Stock Markets Exposed

how does stock that pay a Dividend work vs a regular stock?

I want to invest in stocks but im not sure the difference between them and which would be better to invest more into?? and at what point should you decide to sell a stock once it has went up in value?? which would be better to invest in???

Public Comments

1. They work the same way... The companies that don't offer dividends just reinvest their money in other things or keep their cash reserves which makes their company keeps their company in good shape (as far as being stable and positioned to grow).
2. People don't agree on when to sell, Business is too random for that. You've got two motivations: fear and greed. If it is a cyclic stock, then look for precedents (dont quote me on this). Dividend stocks are more stable. If you're an old person, this is good for retirement. Regular stocks are less stable, because instead of cash, you get a hopefully more powerful stock. So in the investment pyramid(risky top stable bottom) dividend stocks are lower.
3. If you are an old line company, like say a railroad, you pay out your profits as dividends. Might as well, since all the needed rail has been laid and the opportunity to significantly grow is limited. On the other hand, if you are in semiconductors, keep the profit in-house and use it for research and expansion. Don't give it out as dividends. To the investor, the dividend paying companies represent stability and steady income, better than a bank but not by too much. The growth companies pay nothing but their stock increases in value. No income here and less stability. Profit comes when you sell the stock.
4. When deciding to invest there are many factors to take into account. Indeed dividends are one factor. Expected growth rate is another. Size of the company is another. As one responder mentioned already, generally stocks that pay dividends have more stable value and are less likely to drop a great deal in price. The answer to your question is very difficult to say. Generally, over the last 5 years value stocks--stocks that pay dividends--have way outperformed growth stocks--stocks that do not pay dividends. Whether this trend will continue is debatable. A good approach is to own some of each. That way you will win a little in either case. As for selling stocks, that is a very difficult question to answer. Generally, short term sales should be avoided because of the tax implications, but not always. Also it is best to dump your loosers by year end just to purge and clean up your portfolio in my opinion. Many people hold on to their loosers hoping they will eventually go up in value. They hold on for years. The really big money is made by buying stocks that are growing and holding on to them for years and years. Keep that in mind.