Dividend Investing For Newbies: A Complete Guide


Would you be interested in an investment that supplied income on a regular basis, along with its possible to grow in value as time passes? That routine income would be passive, brought in just because the investment is owned by you, with no added effort needed on your part.

You might want to consider investing, if this kind of investment seems appealing. Interested? Here’s a guide to allow you to figure out the best way to start, and whether this type of investment could be suitable for you.

What’s a Dividend?

A dividend is “a distribution of a part of a business’s gains, determined by the board of directors, to a category of its stockholders,” according to Investopedia.

Dividends can be paid in cash, stock or property and in many cases are paid out. Cash dividends are common, so I’ll focus on those in this place.

Who Might Want to Put Money Into Dividend-Paying Stocks?

Because they’re a kind of income, dividends are especially appealing to investors seeking income that is regular, like retirees.

But retirees aren’t the investors that are only interested in dividend-paying stocks. This practice can subsequently result in greater future dividends for the investor since she or he possesses more shares of the stock. Over time, the saver is benefited by this helps like compound interest.

The way to Choose Stocks That Pay Dividends

There’s no deficit of dividend-paying stocks to pick from. In 2013, . was dividend by 81% of the S&P 500 firms paid a How should an investor pick, with all those choices available?

Another, more conservative strategy will be to consider, although it’s natural to desire to concentrate on the stocks that pay the greatest dividend. This strategy is particularly useful for long term investors who need to make sure that the stocks within their portfolios continue paying dividends year in, year out.

Individual shares of dividend-paying stocks can be purchased the same manner other stocks can. For instance, through a brokerage or in some cases directly from the firm itself. But purchasing individual shares isn’t the only route to choose.

Investing through a mutual fund can potentially keep brokerage fees to a minimum at the exact same time, and can assist you to diversify your portfolio by spreading your investment across numerous distinct stocks. Many stock mutual funds check dividend-paying stocks, but some of those funds are made especially to optimize dividends for the investor.

While I’m not going to advocate particular stocks or mutual funds, you could begin by checking out some of the dividend-particular mutual funds at low cost brokerages, like Schwab or Vanguard.

Investing in stocks is fundamentally dangerous and dividend-paying stocks are no exception. While you are able to reduce your risk (and possibly your return) by selecting more conservative stocks, there isn’t any promise that any stock will rise in value or the business will continue to pay a dividend.

Prepared to begin researching dividend investing? Here’s where to start.
1. The dividend number expressed as a percent of the market price of a share of the stock
2. Announcement Date: The date on which a firm declares its intent to pay a dividend
3. Dividend Date
4. DRIP (Dividend Reinvestment Strategy): A firm that offers a DRIP permits investors to reinvest their dividends back into additional shares of the stock

Hopefully this info will get you started in the right direction.


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