I’m trying to understand the benefits of dividend stocks. I usually hear they generate “passive income” but from what I can tell, the dividend you receive is a tiny fraction of what you paid for the stock itself, and would take decades to recoup what you paid for the stock. Setting aside the possibility of stock price appreciation, how is receiving a small dividend better than keeping the lump sum you would have paid for the stock to begin with. What am I missing?
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If the company increases profits, it might also rise dividends. There are even “dividend kings” that have increased the dividend payment every year for several decades. Of course this normally also means that the stock price also increased by a similar rate.
A stock with maybe 3% dividend yield from today’s price might correspond to more than 10% if you have bought the stock 10 years ago.
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