One of the major benefits of owning stocks is their ability to produce regular income (dividends payment) and long-term growth.
The challenges of the 2008-09 financial crisis put a strain on some companies to reduce or eliminate dividends, but for strong companies, this is just temporary.
When the economy rebounds, some companies will be in better financial condition than others. Mature companies with established markets may be in an enviable financial position.
As is often the case, companies providing products or services to businesses may experience rapid growth. Companies that have curtailed spending during the economic crisis will play catch-up, scrambling to capture market share or protect what they still have.
As we work through a recovery, market-leading companies will become cash cows, throwing off extra income in the form of dividends and stock buybacks. It is safe to assume that investors are going to be more wary of risk in the future. Companies with a consistent record of dividend payment and growth will command a premium in the market.
It is almost certain that either through regulation or shareholder action, executive compensation and bonuses will come under close scrutiny. Stocks that return more profits to shareholders may be viewed in a more favorable light by regulators and shareholders. Don’t be surprised if regulators encourage dividends through tax policies.
For investors, the combination of regular income and long-term growth makes stocks a wise choice for those with a long time frame. While there is still be much emphasis on quarterly profits, the investing community is likely to take a closer look at companies that have a longer term approach to growing the business.
With the right stocks in your portfolio, it is hard to beat the potential of current income and long-term growth.