3 reasons to avoid dividend paying stocks | Smart Change: Personal Finance

Also, don’t think of these dividend payments as small potatoes. If you have a portfolio worth around $400,000 with an overall average dividend yield of, say, 3%, you’ve set yourself up to collect about $12,000 a year, or about $1,000 a month. That’s powerful!

You may be avoiding dividend-paying stocks because you think they’re mostly boring old companies that aren’t likely to grow quickly. That’s a reason to avoid them, but it’s not a good one. For starters, many high-growth companies pay some sort of dividend these days, and even if it’s not a hefty one, it might grow at a respectable clip.

Starbucks (NASDAQ: SBUX), for example, pays a dividend that recently had a dividend yield of 1.7%, and it is still a fast-growing company, with fourth quarter net sales up 31% year over year and 538 net new stores opened. The dividend has increased by an average of 14% on an annual basis over the past five years. Over the past ten years, its shares have more than quintupled in value – an annual average of 20.3%. (And that’s without even reinvesting dividends.)

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