- Dividend stocks are considered staples in every investor’s bucket.
- Apart from ensuring a steady income stream, dividends can be reinvested, thereby helping to multiply one's investment portfolio.
- However, sometimes, these dividend-paying stocks might have a downside too.
Dividend stocks are considered the holy grail for all income-seeking investors around the world. They play a significant role in any portfolio as they guarantee a reliable and steady flow of income stream.
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The importance of dividend stocks can never be underestimated, for they not only indicate the fundamental well-being and prospects of a company but also help in reducing the overall portfolio risks, preserve the purchasing power of capital, as well as provide tax benefits to the investors.
Why does dividend stocks matter to investors?
Dividend-paying stocks are beneficial to investors as they prove to be a useful investment strategy to address the ill effects of inflation and stock market volatility.
They are the star attraction of any stock market and offer many advantages to investors.
- Provides reliable income source
The prime reason why these dividend stocks are welcomed by every investor is that they offer reliable and stable income flow without doing many alterations to one's portfolio. As one retires, a steady income flow becomes necessary.
- Helps in increasing wealth
To build one’s wealth is considered the prime objective of any trader who deals in stocks. Dividend stocks greatly help in this regard. Dividends earned through investments can further be reinvested to purchase more shares, thereby increasing one's portfolio.
- Cushion in times of market instability
Dividend income greatly helps in reducing the losses incurred due to stock price decrease, thereby providing a safety net during a turbulent market. Reports suggest that during bear market period, dividend-paying stocks generally outperform the non-dividend-paying stocks.
- Offers sustained growth opportunity
Usually, well-established companies are consistent with their dividend policies and declare dividends accordingly. Even during times of uncertainty, such companies do not falter in their dividend payment, though they may reduce the dividend amount.
Lastly, there are numerous tax benefits associated with dividend earnings as compared to the incomes derived from other investment.
Generally, regarded as a safe investment option during choppy markets, dividend stocks, however, are not always a safe bet for the investors and not always make one rich for reasons mentioned below:
- Since dividend stocks are usually offered by large companies and industry gainers, these securities come with high-price value, which may sometimes be out of the reach of a common man.
- Companies may curtail or stop paying dividends in case of any unforeseen natural calamity or an event. Hence, investors must be doubly cautious and vigilant while investing in such stocks.
- The share price of a company may experience a drop irrespective of whether it pays dividend or not.
Are dividend stocks dependable?
After analysing the pros and cons of dividend stocks, one can conclude that these income boosters are a staple for a balanced investment portfolio. They are dependable and provide sustainability even during volatile market trends and usually ensure a steady income for the investors.
A look at the NZX-listed dividend-paying stocks
As New Zealand's economy is on the road to a revival since its successful stemming of the monster virus within its shores, the stock market is brimming with confidence. Many companies are rewarding their investors for standing with them during uncertain times by way of dividends.
Let us quickly have a look at them.
Fisher & Paykel Healthcare Corporation Limited (NZX:FPH)
The world-famous healthcare company, Fisher & Paykel Healthcare Corporation Limited, is renowned for its respiratory care products. Driven by unprecedented revenue growth of NZ$1.5 billion in its hospital product group in FY21, the Company has announced a final dividend of 22.0 cps for its shareholders. The same will be paid during this month.
On 2 July, at the time of writing, Fisher & Paykel Healthcare Corporation dipped by NZ$0.03, and was trading at NZ$30.700.
Mainfreight Limited (NZX:MFT)
Mainfreight Limited is one of the largest logistics and transport-based companies operating in New Zealand. Even during the tumultuous year, the Company navigated successfully and recorded a PBT of NZ$262.41 million. It will pay a dividend of 45.0 cps on 16 July to its investors.
The shares of Mainfreight declined by 0.01%, and were trading at NZ$76.980, at the time of writing on 1 July.
Scales Corporation Limited (NZX:SCL)
Scales Corporation Limited is a provider of essential services to the country’s primary sector. Its reported NPAT stood at $26.6 million for FY2020, mainly on accounts of its diversified business strategy. The Company has declared a final dividend of 9.5 cps to be distributed on 9 July, thus, bringing the total dividend declared during the year to 19.0 cps.
On 2 July, at the time of writing, Scales Corporation rose by 0.64%, and was trading at NZ$4.72.
Ryman Healthcare Limited (NZX:RYM)
One of the leading operators of rest homes across New Zealand is Ryman Healthcare Limited. Underpinned by record new sales and resales during the final quarter, the Company posted an underlying profit of NZ$224.4 million for FY21. It rewarded its shareholders by paying a final dividend of 13.6 cps in June this year, thus taking the full-year dividend to 22.4 cps.
Ryman Healthcare rose by 1.04%, and was trading at NZ$13.580, at the time of writing on 2 July.
Turners Automotive Group Limited (NZX:TRA)
Turners Automotive Group Limited provides automotive retail, finance, as well as insurance. With solid growth across all its business segments, including a rigorous cost management approach, the Group’s NPAT clocked NZ$26.9 million for FY21. It has announced a dividend of 6.0 cps, payable on 28 July, thereby reporting 20.0 cps as the total FY21 dividend.
At the time of writing on 2 July, Turners Automotive Group was trading flat at NZ$4.51.