Defensive vs. Cyclical Stocks
Defensive stocks, such as utilities and consumer staples, tend to perform well during economic downturns due to their stable demand.
Cyclical stocks, such as industrials and technology, perform better during economic expansions. A mix of defensive and cyclical dividend stocks can offer stability and growth.
- Example: An investor might hold defensive stocks like Procter & Gamble for stability and cyclical stocks like Apple for growth potential.
Dividend Reinvestment Plans (DRIPs)
DRIPs allow investors to reinvest dividends automatically to purchase additional shares, enhancing compounding returns.