TLDR: Is it ever worth investing in stocks to make profit off of dividends?
I did some research on dividends. It seems like it has a reputation for stable income, irrespective of the market fluctuations (sort of, since dividends drop the stock price). Some people even claim that professional investors invest in dividends because they make for stable portfolios.
I decided to give this a try; I invested a couple of thousand dollars over two years and monitored the results. I discovered that with a sufficiently diverse portfolio, you get around 2-3% per annum.
- 2-3% is pretty low
- I live in a place with an inflationary economy; my money devalues by ~2%/year
- Given the tax brackets where I live and my income, roughly 50% of my ROI goes to the taxman.
After all this, someone I know made a comment that "why would you risk your money to make nothing?" which made me think:
On the flip side, when my experiment ended, my portfolio happened to be 30% up, so I made around 15% per annum on that. (But that's not something you can count on when you invest in stocks, and was not my intention.) It was a mixture of stocks (energy, technology, medical, etc.) mostly US-based.
Are dividends really worth investing for?
It seems that long-term investing was more worthwhile (at least in this case).