In my experience in business school, the Finance Department drilled it into my head how great compound interest is, but never mentioned the concept of compound dividends. Although I do think compound interest is nice, I prefer investments in equities, especially REITS, that have DRIP(Dividend Reinvestment Program), so that I can receive compound dividends.
What is Compound Dividends?
Compound Dividends is simple, instead of taking cash from the dividend, you reinvest the dividend amount to buy more shares. If you sign up for DRIP, this is done automatically for you. This means that each dividend gives you more shares, which increases the amount you’ll get from the next dividend.
Why do I prefer REITS for Compound Dividends?
A Real Estate Invesmtent Trust is required to pay out 90% of its income to shareholders. So if you invest in REITs, you can expect to receive a dividend 4 times a year annually (unless a REIT has negative income). Dividend Yield for the Top 6 REITS http://stock.ly/0d565b
Another Reason to invest in REITS for the purpose of compound dividends is to gain appreciation in the value your equity is worth. The top 6 REITS not only beat the market, they DESTROY it. Top 6 REITS vs. the market http://stock.ly/05niyg
The choice is yours, compound interests or compound dividends.
Disclosure: Long REITS