Why You Should Invest in Dividend-Paying Stocks
They offer some stability and income for today's volatile and low-rate environment.

In today's environment, investors searching for higher yields in the market may also encounter a greater deal of volatility. Like many investments, low-risk bonds often bring low returns, and this dilemma will only increase as interest rates continue to rise.
With so much uncertainty out there, one option is to turn to well-established stocks that, over time, have traditionally paid dividends to their shareholders. Granted, these usually aren't the up-and-coming investment opportunities television personalities talk about on financial and business networks. But even if they don't generate a lot of buzz, established dividend-paying stocks have an appeal for several reasons.
There's no guarantee a stock will perform as well as it did in the past, but mainstays that have kept a steady presence in the market for decades may be less susceptible to volatility than fast-rising stocks associated with a startup.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Investors choosing the dividend-paying stock route can also choose to back companies that are based in the United States, but do business in several other nations, giving them global exposure. For example, people drink Coca-Cola (symbol KO) in America of course—but they also drink it around the globe in Albania, Algeria, Angola, Antigua, Argentina, Armenia, Australia, Austria and scores of other nations. Investors take note. Companies with a worldwide presence aren't as severely impacted when a single nation enters a recession or faces a more severe economic downturn.
Even when the market is down as a whole, investors are typically less likely to sell dividend-paying stocks because, in the long run, they are more likely to bounce back and continue generating income. With so many investors holding on to big-name stocks, such as Coca-Cola or McDonald's (MCD), the total return of that holding is boosted as well.
Since so many investors count on receiving dividends from these types of stocks, the companies that offer them are, more often than not, pretty conservative when it comes to how they conduct their operations. Because they pay dividends to expectant shareholders, these companies may be more diligent with their investments, business decisions, asset management and the creation and marketing of their various products.
Established companies are far more likely to offer dividend-paying stocks. They don't have to consistently re-invest their profits into their company the way non-established companies do. This makes traditional dividend-paying stocks appealing for investors of all ages, especially for those nearing retirement age. Even younger investors, who may take on more explosive, high-paying stocks because they have more time to recover from losses, could benefit by investing in established companies.
Established, dividend-paying stocks can often lead to tax benefits as well. Investors with a dividend-stock strategy may find that nonqualified brokerage accounts can be more tax effective than qualified accounts. Investors will still pay taxes on the dividends, of course, but nonqualified accounts are taxed at a more favorable capital gains rate.
Dividend-paying stocks remain an excellent and reliable investment opportunity that consistently offer yield. They're a stable option for investors in an increasingly volatile market and usually prove to be strong long-term investments. Incorporating these stocks should be part of most investors' wealth management plans.
Tony Zabiegala helped found Strategic Wealth Partners and serves as vice president. He is an Investment Adviser Representative and licensed insurance professional. He lives in North Royalton, Ohio, with his wife, Melissa.
Kevin Derby contributed to this article.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Tony Zabiegala helped found Strategic Wealth Partners and serves as vice president. He is an Investment Adviser Representative and licensed insurance professional. He believes in providing clients with the highest level of proactive wealth management guidance possible. Zabiegala spends most of his days developing innovative long-term financial strategies, one client at a time. He holds a B.S. in Civil Engineering from Cleveland State University.
-
What About Those ‘Guaranteed’ Life Insurance Ads?
Guaranteed life insurance policies can sound tempting if you've been declined for insurance elsewhere. Here are four downsides and one alternative.
-
13 Answers to Pressing Social Security Questions
From smart claiming strategies for couples to tips on maximizing your monthly check, we have advice that can help you.
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the Fairway
Think of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty Moves
If you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.
-
You Were Planning to Retire This Year: Should You Go Ahead?
If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get It
The Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning Playbook
Consider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Your Home + Your IRA = Your Long-Term Care Solution
If you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a Recession
Recessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
-
A Retirement Planner's Advice for Taking the Guesswork Out of Income Planning
Once you've saved for retirement, you'll need your nest egg to support you for as many as 30 years. For that, you need a clear income strategy, not guesswork.