January 29, 2009 - California, USA.  It seems that most of the financial pages we read now a days shows a gloomy and rough forecast ahead for the next few years.  All we here is market is down, market is too volatile, companies laying off people, governments are struggling and busy in making policies to revive the market.  With all of these in our mind, somehow a questions comes into our mind on how would it take for an investor to survive through this tough times and still earn some decent returns on their portfolio?

There are two ways to earn return from the stock market.  One is Capital Gains and the other is Dividend.  Capital Gains is the difference between the Fair Market Value of the Stock less the Investment Amount.  Basically what it means is current price of the stock minus the price you paid for the stock multiplied by the number of shares you bought.  Dividends is the amount the company returns back to the shareholders of the company for each share he bought.

Now a days, most of the companies stock prices are plumetting thus making the chance of having capital gains in the stock you pick slimmer.  So with this in mind, investor's should also look at the Dividend Yields for the companies they are going to invest in.  Why look at dividends?  There are a few reasons why you should look at dividends:

(1)  GOOD COMPANIES PAY DIVIDENDS EVEN DURING TOUGH TIMES - Good and healthy companies usually maintain their dividend payout to investors on a consistent manner to encourage investors to invest in the company.  Most healthy companies do not cut dividends.  But if a good company is forced to raise capital or sees an opportunity of higher return for their shareholder's investment, they may lower their dividends but still try to maintain their dividend payout consistency. 

(2) GOOD COMPANIES PAY DIVIDENDS IN A CONSISTENT MANNER - There are some companies who payout dividends to it's shareholders in a consistent manner.  Imagine a stock that pays you 1.60 per share each quarter.  So if you purchase 100 shares of this stock you'll earn $640 each year without doing anything at all.  Now incorporate the flactuations in the stock market and you'll even earn more.  To make this more interesting there are several stocks out there that pays dividends in a MONTHLY BASIS.  Yes that is monthly basis.  That monthly return is a lot higher than what your bank currently pays you in your savings.

(3)  MOST OF THESE DIVIDEND PAYING STOCKS ARE BRICK AND MORTAR COMPANIES - Most of these stocks that pay consistent dividends have real assets and have been running for a long time.  Unlike internet companies, start up companies and IPOS these stocks owns assets like buildings and machinery to sell off if they are cash strap.  Most of these dividend paying stocks can be found in the Energy, Oil, Mining, Telecom, Real Estate, REITS, MLP's, and Transportation sectors.

Just imagine a portfolio where each stock in the portfolio pays off dividend streams in a consistent  manner on a monthly basis to you while you wait for the stock price to appreciate.  Wouldn't that be sweet!

Article Written by: alerts@imobhq.com