Dividend investing and Value investing are two different ways to approach the stock market. Value investing attempts to find strong stocks that are simply undervalued. The other involves buying stocks that are consistently paying off an income.
Which one of these two is the most profitable? Both of these strategies have one weakness and one big strength.
Value investing tries to take advantage of strong companies that are currently undervalued by the market. When you look at the long term results of this strategy it really does work. Companies that have excellent fundamentals will ususally beat yearly average stock market return in the long term.
That means looking at things such as the PE ratio and debt to equity ratio is one way that can seriously improve the quality of a stock.
There is one thing that value investing lacks however. Investing in strong companies is a long term approach. It is not something that you are going to see the results of in the next few months.
The best reason of getting into high dividend paying stocks is that you are able to see some profits once you get into the stock, without waiting many years. Because stocks will pay a consistent dividend buying good quality dividend stocks helps to produce an income whether or not the stock goes up.
However dividend investing has one big pitfall of its own, it takes a lot of money to make money.
That is why the best long term strategy is probably not to simply buy a value stock or a dividend stock, but to combine the two. As a stock appreciates over time so does the dividend which means the income it produces also increases. In short each of these strategies is comes up short where the other is profitable.
This is a really hands off way to make a living from the stock market, but it does take a while and a lot of savings to get it to work.