I Heart Dividends

As I get closer to getting ready to stop reinvesting my monthly dividends and actually living off of the dividends (June or July), I figure now’s as good a time as any to talk about how awesome dividends are for an early or regular retiree.  So here goes:


  • Monthly Cash Flow For Me

Pretty self explanatory.  I have several individual stocks that I’m invested in, paying me a quarterly dividend.  It just so happens that every month of the year, I have cash flow coming in from dividends to pay the bills. If you can have more dividends coming in each month than you are spending, I think that is like hitting financial nirvana.

  • Inflation Hedge

While certainly no guarantee of a dividend cut ever taking place, dividend paying companies with a long streak of increasing dividends is a pretty good indicator of future increases.  As your cost of living goes up, your income from dividend growth stocks goes up as well.

  • Not forced to sell your stocks

Going back to the first bullet point, having enough dividend income flowing in each month, you are not forced to sell your stock holding to raise cash to cover living expenses.  This helps from selling during a down market and missing out on a rebound in the stock price.  With companies that don’t pay a dividend, you may be forced to sell the stock to raise cash at a time the market is down.

  • Appreciation

Despite what the text books say, you are not forgoing appreciation in stock price by investing in dividend stocks.  I have already talked about this before right here.

  • Taxes

Qualified dividends, under current tax laws, are taxed at 15% (potentially lower depending on your tax bracket).  Ordinary income tax brackets for earned income (you have to show up to a job) are generally going to be higher for most normal folks.

  • Yield

Compared to interest rates on savings and non-junk rated bonds, yields on some quality stocks are still attractive.


There you have it a few reasons I love dividends.  For anyone reading this that is not a retiree, I would add dividend reinvestment to this list.  Every dividend reinvested, purchases you additional future dividend income.  Over time, it just starts to get ridiculous to see how those small reinvestments build over time.

Sound off below, do you love or hate dividends? Why?


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