In case you don’t have a savings account or keep any money in a certificate of deposit, the interest rate you get paid for allowing these financial entities to use your money is a joke. We are talking in the range of ½ of a percent down to 1/5 of a percent. You may as well keep your cash in a pillow. That is why the popularity of dividend paying stocks is so high today.

There are so many things to like about a dividend stock. As stated, they are very popular in a recession where interest rates are an insult. They are always the choice of institutional and smart investors even in good times. This means these stocks are very liquid, and usually only offered by very stable, profitable companies. What this means for you, is they are very easy to sell and are the only stocks that have long term value. Buy and hold is dead except when it comes to dividend stocks.

There are basically 3 types of dividend periods that companies pay out. Most common is the quarterly model in which the distribution is paid 4 times a year. This works well for most people. The popular option for persons on fixed income is the monthly distribution. This is also popular for active traders who time ex dividend dates. The last option is the yearly distribution. Nobody likes this but the company itself. The danger here is that after owning the stock for a year, the company decides to suspend or even stop paying dividends.

When doing your research you will find that of the100 highest dividend yielding stocks, close to 70 of them will be using the quarterly dividend distribution model. This acknowledged, if you can find a stock with a monthly distribution, that is preferable to you the stock owner but not always. I like to buy closed end funds for income purposes as they often pay monthly and are usually very stable price wise. You may be tempted to buy high yield dividend stocks that are trusts. If you are the average self guided investor who does your own taxes, then I would avoid these. The tax paperwork is not worth it.

Dividend stocks are very hot and will remain so for years to come. The banks cannot pay a competitive rate on your money, so expect discount brokers to become the new favored place to keep money. People fleeing the banks will be investing in low risk stable stocks such as those that pay a regular dividend.