I Love Dividends -- but I Refuse to Fall Into This Trap
There's a reason so many investors are big fans of dividend stocks: When you buy shares of dividend stocks, you get two opportunities to make money.
First, you can collect your dividends and reinvest them to fuel your portfolio's growth. Secondly, as is the case with all stocks, dividend-paying stocks have the potential to gain value over time. You might buy shares at $200 a pop, and if you hold them for many years, they may be worth $400 apiece down the line.
I happen to own shares of a number of dividend-paying companies in my portfolio. Some of those are REITs, or real estate investment trusts, which are actually required to pay at least 90% of their taxable income as dividends, and, as such, commonly have higher dividend yields than your average stock.
Source Fool.com
