Use Dividend Stocks to Dial Down Your Market Worries
If you’re worried that stock records won’t last, the boost that dividend stocks provides over the long term could be a calming cushion.


While most investors are publicly celebrating this record-setting bull market, many tell me in private that they’re nervous about the possibility of a downturn.
People have different reactions when the market does so well for so long. Some are sure they should get out, but greed won’t let them pull the plug. Others are eager to get in on the action, but fear won’t let them pull the trigger.
I tell clients to base their decisions on their long-term plan, not what’s happening day to day. Staying on a steady course is always key in investing, but especially in uncertain times.

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.
One of my favorite ways to add some stability to a portfolio is with a thoughtful dividend strategy — especially if you can reinvest those dividends instead of taking them as income.
What’s the payoff for patience?
Let’s hypothetically say you had put $10,000 in an investment that perfectly matched the S&P 500 at the end of 1960. If you had taken the dividends as cash and not reinvested them, at the end of 2015, your $10,000 would have grown to $351,000.
Not bad. But if you’d reinvested those dividends, you’d have just shy of $1.9 million.
Jaw-dropping, right?
Now, you may not be able to wait 55 years, but even 10, 20 or 30 years could bring you some pleasing results.
And the thing is that most folks, if they’re still working and earning a paycheck, don’t need that dividend income. Oh, it might pay for a vacation every couple of years or so. But if you can keep your hands off and reinvest it, there’s a good chance you’ll see exponential growth. It’s one of the easiest and least expensive ways to increase your holdings over time.
And even after you retire, you may choose to continue growing those investments as you pull from other income streams.
There are various way to handle reinvesting:
- You can enroll in a dividend reinvestment plan (DRIP).
- You can buy a low-cost fund that automatically reinvests distributions for you.
- Or you can stockpile the cash until you decide to make a purchase on your own. (I’d avoid the third option unless you are both market savvy and extremely disciplined.)
Keep in mind that, no matter which method you choose, this is a slow process. You’re not looking for the next big thing, and you want to stay far away from the big thing that’s almost over.
Don’t make the mistake of simply choosing stocks that offer the highest yields possible. Over time, those stocks have not performed as well as those that pay high, but not the very highest, levels of dividends. Why? Sometimes a company will declare dividends to grab investor interest and boost share price, but then it can’t sustain those payments. And if there’s a dividend cut, the market might read that as a sign of weakness.
Look, instead, for stable, well-run companies that pay constant or rising dividends — companies that are going to be here for a while. For example, iconic American brands, even though they may be in mature industries, can be terrific investments. I’m pretty confident we’ll be eating at our favorite fast-food restaurants, drinking popular soft drinks and using those brand-name laundry detergents for years to come.
But do your homework, because even consistent dividend payers can develop problems.
Talk to your financial professional about how dividend stocks might work in your portfolio. Be sure to ask about tax consequences (good and bad) and how your strategy might affect your overall retirement plan.
Most important: Know thyself.
If you are a patient, careful investor, dividend stocks may be just the thing to help take your market anxiety down a notch.
Kim Franke-Folstad 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.

Michael R. Andersen is the founder and president of Andersen Wealth Management, a Registered Investment Adviser. He is an Investment Adviser Representative and a licensed fiduciary. A firm believer in financial education, Andersen holds regular informational seminars for clients and the community, and he is the host of the "Wise Money" radio show.
-
Stock Market Today: Another Quarter, More Mixed Price Action
"Up and to the right" remains the general trend despite persistent uncertainty around critical policy issues.
-
Over 100k Medicare Accounts Breached in Latest Hack: Was Yours One?
Letters are going out to 103,000 Medicare beneficiaries who may have been impacted. Here's how to protect your identity and benefits.
-
Why Homeowners Should Beware of Tangled Titles
If you're planning to pass down property to your heirs, a 'tangled title' can complicate things. The good news is it can be avoided. Here's how.
-
A Cautionary Tale: Why Older Adults Should Think Twice About Being Landlords
Becoming a landlord late in life can be a risky venture because of potential health issues, cognitive challenges and susceptibility to financial exploitation.
-
Home Equity Evolution: A Fresh Approach to Funding Life's Biggest Needs
Homeowners leverage their home equity through various strategies, such as HELOCs or reverse mortgages. A newer option: Shared equity models. How do those work, and what are the pros and cons?
-
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.