Dividend investing - Financial definition
Concise definition of the term dividend investing
Dividend investing is a strategy that focuses on purchasing stocks that pay regular and often increasing dividends. This approach aims to generate a steady income stream in addition to potential capital gains.
Comprehensive definition of the term dividend investing
Dividend investing involves selecting companies known for their reliability and history of paying dividends, typically large, established firms with strong cash flows. Investors favoring this strategy often look for dividend yield and growth as key indicators of a stock's attractiveness. Practical examples include investing in blue-chip companies like Coca-Cola or Procter & Gamble, which have a track record of consistent dividend payments.
This approach can offer a cushion against market volatility, provide passive income, and potentially enhance total returns through reinvested dividends. Additionally, dividend reinvestment plans (DRIPs) allow investors to automatically reinvest their dividend payments into more shares, compounding their returns over time.