although some do charge commissions).
The biggest downside to dividends would be that since they are profit, you have to pay taxes on gains.
Because I won’t speculate on individual stocks, EVER…I will only say that dividends are a great tool to reinvest or get a cash profit. Due diligence is extremely important when researching companies for investing. Times are tough and more research than ever will be required to pick safe and profitable investments.
I highly recommend The Motley Fool and wherever your brokerage account is held (mine is Sharebuilder ) for the bulk of your research. Always remember to use MULTIPLE SOURCES to get the most accurate picture of the company that you are contemplating investing in.