What is more important when investing in shares - price change or dividends?

Investing in company shares is one of the most popular options if you want to invest for the long term.

When purchasing securities, investors seek to make a profit. This profit can be obtained in two ways: through changes in the price of shares or through receiving dividends.

When choosing which shares to buy, most investors first of all pay attention to the amount of dividends that the company pays.

But is this approach always correct and how justified is it to focus only on paying dividends, from which you can get more profit?

Profit from changes in share price

Changes in the price of shares are the main source of profit for investors who expect rapid growth in the value of their assets. If the price of a stock rises, the investor can sell it at a higher price than he bought it for and make a profit.

Moreover, the amount of profit received in a year can be calculated in tens and even hundreds of percent. Here is an example of how much the securities of leading American companies have risen in price over 20 years:

Looking at the table, you can calculate how many percent of the average annual profit on average some shares brought to their owners:

1. Monster Beverage 6000%
2. NetEase 2750%
3. Apple 2450%
4. Tyler Technologies 1650%
5. Tractor Supply Co 1450%
6. Booking Holdings 1350%
7. j2 Global 1300%
8. Old Dominion Freight 1150%
9. Amazon 1000%
10. Dorman Products 950%

That is, if you had invested only $1,000 in Monster Beverage shares 20 years ago, your securities were now worth $120,000.

There are many factors that can affect share price changes, including:

• Financial results of the company. If a company performs well, its shares tend to rise in price.
• Economic situation. If the economy is growing, shares of companies from that country tend to rise in price.
• Political events. Political events can have an impact on stock prices, either positively or negatively.

How big is the profit from dividends?

Dividends are a portion of a company's profits that are paid to its shareholders. The amount of dividends is usually set by the company's board of directors and depends on the company's financial performance.

There is a lot of talk about dividends, but in reality the interest paid to shareholders is not that great:

As you can see, the maximum payment amount does not exceed 20% per annum, and this is a rare exception. Higher interest rates are typically paid by small companies in hopes of attracting investors and increasing the market value of their shares.

For a company with a capitalization of more than $10 billion, dividends usually do not exceed 5% per annum.

Therefore, the answer is obvious; when choosing stocks, it is more correct to focus on the prospects of the company. How dynamically it develops and how much money it allocates for development.

Using the size of dividends as the main argument in favor of choosing is also quite risky, since if the value of shares falls, you can lose not only the interest earned, but also the money invested.

Brokers from whom you can buy shares - https://time-forex.com/vsebrokery/brokery-fondowogo-rynka