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5 Biggest LIES in Dividend Investing For Passive Income (EXPOSED)

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5 Biggest LIES in Dividend Investing For Passive Income (EXPOSED)

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Dividend investing for Passive Income - New investors often learn that dividend stocks are a wise option. Generally looked at as a safer option than growth stocks. Yet, dividend stocks aren't always the safe options we've been led to believe. Like all investments, dividend stocks carry some risk and there are some misconceptions when it comes to dividend stocks, which led me to talk about this topic and hopefully help anyone out there avoid some of these pitfalls and accelerate your growth. Understanding them should help identify which dividend stocks you should consider. The 5 biggest lies in dividend investing for passive income.

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1. High Yield is King

The biggest misconception of dividend stocks is that a high yield is always a good thing. Many dividend investors simply choose a collection of the highest dividend-paying stock and hope for the best. And this would be mistake for many reasons. Remember, a dividend is a percentage of a business’s profits that it is paying to its owners (shareholders) in the form of cash also quoted as its payout ratio. Any money that is paid out in a dividend is not reinvested in the business. If a business is paying shareholders too high a percentage of its profits, it may be a sign that management prefers not to reinvest in the company given the lack of upside.

2. Dividend Stocks are a safe investment

Dividend stocks are known for being safe, reliable investments, and this is why am a huge advocate for investing in dividends and hedging against inflation. The dividend aristocrats and dividend kings are companies that have increased their dividend annually over the past 25 to 50 years and more. However, and this is the misconception. Just because a company is producing dividends does not always make it a safe investment. For a moment, those dividend yields looked tempting....

3. Dividend will not even keep up with inflation

Some companies’ dividend increases do in fact fail to keep pace with inflation. Your goal as a dividend investor is to ensure that the dividend payments from companies you invest in at least keep up with inflation and hopefully exceed the inflation rate...

4. You can get better returns with growth stocks

Although growth stocks may offer more in terms of share price appreciation, dividend stocks can combine both share appreciation, dividend increase plus, more share purchases to compound and create a snowball effect. So Dividend stocks can see returns in a few ways...

5. Dividend investing is for old people

Dividend investing is admittedly attractive for seniors, whose goals are typically capital preservation and income. But the truth is Younger investors, have time on their side and can benefit from growing a massive dividend portfolio, the benefits of compound effect, dividend increases and capital appreciation as the company goes up in value. So start now and make consistent deposits throughout your life, regardless of the amount and reinvest your dividends to acquire more shares.

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DISCLAIMER: Ron Lennox is not licensed financial planners, financial advisors, stockbrokers, investment brokers, or investment advisors. Before making any trades or financial decisions, check with a financial planner, investment advisor, tax advisor, or anyone else that controls your finances to make sure if its right for you. The information provided on this site should not be construed as individual investment advice.

AFFILIATE DISCLOSURE: I only recommend products and services I honestly believe in and use myself. Some of the links on this webpage are affiliate links, meaning, at no additional cost to you, I may earn a commission if you click through and make a purchase and/or subscribe. Commissions earned will be used towards growing this channel.

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