Good to Know

Dividends Are Your Friend

Apple;s share price dropped from $110.38 to $105.26 in 2015. That’s an 11% decline, but investors who owned the stock all year lost just 3%. Why? Because Apple paid out $2.03 in dividends over the course of the year.

Dividend-paying stocks aren’t immune from declines, but they do offer a degree of insulation that others don’t. A word of warning though – rich dividends that look too good to last often don’t. Just ask owners of Kinder Morgan , which slashed its quarterly payout by 75% in December.

Shark Tank investor Kevin O’Leary is fond of a statistic that shows the bulk of the S&P 500’s returns over the years have come from dividends, not price appreciation. That’s why he says he’ll never own a stock that doesn’t pay at least some of its profits out to shareholders.

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