Dividend Growth Investing - How to Maximize Your Dividends and Minimize Portfolio Volatility

If you've been in the stock market for any length of time, you've likely noticed that the market is almost always irrationally negative. Dividend growth investing offers a different approach. It allows investors to avoid the temptation to time the market, and instead, cultivates a long-term, value-oriented mindset. Dividend growth investing can set investors up for better returns over time. Here are some ways to maximize your dividends and minimize portfolio volatility.

Investment growth

There are a number of advantages and disadvantages to investing in stocks and mutual funds that offer both dividend growth and investment gains. Dividends are a way to invest in a company, while growth investors seek higher capital appreciation. Dividends can also be used to buy additional shares or for other purposes. The key to successful investment is to know which type of stock is best suited for you. Below are a few things to consider when choosing between investment growth and dividend growth.

Dividend growth investing focuses on investing in companies that pay growing dividends. Investors who focus on dividend growth can generate a steady stream of income over time. Dividend growth investing requires a smaller list of stocks than other types of investing. This means only investing in high-quality companies with the potential to grow their dividends. Dividend growth companies are often profitable despite economic conditions, and their dividend growth over the years shows that they can generate income in any economy. Dividend growth investors also want to be able to use income from investments to cover expenses in retirement.

Dividend reinvestment

Dividend reinvestment for dividend growth can increase your investment by 640%, or more than double. That's the compounding effect at work, and it snowballs over time to generate a much higher return than your initial investment. You'll see this compounding effect in action with the chart below. The total return index, meanwhile, increases significantly faster than the original investment, even after accounting for dividend reinvestment.

If you're planning to invest your dividends for dividend growth, you can choose a plan to automate the process. The plan will automatically purchase additional shares whenever you receive a dividend payment, which may save you money on brokerage commissions and offer a discount on your stocks. Dividend reinvestment plans generally initiate purchase transactions on the market's first trading day after a dividend payment.

Monthly dividends

If you are considering switching your portfolio from regular stocks to monthly dividend growth stocks, consider this. Most stocks pay dividends quarterly, while most bonds only pay twice a year or semiannually. These payments can be sporadic and force you to budget your portfolio's inflows and outflows. This will smooth your income stream and align it more closely with your investment goals. Monthly dividend growth stocks pay a dividend once a month, so you will receive more cash each month.

Another great option for investors is a monthly dividend stock that pays a high percentage of its income. For example, STAG Industrial REIT is expected to continue its expansion, aiming to buy about $1 billion of property every year. This REIT has been steadily increasing its monthly dividend and will continue to increase it in the future. The company is also safe from the volatility of the stock market. Monthly dividend growth stocks are an excellent choice for retirement funds and investors who are unsure of the market's direction.

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