The Best Ways to Jump Into Dividend Stocks

Dividend stocks have become the new darling on Wall Street, and investors looking for income are pouring billions of dollars into them.

These securities are considered a good buffer during times of market volatility. They also are seen as an inflation hedge, considering that S&P 500 dividend growth has outpaced inflation since 2000.

But buying dividend stocks takes savvy. To be successful, individuals need to understand the mechanics of how the stocks work, and the metrics used to evaluate performance.

In the second quarter of 2022, dividend payouts by U.S. companies in the S&P 500 set a record despite rising interest rates, inflation and an economic slowdown. They totaled $140.6 billion, up 14% from $123.4 billion in the year-earlier quarter, according to S&P Dow Jones Indices. “It’s expected this trend will continue in Q3 and through year’s end,” says

Anu Ganti,

senior director of index investment strategy at the company.

That’s good news at a time when bond-market yields remain low and volatility in the bond market has become the new normal. “People aren’t accustomed to that kind of roller-coaster ride in the bond market,” says

Ross Frankenfield,

managing director of Harbor Capital Advisors Inc. “Many are turning to dividend stocks to fill the fixed-income void instead.”

Here are some answers to common questions about dividend stocks.

What is a dividend stock?

It is a share of a company that regularly distributes a portion of its earnings to shareholders in the form of cash or additional stock. Not all companies choose to distribute profits in the form of dividends to shareholders; some…


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