There are various preferences among investors on what type of stocks they choose to invest in, and each have their pro’s and cons. Here, I will list out 5 advantages of dividend paying stocks:

Passive Income

Dividend stocks are literally passive income. You make an initial investment of stock(s), and reap in the rewards on a periodic basis. Watch those companies simply send you a cut of their profits while you sit back and relax.

Protection from market losses

One of the primary benefits of dividend paying stocks is that if you find yourself in the middle of a market correction (that is, stocks are losing value), in most cases you can still count on earning the dividends, so it is not all bad and the dividends may one day help recoup any market loss.

sense of stable income

Piggybacking on the last note, dividends are a form of somewhat stable income. If you choose your stocks wisely, such as those with a track record of sustaining and growing dividends for many consecutive years, you will maintain a sense of stable income.

You can reinvest (DRIP)

Dividend Reinvestment Plans are the icing on the cake. They really help add the compounded effect to your dividends. What I mean exactly is, say your $50 stock pays a $2 dividend. With DRIP enabled, that $2 you received will automatically be reinvested into the same stock, so instead of owning 1 share you will now own 1.04 shares, and so your next dividend payment will be more than the initial $2 dividend. The income will continue to grow as a result.

Retirement Strategy by many individuals

The great thing about dividend stocks is that many retirees opt to have them as a large portion of their portfolio to offset some risk and have a consistent income stream. For all of the reasons listed above, it certainly helps to diversify your risk and income by dedicating a part of your retirement portfolio to dividend paying stocks.