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Why dividend paying stocks are the best shares to buy

by , 22 July 2015

When deciding which stocks to buy, it's common to spend time trying to find the ones that are going to be the next big thing.

In fact, the best shares to buy are the ones that pay dividends. By investing in dividend paying stocks and reinvesting those dividends, you can boost your stock market returns.

Let's take a closer look…

Dividends boost your returns

When building a long-term portfolio of stocks, the best shares to buy are those that pay dividends. The income you receive in the form of dividends and reinvesting this income can make up nearly 90% of your returns.

This is why it’s so important to include a chunk of solid dividend paying companies in your portfolio, Keith Fitz-Gerald in Money Morning US explains. This will help to consistently grow you stock market wealth over time.

So what makes a great dividend paying company?

The best shares to buy are those that increase their dividend payments over time. These consistent, growing income producers are key to your investing success.

The best shares to buy maximise your long-term investment returns

Now the merits of investing for dividends isn’t a new investment fad. In fact, Benjamin Graham and David Dodds highlighted the benefits of dividends in 1934.

For example, take New York listed Reynolds American Inc. If you’d bought shares in this company in July 1999, you’d have seen a rise of 168% in the share price until now. Doesn’t sound that great a performance in 16 years. But if you include the returns from dividends, your returns balloon to 2,900%.

Dividends maximise your returns and you can’t ignore this. This investment strategy is for the long-term, but it will pay off if you let time work and hold the best dividend paying shares.

So there you have it. Why dividend paying stocks are the best shares to buy.

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Why dividend paying stocks are the best shares to buy
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