4 Reasons to Avoid Dividend-Paying Stocks
Dividend stocks are probably an important piece of your investment portfolio, but they might not be the best asset for your goals. Every different type of security has features that make them great tools for specific purposes, but no single investment is perfect for every circumstance. Consider these characteristics of dividend stocks that can make other assets more suitable for certain roles in an investment plan.
Dividend stocks are popular because they can provide balanced returns from both price appreciation and cash distributions to shareholders. That balance is attractive to many investors, but it also means that dividend stocks aren't optimized for high growth.
Businesses usually need to deploy cash to achieve high growth rates. To push sales higher, they need to make key hires, develop product enhancements, and maintain a rising marketing budget. As a result, high-growth companies typically don't have excess cash to distribute to shareholders as dividends. Instead, they reinvest cash flows for expansion.
Source Fool.com
