Call it the emergence of a new world order.

US President Donald Trump declared 2 April the US’s “Liberation Day” by imposing a 10% tariff on more than 180 countries along with higher reciprocal tariffs on 60 nations.

This shocking announcement created a tsunami of fear that reverberated throughout global stock markets.

Two days later, on 4 April, the Dow Jones Industrial Average plunged more than 2,200 points to enter a correction while the technology-heavy NASDAQ Composite Index fell headfirst into a bear market.

Meanwhile, the S&P 500 Index lost 10.5% of its value within two days, culminating in its fifth-largest two-day decline since 1950.

Over in Singapore, the Straits Times Index (SGX: ^STI), or STI, also experienced gut-wrenching volatility, plunging by 7.5% on 7 April as investors headed for the exits.

Since then, Trump has announced a 90-day stop to the reciprocal tariffs (except for China).

In the latest twist, smartphones and computers have also been exempted.

Yet, investors remain jittery.

With volatility being rampant, here’s why you should consider investing in dividend-paying stocks.

A tangible return in your pocket

Dividends, first and foremost, represent a tangible return on your investment as it is money that goes straight into your pocket.

Unlike capital gains, a dividend, once paid, cannot be taken away from the investor.

By investing in dividend stocks, you need not lose sleep over the daily fluctuations in share prices as your primary motivation will be on receiving dividends from your stocks.

As a bonus, dividends from SGX-listed companies are also exempted from personal income tax as they are already taxed once at the corporate level.

By building up a portfolio of dividend stocks, you can enjoy a tax-free flow of passive income and notch up a return on your portfolio that is unaffected by volatile share prices.

A bedrock of stability

It’s a well-known fact that blue-chip stocks have a long operating track record and have the size and clout to weather downturns and other negative events such as tariffs.

All 30 stocks within the STI pay a dividend and many of these stocks can provide a bedrock of stability for your portfolio.

Some examples include the Singapore Exchange (SGX: S68), which has a solid reputation for being a multi-asset exchange with a broad slate of securities to help investors and fund managers hedge their investment portfolios.

DBS Group (SGX: D05) and Singtel (SGX: Z74) are also leaders in their own right.

DBS is Singapore’s largest bank and forms the pillar of the nation’s economy while Singtel is the largest telecommunications company.

Both companies boast long track records of weathering crises and are still dishing out increasing dividends.

Healthy cash generation with strong balance sheets

Stocks with long histories of paying dividends also have another thing in common.

They have sturdy balance sheets coupled with consistent free cash flow generation.

These attributes make them resilient to recessions and adverse events and allow them to bounce back stronger once the crisis has passed.

VICOM (SGX: WJP) is a great example.

The vehicle test and inspection company had S$60.7 million of cash on its balance sheet at the end of last year with no debt.

The company also generated a positive free cash flow of S$23 million for 2024, supporting its total dividend of S$0.058 for last year.

Another is the conglomerate Haw Par Corporation (SGX: H02).

For 2024, the manufacturer of Tiger Balm ointments and salves had an impressive S$889.2 million of cash and cash equivalents on its balance sheet, along with a little over S$36 million of debt.

Haw Par also churned out over S$50 million of free cash flow last year and received a hefty dividend income of S$149.1 million.

This sturdy balance sheet and healthy cash inflow allowed the conglomerate to pay out an S$0.40 ordinary dividend and S$1 special dividend (per share) for 2024.

Get Smart: Dividend investing has a place for all investors

Uncertainty is an inherent part of investing.

But with Trump’s tariff tantrums, the level of uncertainty has been dialled up several notches.

Dividend investing can keep you grounded and provide you with a restful night’s sleep.

While growth investing may sound glitzy and attractive, I believe investors should not neglect dividends.

When markets become volatile, dividend investing will demonstrate its relevance.

Hence, dividends should have a place in every investor’s portfolio.

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Disclosure: Royston Yang owns shares of DBS Group, Singapore Exchange, and VICOM.