Is investing in stocks with quarterly or monthly dividends a good strategy for saving for retirement?

I recently heard about buying into stocks that pay out per quarter, or monthly, based on the number of shares you own. I've also heard that these payouts, or dividends, can help in the long run even when it's a small investment. I'm 25 and thinking about saving for retirement. 

Retirement, Investing, Stocks
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February 2018

It's awesome that you're doing your own investing, and getting started at the age of 25.  Stocks that pay out (usually quarterly) dividends tend to have nice cash flow, which typically indicates sounds financial footing.  Beware a trap here though.  There are some companies that pay very high dividends, because of the structure of those companies.  Companies like Blackstone (Ticker: BX), Digital Realty (Ticker: DLR) are companies that pay very nice dividends, but companies in their sectors usually pay high dividends.  I actually like both of these companies, but the more important thing to consider is do these companies have staying power?  Are they leaders in their industry or do they have some form of competitive advantage over their peers?  Take Amazon as an example.  Amazon has an amazing knack for disrupting industries yet they pay no dividend (really because they don't have high profit margins and they keep reinvesting it back in the business).  Illumina (Ticker: ILMN) has done great work in mapping the human genone in the healthcare space.  Tesla (Ticker: TSLA), despite its product problems, has the opportunity to disrupt not just the automotive industry but also the solar power industry.  There is much more to picking a strong company than picking a company with a dividend.  Often times a strong company will pay you a dividend, but paying a dividend is not necessarily indicative of staying power.  In addition, in a bear market many companies will lower or shut off their dividend.  Prior to making a purchase I would go to a website like SeekingAlpha.com and seeing what others say about that stock.  Investopedia also has a great tool where you can invest in companies without using real money.  It's a great way to cut your teeth without losing real money until you figure out your routine.

Since you are just getting started I would suggest picking a few that you really like and then blending it with passive ETF.  The diversification from the ETF will help control the risk of being overly concentrated in a few individual positions.  

February 2018
February 2018
February 2018
February 2018