1. Regular Income
• Dividends provide predictable cash flow, which can supplement salary or retirement income.
• Useful for income-focused investors, such as retirees.
2. Compounding Power
• Reinvesting dividends (via DRIP: Dividend Reinvestment Plans) lets you buy more shares, increasing your total return through compounding over time.
3. Stability and Lower Volatility
• Dividend-paying companies are often established, profitable, and financially stable.
• Their stocks tend to be less volatile than non-dividend growth stocks.
4. Hedge Against Inflation
• Dividends can grow over time, especially from companies with a track record of increasing payouts (like Dividend Aristocrats).
• This helps preserve purchasing power over the years.
5. Total Return Boost
• Even if stock price growth is slow, dividends contribute significantly to total return.
• Over decades, dividends can account for a large portion of equity market gains.
6. Tax Efficiency.(Singapore )
Dividend in Singapore is tax free.
7. Market Discipline
• Companies that pay regular dividends are often disciplined with cash and less likely to make risky investments.
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Example:
If you invest in a company like OCBC or Johnson & Johnson, you may get 3–5% dividend yield annually plus potential stock price appreciation, making for a powerful long-term strategy.
Modify on 2025-05-02 02:48
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