Recession Proof Your Portfolio
Safeguard Your Investment Portfolio Against a Recession by Investing in Dividend Stocks
When the economy is in a bad situation, it's easy to get caught up in the anxiety and start dumping your stocks like they're sushi from the week before. But before you panic and click "sell," there's something you should know: dividend stocks are like the "little engine that could" because they keep on ticking along.
You have to recognize that businesses that send out dividends have historically been operating for some time, and they typically have a steady source of revenue. It's not enough for them to keep stock prices high to keep investors happy; they also throw in some cash to make the deal more enticing. As the economy tanks, companies like PG, KO, and MCD still make money, so they can continue to pay dividends to their investors.
Now, I know what you're thinking — "What about corporations who slash their dividend payouts during a recession?"
You make a reasonable point, and in reality, we have lately experienced this conduct from firms such as VFC and INTC.
But let me ask you this: in the midst of a recession, would you rather take a chance on a firm that has never paid a dividend and probably won't start now, or would you rather invest in a company that has a history of paying (and growing) dividends and has a likelihood of continuing to do so? Let me ask you again: would you rather invest in a firm that has a history of paying (and rising) dividends and has a likelihood of continuing to do so?
During a recession, investing in dividend stocks isn't only about earning that sweet, sweet dividend income. Further advantages can be found. Having some degree of constancy in your portfolio is particularly vital in times when everything else seems to be going nuts. Although it's possible that your stock price will drop, at least you'll be able to rest easy knowing that you'll continue to be reimbursed for your labor.
On the other side, certain dividend stocks, such as the ones that are highlighted in this article, have the ability to beat the market and rise even as the market is undergoing a slump. Dividend income is the only source of stability that wise investors can rely on to protect their portfolios when things become chaotic on Wall Street.