Secure a Steady Stream of Income with Dividend Stocks - dummies

Secure a Steady Stream of Income with Dividend Stocks

By Lawrence Carrel

Investors often talk about the beauty of passive income. Instead of having to work to earn a buck, you put your money to work for you. Dividend stocks enable this dream to come true. You buy shares, and as long as the company is profitable and paying dividends, you have a steady source of income without having to lift a finger.

With most other investments, you don’t realize a profit until you sell. Before you tell a broker to sell, any profit is a paper profit — you can see it on a statement, but you can’t spend it or stick it in your piggy bank. If your investment drops in value, that profit can go “poof!” Just ask anyone who held shares of Enron before news of its scandal broke.

Dividend stocks are different. Companies pay out the dividends in cold, hard cash. These aren’t paper profits that can disappear in a bear market. Dividends are money in your pocket, and after they’re paid they can’t be taken from you.

Companies typically pay dividends on a regular basis — usually every fiscal quarter (three months).