Reason #1: Dividends add substantially to your stock returns
The huge returns (and low dividends) of the late 1990s and early 2000s were an aberration.
Over the long-term, dividends have accounted for a full one-third of total returns from the stock market, based on the S&P 500.
In ten years, a 7% dividend will more than double your money.
Moreover, dividends are based on current stock prices - not what you originally paid for the stock. So if your shares double in value and you get a 7% dividend, you are effectively getting a 14% return year after year.
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Reason #2: You get much higher returns than you can from a bank
Even with recent increases in interest rates, most banks are still paying a paltry 2 or 3% in interest on savings accounts and CDs. That's far less than you can get from the dividends of many stocks.
What's worse, to get even these small bank returns, you have to tie up your money for 12 to 24 months or longer. If you want your funds back sooner, you have to pay substantial early-withdrawal penalties.
In contrast, dividend stocks require no long-term commitment and you can sell your shares at any time.
Reason #3: Dividends are tax-advantaged investments
As mentioned above, you now pay a maximum of 15% federal tax on dividends, compared to as much as 35% on bank interest and other income. That makes dividends even more lucrative.
Reason #4: Real estate has become extremely risky
For the past 15 years, real estate has been an excellent alternative to investing in stocks - particularly in major metropolitan areas, where home prices have recently been increasing by 15 to 20+% a year.
But that's about to change. As we have stressed in FIR, there is growing evidence that the U.S. real estate market is now at or near a 10-year peak and will likely go down from here.
Reason #5: You can get both high dividends and high appreciation
As you will see from our dividend stock picks included in this report, there are many safe stocks that now pay you 3 to 10% annual dividends year after year - on top of 30 to 70+% annual appreciation in share value.
All of these benefits make dividend stocks well worth considering.
Editor's note:
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