The recent selloff in the markets has given discerning value investors the opportunity to scoop up great dividend stocks at amazing prices. Many long-time dividend paying companies (Dividend Aristocrats, for example) have steadily increased their dividends for decades. These companies have stable businesses that are able to generate stable earnings streams in industries with high barriers to entry (imagine another Proctor & Gamble getting started these days). Buy owning these stocks, you’re able to own a piece of that stable income stream forever, which is increasingly valuable in markets like these.

Stable dividend payments are only one part of the equation, however. There are two other huge benefits to owning stocks that increase their dividends over time. The first is the ability to systematically reinvest those dividends into the stock. The second is the fact that the yield of your initial investment rises over time. Consider the case of Johnson & Johnson – a veritable dividend powerhouse of the last several decades. 100 shares of JNJ 20 years ago would’ve cost about $6,750. By reinvesting those dividends back into the stock, you’d have over 1200 shares today worth over $68,000 (10x your original investment) and paying over $2,500 in dividends a year – almost 40% yield on your original investment. When you consider how powerful this compounding effect can be over several years, the implications for a retirement portfolio are huge.

This is why dividend investing is simply the best way to build long-term wealth AND passive cashflow.

Given a little bit of research and some patience, a prudent dividend investor will be able to create massive wealth by exploiting these two properties of dividend stocks. Furthermore, consider the alternative method for earning passive income – bonds. A bond’s coupon never goes up. So by spending your hard-earned dollars on an investment with a fixed payment, especially in a low-rate environment like this, you’re locking in the maximum yield you can earn and exposing yourself to rising interest rates and the ravages of inflation.

The best part about dividend investing is that this isn’t a complicated strategy. It may not be “easy” since it does require discipline – but it’s certainly not complicated. In fact, a very simple way to get started is with Dividend Reinvestment Plans which are offered directly by the company as a service to investors. These plans allow you to purchase shares of stock directly from the company (sometimes at a discount) and the dividends are automatically reinvested into more shares of stock.

This is a great way to “set it and forget it” while you let the checks build up. As far as which dividend stocks to invest in? I always recommend starting with the Dividend Aristocrats list which is a list of those S&P companies that have raised their dividend every year for the last 25 years. Many of these companies are household names like Pepsi, Coke, Johnson & Johnson, Procter & Gamble, etc. When you consider the example of the power of reinvesting dividends that increase over time (given above) it’s easy to see how this strategy can build real wealth over time with the safety of investing in solid franchises. You don\’t have to risk your nest-egg on the next Google to get rich. Boring companies will do it for you and with a lot more sleep at night.

www.dividendinvesting101.com is dedicated to uncovering the best high yield stocks for building wealth. We have tons of free information on all the top dividend paying stocks and which ones are a good buy now.

http://www.dividendinvesting101.com is dedicated to uncovering the best high yield stocks for building wealth. We have tons of free information on all the top dividend paying stocks and which ones are a good buy now.

Author Bio: www.dividendinvesting101.com is dedicated to uncovering the best high yield stocks for building wealth. We have tons of free information on all the top dividend paying stocks and which ones are a good buy now.

Category: Finances
Keywords: top dividend paying stocks, best dividend paying stocks, dividend aristocrats