When I talk about Dividend Investing, people think that getting dividends means we are getting free money from the stocks. But that is not true. Dividend seems to be free money because they give the impression that you are getting something extra from the stocks/fund. In simple terms, dividends are the returns being given to you. For example, a stock which is not give dividends might give more returns than the stocks that give dividends.
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Companies pass on the profit as a dividend, but those companies that reinvest the profit to increase the business might give more returns in the future, as the profit is being reinvested. So the dividend investment in some way is good, but it doesn't mean that you are getting good returns from that stock. Dividend investing is a way of getting passive income from your investment. Whereas if you are investing for growth and creating wealth for the future, then investing a minimum amount in the dividend-paying stock is a better option.
I invest in both growth stocks as well as dividend stock. Dividend stock is actually those stocks which don't move much, just like ITC, but it gives a healthy dividend, which gives balance to my portfolio. Whereas the growth stocks give good returns to me, and thus at the end of the day, these two types of stocks create that balance in my portfolio. And that's why you should know why you are investing in which type of stock.
If you are looking for growth stock, invest in only growth stock, whereas if you are looking for dividend investing, invest in dividend-paying stock. I am not saying you shouldn't invest in dividend stocks, you should invest. But it comes with a cost. If you are thinking of growth + dividend in one stock, then it's not there. So invest accordingly.
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Mostly PSU stocks give healthy dividends compared to other sector stocks.
I see dividends as a sign of stability, that the company is doing good, although they dont have any immediate expansion on the plate.
But judging a company solely based on the dividends can be disastrous.
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