Buying Stable Dividend Stocks
Investing in dividend stocks has become a very popular method of investing into the stock market. One way fo going about this is to buy companies that are already well established and hold them for their dividends.
There are a lot of investors who will go out and buy MSFT just because it is a dividend paying stock which will almost certaintly be around for many decades to come. And while that might be a nice idea if you already have a lot of money and just want to put it somewhere that is paying you a no hassle income, there are better ways to grow your money.
The major problem of investing into well established companies like these is just that, they are already well established. All the major profit that was to be made in them was made 30 years ago. Microsoft and Coke are both great examples of stocks that people buy, but haven’t really done anything for a very long time, except pay dividiends that is. There are just better places to invest your money if you want it to grow.
Even with the dividends that they have paid out I doubt they have made any investor very happy lately. I doubt they have even help an investor to match the market let alone beat it. Also the dividends these big companies produce are not really anything to write home about, unless of course you are investing millions of dollars into the company.
So, what is a better way of investing for the long term? Well for long term investing the most powerful method is finding strong companies that are undervalued and likely to come up. This method is called value investors and uses things like PE Ratio and Debt to Capital Ratio to get some idea on how strong the company is.
This way you can tell how strong the company is and how fair the price of the stock is. What is the companies true value and where is the price of the stock compared to that? Knowing this can be important.
Value investing lets you grow your money in the long term, while at the same time collecting on the ever growing dividends that they produce. Value investing may take more reasearch then simply buying already well established companies, but can be much more powerful as well.
