In contrast to the savings account interest rates, the dividend rate on the S & P 500 currently is 1.95%. So that same $20,000 investment would pay you $390 per year in dividend income. Plus, the vast majority of that income is from qualified dividends. That means you enjoy the favorable dividend tax rate.
Historically, dividend-paying stocks have outperformed the market as a whole. That is simply because, in addition to the growth of the stock itself, you get the added benefit of dividends. When you combine these two, you can achieve higher than average growth.
When you invest in dividend-paying stocks, you earn income every time the stock pays you a dividend. In most cases, this means you get paid four times a year. That is money you make no matter what you are doing.
Dividend stocks are less volatile than stocks that don’t pay or grow their dividends.There are two reasons for this.1. Dividend-paying stocks tend to be larger, more mature companies.2. Investors in stocks that pay dividends tend to be ‘buy and hold’ investors.