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Dividends are powerful.
Especially as a source of passive income.
I want to clear up some common dividend misconceptions.
Here are the top 3 MYTHS of dividend investing.
- A THREAD -
Especially as a source of passive income.
I want to clear up some common dividend misconceptions.
Here are the top 3 MYTHS of dividend investing.
- A THREAD -
1.
“Dividend stocks are always safe”
Investing your money is risky, no matter what your strategy is.
- Options trader
- Index fund investor
- Growth investor
- Value investor
- Dividend investor
Or all of the above.
You’re still exposed to risk.
“Dividend stocks are always safe”
Investing your money is risky, no matter what your strategy is.
- Options trader
- Index fund investor
- Growth investor
- Value investor
- Dividend investor
Or all of the above.
You’re still exposed to risk.
However, it is true that dividend-paying stocks tend to be “safer” than some other alternatives.
Why?
Because companies that pay dividends are typically in mature industries.
Companies like:
- Johnson & Johnson
- AT&T
- 3M
- And many Financial Institutions
Why?
Because companies that pay dividends are typically in mature industries.
Companies like:
- Johnson & Johnson
- AT&T
- 3M
- And many Financial Institutions
Think of it as a life cycle.
Companies start off in “Infancy” just like people…
Where they’re probably spending more than they’re earning.
They’re trying to grow but need an influx of cash to make that happen.
Companies start off in “Infancy” just like people…
Where they’re probably spending more than they’re earning.
They’re trying to grow but need an influx of cash to make that happen.
Then they move to “Childhood”…
Where revenues start to increase.
But the risk factor remains high, as children are still prone to mistakes.
Then comes the “Teenage” phase….
Where they’re making some profits, fairly independent but still have tons of growth potential.
Where revenues start to increase.
But the risk factor remains high, as children are still prone to mistakes.
Then comes the “Teenage” phase….
Where they’re making some profits, fairly independent but still have tons of growth potential.
We then move into the “Adulthood” phase…
This is where we find mature companies.
Most of their growing is already done.
They’ve been profiting for years.
And they’ve accumulated tons of experience and are less “risky” because they understand the ins and outs of risk/reward.
This is where we find mature companies.
Most of their growing is already done.
They’ve been profiting for years.
And they’ve accumulated tons of experience and are less “risky” because they understand the ins and outs of risk/reward.
Strong dividend-paying companies are commonly found in the “Adulthood” phase.
Growth is slower.
But they have excess money to pay out to shareholders.
They aren’t always safe.
Nothing in the market is.
But they are safer than many other alternatives.
Growth is slower.
But they have excess money to pay out to shareholders.
They aren’t always safe.
Nothing in the market is.
But they are safer than many other alternatives.
2.
“Dividend Investing is only for those who are retired”
This couldn’t be more wrong.
Sure, when you’re retired many people tend to buy more dividend stocks.
Because they’ve accumulated such a large sum of money and want to live off their dividend payments…
“Dividend Investing is only for those who are retired”
This couldn’t be more wrong.
Sure, when you’re retired many people tend to buy more dividend stocks.
Because they’ve accumulated such a large sum of money and want to live off their dividend payments…
But just imagine if you hadn’t waited until retirement.
If you started early and compounded your earnings.
The competitive advantage of dividend investing is TIME
If you have it, use it to your advantage.
If you started early and compounded your earnings.
The competitive advantage of dividend investing is TIME
If you have it, use it to your advantage.
3.
“Companies must maintain a stable dividend payout”
This is just simply not true.
Dividend-paying companies try to maintain their dividend as much as possible.
Because a cut reflects poorly on the company itself, as well as the share price.
“Companies must maintain a stable dividend payout”
This is just simply not true.
Dividend-paying companies try to maintain their dividend as much as possible.
Because a cut reflects poorly on the company itself, as well as the share price.
This is why companies protect themselves by using:
- A residual method
Where dividends are paid out only if the company meets the capital requirements of its internal projects.
This can create fluctuations in dividend payouts if benchmarks aren’t met.
- A residual method
Where dividends are paid out only if the company meets the capital requirements of its internal projects.
This can create fluctuations in dividend payouts if benchmarks aren’t met.
They also use:
- A stability method
Where the company sets the dividend at a specific number.
Which gives investors more certainty over their earnings and the amount it will be.

Finally…
- A stability method
Where the company sets the dividend at a specific number.
Which gives investors more certainty over their earnings and the amount it will be.

Finally…
Companies can utilize both.
This is called:
- A hybrid method
Which is (in my opinion) the most effective way to keep shareholders confident and satisfied.
This is called:
- A hybrid method
Which is (in my opinion) the most effective way to keep shareholders confident and satisfied.
Now that you know about 3 major myths of dividend investing.
You can’t be fooled.
So go out and earn some dividends!
And if you’re looking for a place to start.
I got you covered…
You can’t be fooled.
So go out and earn some dividends!
And if you’re looking for a place to start.
I got you covered…
Everything about:
- Dividends
- Company analysis
- Effective compounding
- The Cycle of Wealth
- What NOT to do in the market
Is included in my course below
Start your journey here: https://bit.ly/dividendmoney
- Dividends
- Company analysis
- Effective compounding
- The Cycle of Wealth
- What NOT to do in the market
Is included in my course below
Start your journey here: https://bit.ly/dividendmoney
