One of the most basic principles of investing is that you want to buy stocks you think will achieve significant growth – you pay a certain price for them now in the hope that they will soon be worth much more. When you end up with stocks that aren’t increasing in value, you usually sell them. But is it ever worth it to hang onto a stock that isn’t growing rapidly?
An alternate way to profit from your stocks involves earning dividends, or payments a corporation makes to its shareholders out of the company’s quarterly earnings. Companies don’t have to pay dividends, so those that choose to do so are trying to attract shareholders. These companies’ growth rates have usually leveled off, and they don’t think they’ll benefit from trying to increase their growth any further, so they have to provide their investors with something else of value. As long as the company is stable – that is, as long as it’s not rapidly decreasing in value – you can still earn money from dividends, even if your stock isn’t growing as quickly as you’d like. So there are times when a stock that’s considered bad by conventional standards can actually turn you a profit through less conventional means.