If you’re investing for the long-term, reinvest your dividends

Julie Brownlee, Fsp Invest, 10 Mar. 2015

Tags: dividends, reinvest dividends, reinvesting dividends, why reinvest dividends, investing in dividend paying shares,

Investing over the long-term is a strategy many investors follow. It’s a way of building wealth for later in life. And it can provide a way of generating an income.

If you hold dividend paying stocks, you should consider reinvesting dividends you receive to buy more shares. This will help you to grow your investment portfolio over time.

So what are the advantages of investing in dividend paying companies? And why should you reinvest your dividends?

Read on to find out…

The benefits of investing in shares that pay dividends

The companies that pay the best and most consistent dividends tend to be older and more established than many of their stock market counterparts.

When a company pays a dividend to its shareholder, it’s sharing a portion of its profits. And if a company consistently pays dividends and raises them over time, it signals that it’s growing its profits.

Generally speaking, a company paying regular dividends is a quality business. And one that you should consider including in your investment portfolio.

Why reinvest your dividends?

If you’re growing your investment portfolio for later in life, it makes sense to reinvest your dividends if you don’t need the income.

This way you can buy more shares with your dividends, growing your shareholding. And this ultimately leads to you earning more money in dividends.

It all comes down to compounding.

For example, if you keep your interest payments in a bank savings account, you’ll earn interest on your interest income as well as your capital. This compounds your gains over time.

You wouldn’t get this effect if you withdrew your interest payments.

It works the same way with dividends. If you use your dividends to buy more shares, your investment will grow and you’ll receive more dividends.

The longer you let this process go on, the better.

So there you have it. Why you should reinvest your dividends if you’re investing for the long-term.

*********** New release ************

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Click here to find out all about these five shares set to rocket in 2015!


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