Ask Bankrate: Are Dividend Stocks Still A Good Investment? Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Photos by Getty Images / Illustration by Bankrate August 21, 2020 Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Ask Bankrate is a recurring feature where Bankrate’s experts answer your financial questions. Visit for more information on how to submit your question. Click on a question here to jump straight to it. Questions
Q1 Are dividend stocks still a good investment tool
Dividend stocks had been getting hammered. Do you still think they’re a good investment tool? — Gail C. Answered by Stephen Kates, CFP: “Dividend stocks, like all stocks, can still have significant volatility, which is normal especially in extraordinary times like we are in. The merits of an individual dividend stock should be based on its fundamental factors such as revenue growth, debt, dividend payout ratio, and dividend track record. For a quality company, a drop in price can often be viewed as a positive: great company on sale for a limited time only! Some of the most stable and strongest dividend stocks are referred to as Dividend Aristocrats, meaning they have consistently raised their dividends for 25+ years. Companies like these have weathered multiple recessions and business struggles. Quality dividend companies are rarely as flashy as the high-profile growth companies that have taken over the headlines, but they are still worthy investments for people who are looking for income-producing investments. I suggest you consider your goals for this investment and the type of account you will be holding this investment in. If you are planning to use this investment for a current income, then a portfolio of strong dividend stocks can create a stable stream of income. If you are not planning to use this money for income soon, then you should focus less on dividend stocks specifically and instead focus on finding stocks with the best total return, whether that is from price appreciation, dividends or both. Also worth considering is the tax status of your account. If this is a taxable account, you might be paying income taxes on your dividend income and this may raise your tax liability if you aren’t planning to use the dividends for current income.” Q2 Do CDs beat bonds over the next five years
Lower interest rates have caused bond yields to drop. Would CDs be a better choice for the next five years or longer? — Jennifer Answered by Greg McBride, CFA, Bankrate chief financial analyst: “Bond yields have dropped, but unfortunately, so too have CD yields, as well as the returns for other safe-haven savings and investment products. The do offer yields that beat what you’ll get in government bonds and maybe high-grade corporate bonds too — and without the risk of default. While bonds are subject to interest rate risk — the risk that bond prices fall with a rise in interest rates — the early withdrawal penalties on CDs are minimal by comparison, and spelled out in advance so you’re not subject to the whims of the market if cashing out prior to maturity. A CD early withdrawal penalty involves forfeiting some, or all, of the interest earned depending on the maturity of the CD and when you withdraw. So while CDs are a better choice than bonds, with interest rates at record lows that’s a little like saying that getting your foot stomped on is better than getting kicked in the shin. Neither one is very fun. And with interest rates at record lows, locking into longer maturity CDs doesn’t offer much in the way of return, even over a period of five years. In fact, the yields on aren’t much higher than , so there is little incentive to commit your money for that long at such a low rate of return.” Q3 Housing prices keep going up When will they go down
At least where I live, housing prices have gone up instead of down. Is there typically a delayed reaction in housing prices? I keep waiting for the housing market to adjust, but it’s adjusting up, not down. — Susan H. Answered by Greg McBride, CFA, Bankrate chief financial analyst: “Home prices in your area may still continue to go up if the demand among homebuyers exceeds the supply of homes available for sale. That dynamic has been in play for the past few years, fueling higher home prices in many markets, and is even worse in the pandemic environment.” Q4 Will I lose what I ve paid in interest if I refinance
What happens if you have paid mortgage for five years out of 20 and then refinance to 20 again. Don’t you lose what you already paid in interest? — Mary K. Answered by Greg McBride, CFA, Bankrate chief financial analyst: “What you’ve already paid in interest is what’s known as a sunk cost — it’s over, it’s done and there’s nothing you can do about it. Refinancing at a lower rate will reduce the interest you pay going forward, particularly if you stay on the same repayment schedule. If you have 15 years remaining on your current loan and into a , this will generate significant monthly savings, but you’ll be making payments for five years longer than you originally would. This may well still save you money, but not as much as if you’d either a) refinanced into a 15-year loan in order to stay on the same repayment schedule, or b) refinanced into a 20-year term but made extra payments in order to get it paid off in 15 years. It’s a great time to refinance and in doing so, would recommend you weigh the desire to have the home paid off 15 years from now (per your original loan’s timetable) against your ability to comfortably make mortgage payments while still contributing to your retirement accounts and having wiggle room in your budget.” Q5 Already delayed building a home Should we keep pushing it off
We were building a home starting this October but have pushed the start date back to February. Should we still move forward with this or continue to hold off? We have excellent credit, but we’re curious how challenging it will be to get a construction loan if banks are holding back. — Erin S. Answered by Greg McBride, CFA, Bankrate chief financial analyst: “That’s a tough call, as much of this will depend on the overall economic environment. Hopefully a few extra months will allow more time to put the virus and all of its economic constraints behind us. Your odds are better if the virus is in the rear-view mirror and the economy is clearly recovering, rather than an environment where the virus is ongoing, economic activity is restricted and unemployment is still very high. But in either event, as long as your financial state is solid (, proof of income and sufficient savings), financing will be available somewhere.” SHARE: Related Articles