Why dividends are so interesting

In good and healthy companies, dividends are paid out repeatedly and regularly. Depending on the size of your portfolio, this can make the cash register ring. With useful tools like DivvyDiary, dividends can be planned very well in advance. So you can also see in detail how the dividends of individual companies have developed over time and hopefully increased. By regularly increasing the dividends, the own cash flow also increases, even if no further investments were made in the portfolio.

If the payout ratio is not too high, good companies will pay dividends even if the economy as a whole is not doing so well. Here then the time plays a very large role. the longer I own such a share, the larger also the dividends received. This is due to the dividend growth and in addition, especially in the first few years, the dividends received are reinvested again and again.

It is very motivating when the dividends keep increasing. If you’re smart about it, in 10 or 20 years you may be able to convert your full-time job into a part-time position. The dividends will then replenish the money. Or really think long-term in the direction of retirement. If you keep it up for 30 or 40 years and reinvest all dividends directly, you will have a very good monthly additional income when you retire.

However, dividend hunters should avoid one mistake in any case. In the case of dividend stocks, do not use the dividend yield as the only factor for buying a stock. Always look to see whether the company is really economically sound and can finance the dividends from current profits without any problems. A high dividend yield can therefore be an alarm signal (but does not have to be – see REITs and BDCs). So always take a close look at the company in question and then possibly buy shares in it.