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Stocks 408: The Case for Dividends

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1.
What are the two components of total return?
Choose wisely. There is only one correct answer.
Dividends and capital gains. Total return includes both price appreciation (capital gains) and income (dividends).
2.
With a dividend reinvestment plan (DRIP) for stocks, dividends are reinvested automatically for you so that you do not need to invest them yourself.
Choose wisely. There is only one correct answer.
True. This is one of their many benefits: autopilot investing.
3.
Which of the following is not a benefit of a DRIP?
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It pays double the regular dividend. DRIPs encourage long-term investing, and because the dividends are reinvesting regularly, investors may benefit from dollar-cost averaging. However, DRIPs respect the existing dividend rates.
4.
With a dividend reinvestment plan (DRIP) for stocks, what happens to reinvested dividends?
Choose wisely. There is only one correct answer.
They purchase additional shares of stock for you. DRIPs will actually buy additional shares for you; this is a way of investing on autopilot.
5.
Why is an economic moat important for a dividend-paying firm?
Choose wisely. There is only one correct answer.
Both of the above. Moats are critical both for the sustainability of a dividend and for its growth potential.