17 April 2011

Dividend - another sources of passive income

Dividend in long run is proven to be a reliable source of passive income to the investors regardless of the business cycle.

History shows that dividend represents part of total equity return. For example, if your stock return is 10% and your dividend yield is 5%, you will get a total of 15% returns as compared to those without dividend return.

Dividends are far less volatile than earnings. Some companies do distribute dividend during the recession period. As a result of it, it can stands as a protection of the fund price. If the price drops further, the dividend yield will be higher.

When a company increases its dividend, it becomes more attractive to investors and the stock price generally tends to increase, providing investors with a two-fold benefit. Always remember, a bird in hand is better than two in the bush.

To start an investment for this, you can try to select high yield stocks or real estate investment trusts (REITs) which provides good dividend returns. With that, you can sleep with less worry about the stock price movement everyday.

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