What is dividend investing?

Generally, dividend investing is the practice of buying stocks that pay income to shareholders. That payment is called a dividend. By paying dividends, a company is rewarding its shareholders for holding its stock. Dividends are a sign that a company is financially healthy. As a result, dividend stocks are generally less volatile than growth stocks.

Dividend investing is a passive income generation strategy. Investors will buy and hold the stock just to continually receive dividend payments. Those payments can be reinvested in the company to purchase more shares or be collected as a cash payout, taxed as income. Typically, shareholders of dividend-paying stocks will reinvest dividends over time and switch to payouts after they’ve retired, to supplement their income. You can learn more about dividend investing here.