There are multiple approaches to investing. Some investors look for quick gains in stocks, while others approach investing as a long-term gain to build wealth over a lifetime.
A fantastic way to use the stock market to build wealth is long-term investing in dividend stocks. Dividends provide a steady stream of income, which over time can add a lot of value to a portfolio.
There are a couple of ways to treat dividend payments. One way is to use the dividends as an income stream. They can be used to supplement an income, or put it to work in a different investment.
Another approach to dividends is to reinvest the distributions in the stock paying the dividend. Dividend reinvestment plans are a fantastic way to gradually build larger positions in securities, and each time you build a fractionally higher holding in the stock the next dividend will be fractionally higher, putting the power of compounded interest to work for your portfolio.
The strategy works with any dividend paying stock, but better with stocks that increase their dividends each year, since once a year the distribution increases and allows you to purchase an even greater amount of the underlying security for the next four quarters. Over time, the amount of dividends that get reinvested grows significantly, as does the total number of shares that are owned in the stock.
The following five stocks are great options for investors looking to build long-term wealth.