Stock investors usually have this dilemma, to choose between dividends stocks or non-dividend stocks. Dividend stocks allow the investor to both own some percentage of the business and the profit earned. On the other hand, dividend stocks only give the investor cash if they successfully sell their stock. For that reason alone, dividend stocks are better than non-dividend stocks.
Here are the more reasons why dividend stocks are better than non-dividend stocks.
Dividend stock support the stock in a market crash
During a major drop in the stock market, dividend stock has the ability to hold stronger than the non-dividend paying stock. You have to remember, that even during a market drop dividend stock still gives cash for its shareholders, only in the lesser amount.
During that time, investors are panicking. Overnight, the market has been collapsed by 50%. But since dividend stocks still pay their shareholders, there is a chance for those investors with spare cash to get attracted to it.
By that, the new investor help to put a floor under the shares price and stabilize the price.
Dividend stocks have more discipline management
When a company sends a portion of its money to the shareholders, of course, it wants to generate much more money for their business expansion. If this company have two potential acquisition, it will choose the more lucrative option.
The management cannot screw up what they do not control. Therefore, dividend imposes discipline.
Dividend stock company will not lie
There are ways for a company to make fake assumptions and estimations in its income statement. They can make their profit to appear higher than what they actually earn.
But, with dividends, the company cannot lie. They cannot fake liquid cash. You will know if there is a decrease in the company earning if you use dividends. You can tell their earnings from the amount of dividend payment you get.
