Yet the latest conventional wisdom on Wall Street pegs dividend-paying stocks as overvalued.
That "wisdom" is wrong. Ordinary investors and Wall Street gurus alike have long favored dividend-paying stocks for their steady returns. For most Americans, they remain among the surest paths to wealth.
Most large companies share their profits with stockholders by paying a cash "dividend," typically once every three months. Dividends range from a few pennies to a dollar or more for every share. Shareholders can pocket this cash or reinvest it to buy more of the company's stock. If they choose the latter, they'll own more shares and thus earn even more in dividends down the road.
Reinvesting essentially creates a snowball effect. As the years roll on, a small investment can yield a huge return. In fact, from 1930 to 2012, dividends accounted for nearly 42 percent of the total return of the S&P 500 stock market index, according to a Morgan Stanley study.
Dividend stocks are typically far less risky than those with no payout. After all, it takes discipline, stability and a healthy outlook for the future to maintain those regular payments.