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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Well ignoring stock price appreciation, the difference between dividend stocks versus non-dividend stocks is that dividend.
Wouldn’t you rather be given a small amount of money on a regular basis rather than nothing?
If we don’t ignore stock price appreciation, dividend stocks should behave nearly identically IF those dividends are reinvested.
The main difference is that dividend stocks have their growth stunted by the value of their dividends (which cancels out when reinvested).
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