For investors, it pays to own lots of different types of stocks depending on the environment, but Warren Buffett holds a special place in his portfolio for the ones that regularly pay him.
Dividend stocks are investments that regularly return a portion of their earnings to shareholders. In this sense, dividend-paying stocks can be similar to bonds, yet have the potential for much higher returns. For novice investors who aren’t working with a $100 billion fortune to invest, dividend-paying stocks can be a great option, especially during a volatile stretch for the markets. “A diversified portfolio of dividend-growing stocks provides income in the form of dividends that should grow over time to offset the impact of inflation,” explained Ford Donohue, a financial advisor at Homrich Berg. “We also believe that consistent dividend growth is a sign of a sound business model, balance sheet strength, and strong corporate governance, all of which should lead to the growth of the underlying business over time and increase the chances of capital appreciation of a stock,” he added.
