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1. Dividend stocks are stocks that share a portion of their earnings with shareholders.
2. Because dividend stocks share earnings with investors, they essentially offer investors two ways to profit: (1) by earning dividends and (2) by share price appreciation.
3. Dividends constitute an income stream of sorts, as companies typically pay dividends on a fixed frequency (i.e. monthly, quarterly, annually, etc).
4. As with any income type of investment, time and compounding are key: being patient and re-investing dividends are what truly enable greater returns over time. Historically speaking, data suggests that for large cap stocks the re-investment of dividends has proven to be a greater source of wealth than capital appreciation of the underlying stock.