Are Dividend Stocks Really a Solid Bet? Recent Data Might Say Otherwise
The upside of investing in dividend stocks is clear: Collecting dividends gives you a steady income stream you can use to cover added expenses or reinvest to further grow your wealth. Dividend stocks are also a great bet for retirees who often need income outside of their Social Security benefits to pay their living expenses. And the fact that qualified dividends (the most common type you'll find) are taxed at a more favorable rate only adds to their draw.
There's just one problem with dividend stocks: Those dividends are not guaranteed. Whereas bond issuers are obligated, under their bond contracts, to pay their investors interest on a preset schedule, stocks that issue dividends can halt that practice as they see fit, or if their finances don't allow for it.
That's precisely what's happened this year, with 639 companies reducing or suspending their dividends during the second quarter of 2020. And as the COVID-19 pandemic drags on, that list could grow. It therefore begs the question: Should you be relying on dividend stocks? Or are they really just a gamble?
Source Fool.com
