Why Dividends Matter

29/01/2023

Dear Reader

We’re at the end of January now. What a month for the markets! Looking back on the NASDAQ and SNP500, these two indexes have continued to rise, which is great for all investors as it shows faith in the market. The USA has reported that its economy grew in Q4, which was unexpected by many. This unexpected growth likely contributed to the 11% rise in NASDAQ for the month.

Looking into dividends and how they’re often overlooked and actually have a major affect investing. The stock market can be a great way to grow your wealth over time, but the market can be unpredictable and unreliable, especially when you need the money at a specific time. Dividends are payments made by a company to its shareholders from its profits. They are typically made on a regular basis, such as quarterly or annually.

Dividends provide a steady stream of income, even when the stock price is not increasing –  it’s almost like receiving a salary as an employee of a company, even though you’re just an investor and may have your own career in something completely different. Dividends can be especially important for investors who are looking for a reliable source of income. Additionally, dividends can be a sign of a company’s financial stability and strength, providing peace of mind for long-term investors. 

Another advantage of dividends is that they can be reinvested. This means that instead of receiving cash payments, investors can choose to use their dividends to purchase additional shares of stock. This can lead to compound growth over time, as the dividends earned on the additional shares are also reinvested. This can be a powerful way to grow your wealth over the long-term. Reinvestment is important because you’ll be able to gain extra dividends as you will hold more shares in the company, further adding to the future profits – it’s a win-win if you don’t need the income for something else.

In conclusion, dividends can provide a reliable source of income, be a sign of a company’s financial stability and strength, and lead to long-term growth through reinvestment. When considering investing in the stock market, don’t overlook the importance of dividends. They can make your investments more stable and secure over the long run.

Remember, it is always best to seek professional advice when starting to invest, as everyone’s needs and goals will be different. My aim is to motivate people to seek assistance and put faith in themselves to take the leap to get to their end goal. Keep in mind that this is not financial advice and it’s always a good idea to consult a professional before making any investment decisions.  

That’s all for this week. If you’re interested in these blog posts, do have a look back in a week or so as I’ll be making another blog post. I’ll be looking at “blue chip” company shares.

Ben J Kester

Managing Director of Ben J Kester Investments Limited 

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Please note that the information provided in this blog post is for general informational purposes only and is not intended as financial, legal or investment advice. The information in this blog post should not be relied upon as the sole basis for making any investment decisions. The opinions and views expressed in this blog post are those of the author at the time of writing and are subject to change at any time without notice.

It is important to seek independent financial, legal or investment advice before making any investment decisions. Investing in the stock market carries risk, and you may lose all or a part of your investment. The author and any third-party providers of information do not guarantee the accuracy, completeness, timeliness or availability of the information contained in this blog post and shall not be liable for any losses or damages of any kind arising from the use of this blog post, including but not limited to, direct, indirect, incidental, consequential or punitive damages.

This blog post is not intended to be a promotion or solicitation of any investment products or services and should not be relied upon as such. It is important to be aware of the laws and regulations related to investments in your country or jurisdiction and ensure that you comply with them. In the United Kingdom, the Financial Conduct Authority (FCA) regulates the financial markets and provides information on investments, frauds and scams. Investors are advised to visit the FCA website or seek professional advice before making any investment decisions.