Why we like dividend stocks

There is fierce debate whenever there is a choice between two of anything (been on Facebook, lately?) and the internet is full of those who are in favor of dividends and those who say they are a drag on a stock. Most of those people choose a side based on how said dividends affect the price of the stock or value of the company's cash in its coffers. We prefer dividend stocks for a different reason, though.

We trade a stock a lot. Not a lot like day-traders who are in and out of one or more stocks in a day, but a lot like we may buy and sell stock from the same company multiple times in a year. We base these sell decisions on a few different things like ex-dividend date, overall market volatility, and whether we have another stock that is prime hunting ground for a profit. We also like to lock in 3% profit as soon as we get it, regardless of where the stock is headed. Then we find the next deal to invest in. This is where the dividends come in and how we are able to return about 3% of our money every month on average.

Dividends, to us, are an immediate profit lock-in. We spend a lot of time looking for stocks to invest in and when we do find one, we usually want to make the move by the next business day. Those dividends (especially yields over 3%) are a big deal and add an extra cushion to our 3% profit lock. Over 90% of the time, we meet our 3% profit mark, and with one or more dividend payments, we actually end up with over 3% profit without having to have much stock appreciation. This is how we are able to earn a consistent profit with every trade lasting anywhere from a week to two-or-three months.

Once we get that 3-5% profit we can then turn around and invest that appreciated money in either another stock waiting on the list, or wait for the stock we just sold to slip and then re-purchase. That is how we compound our money and see annual profit of up to 95% in a year (give or take, before extra contributions). Of course, it's been a bull market for the last few years, which makes it easier, but even in a bear or flat market, our dedication to this proven method should return us at least 8-15% in a down year (that's a WILD guess, btw).

To summarize...to us, those dividends are either a safety net in case we are on the verge of a down market or extra money that we get to take along with our profit that we lock in once the stock rises. Either way, it allows us to sleep really well at night regardless of what the market does...which is a big deal!!!

Chris grew up in the United States but felt the world calling. After working throughout his twenties climbing the executive ladder, he left the corporate world in order to have the free time needed to focus on family more than money. Since then he has never held a regular job and spends his time honing his skills to make money grow on trees.He now travels the world with his wife and two sons.

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