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Stocks 408: The Case for Dividends

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1.
Why is an economic moat important for a dividend-paying firm?
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Both of the above. Moats are critical both for the sustainability of a dividend and for its growth potential.
2.
What are the two components of total return?
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Dividends and capital gains. Total return includes both price appreciation (capital gains) and income (dividends).
3.
Ultimately, dividends are behind capital gains.
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True. The underlying reason for investors bidding up the prices of stocks is that they are valuing the dividends that the company will pay, even if those dividends do not materialize for a while.
4.
When are taxes on an investment's capital gains due?
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In the year that the investment is sold. Although gains may occur, no tax is due until the investment is sold. This may or may not occur at one's retirement age.
5.
With a dividend reinvestment plan (DRIP) for stocks, dividends are reinvested automatically for you so that you do not need to invest them yourself.
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True. This is one of their many benefits: autopilot investing.