Dividends

Dividends, at their most basic, are simply the money that companies pay their shareholders. It is customary for a company which is able to generate excess earnings beyond what it needs to reinvest in itself for growth to pay out that excess to its loyal shareholders.

One of the great benefits of owning shares of companies that pay dividends is that the owner never needs to separate him/herself from the company, i.e., by selling shares to raise capital. Shares of dividend paying companies can theoretically be held forever – assuming the dividend is not cut – and the owner can continue to generate an income for as long as the stock is held.

Why are dividends relevant? Dividends from reliable companies represent one of the steadiest ways to work toward financial freedom. Building a strong portfolio of dividend paying stocks can also be incredibly painless and, if done well, exceedingly hands-off.

My personal goal is to acquire enough shares of dividend paying companies to achieve financial freedom by the time I turn 35. I am currently 24. This gives me around 11 years to chart my course and document the process.