We had a client who trusted his company and invested in its stock throughout his career. After he was called home, the dividends from that investment provided his surviving spouse with a comfortable retirement lifestyle for a long time. Dividends can be a valuable component of a retirement portfolio, providing a reliable source of income even during market downturns. 

Understanding Dividends 
When a company makes a profit, it has a few options for using that money. It can reinvest it back into the business to fuel growth, or it can choose to distribute a portion of it to its shareholders. That distribution of profits to shareholders is what we call dividends. 

How Do Dividends Work? 
Dividends are typically paid out on a per-share basis, which means the amount each shareholder receives is based on the number of shares they own. For instance, if a company announces a dividend of $0.50 per share and an investor holds 100 shares, they will receive $50 in dividends. 

Dividends can be paid regularly, like every quarter or year, or they can be special one-time payments. For investors, especially those planning for retirement, these regular payouts can be incredibly valuable. 

The Role of Dividends in a Retirement Portfolio 
For individuals building a retirement portfolio, dividends can be a lifeline. They provide a steady stream of income even during turbulent market times when stock prices may fluctuate. Companies that consistently pay dividends are often referred to as “dividend-paying stocks” or “income stocks.” 

But it’s important to note that not all companies pay dividends. Younger, fast-growing companies often reinvest all their profits into expanding their business, so they don’t distribute dividends to shareholders. 

Diversification for Stability 
While dividends can be a reliable source of income, it’s crucial not to put all your money into one type of investment. A well-balanced portfolio includes diversifying your investments across various sectors and asset classes. 

Consider this as spreading your investments across different baskets. If one basket has a few eggs, and something happens to that basket, you won’t lose everything. The same goes for investments. By diversifying, you reduce the risk of losing a significant portion of your money if one particular investment doesn’t perform well. 

Seeking Expert Advice 
Building a diversified retirement portfolio may sound overwhelming, especially if you’re not sure where to start or what questions to ask. That’s where financial advisors like the team at ReJoyce Financial can help. 

Talking to a qualified advisor can clarify your financial goals and guide you in creating a well-rounded investment plan. A good advisor will take the time to understand your unique situation, helping you make informed decisions. Take the first step and connect with a knowledgeable advisor today! Call (317) 903-9157 or fill out the form below to schedule a no-cost, no-obligation visit.