Guide to Investing in Dividend Stocks
Whether you’re new to investing or you’ve been in the game for a while, you’ve probably heard the advice: diversify your portfolio. It’s never a good idea to put all your eggs in one basket, especially when it comes to investing. One significant dip and you could lose a majority of your investment.
When you’re considering what to invest in, you want to look for a variety of different kinds of investments. Dividend stocks are a very safe and secure investment type to consider adding to your portfolio.
Dividend stocks are essentially a great way to get rich slowly.
Let’s start off with the basics; what are dividend stocks?
Dividend stocks are a type of stock you purchase from companies that pay out dividends to their stockholders. Each quarter, you receive a small payment for every share of a dividend stock you own.
The reason dividend stocks are so powerful is because the investor receives a small amount of money, consistently, and over a long amount of time. Dividend stocks are a long-term game. As an investor in dividend stocks, you want to look for companies that have a history of success and consistently high dividend payouts.
The answer is simple: dividend stocks are a safe investment.
The stock market can be volatile, meaning you’re taking a risk with your money when you invest. By investing in dividend stocks, you’re lowering that risk.
Dividend stocks are typically those of more established companies. In contrast, younger, faster-growing companies are reinvesting investor money into the company, instead of returning it to investors in the form of dividend payouts.
Dividend stocks, because they are part of more mature companies, tend to be less volatile than other stocks and they’re able to weather recessions and crashes with better success.
Now that you understand what a dividend stock is, you probably are wondering which dividend stocks to buy. As with every investment, there are some dividend stocks that are a better investment than others.
How do you know which those are? There are a few important factors to look at when choosing which dividend stocks are right for you to purchase.
Many investors’ first reaction when looking to purchase dividend stocks is to look at their yield. The yield is the ratio of the annual dividend compared to the current share price. Yield is expressed as a percentage.
While a higher yield percentage is valuable in terms of dividend stocks, it’s not the most important factor. It’s also important to assess dividend consistency and company growth over time. For example, you’ll find many companies with dividend yields above 5%. But, then there’s Johnson & Johnson, which pays a dividend yield of 2.6%. That sounds low, but when you see that the company consistently pays dividends and has increased its dividend for 54 consecutive years, you can see the wisdom of investing in lower yield, safe dividend stocks.
Dividend stocks are intended to be slow growing and consistent, so reliability is often more important than a high yield.
If you’re new to investments, you have an even safer option than dividend stocks. Instead of investing in dividend stocks from just one company and risking a failure, you can look for ETFs that specialize in dividend stocks.
If you’re still learning about investing, be sure to read through our articles on Dow stocks in addition to the below articles on dividend stocks.
Finding a good dividend stock to buy is the best way to play the market and earn reliable income.
That's why we want to tell you about our newest dividend stock recommendation.
We like this company because it's at the center of this $115 billion industry...
Finding a good dividend stock to buy is the most stable way to make money in the stock market.
It allows you to earn steady, passive income - no matter how the individual stock price performs.
Emerging markets are the best way to get the kind of explosive growth that the United States hasn't offered since Harry S. Truman lived in the White House.
The 23 economies of the MSCI Emerging Markets Index represent a full 13% of world market capitalization. These economies can and often do surge by double digits each year, offering windfall profits to investors with the intestinal fortitude for volatility.
But today, I'm going to introduce you to a place you won't find on the MSCI Emerging Markets Index, though considering what just happened, it likely won't stay off for long. In fact, until just a few months ago, it was pure poison for investors.
You don't need a ton of money to increase your return on investment in today's volatile market. You just need the right strategy.
In fact, the best way to squeeze the most return on investment from an unstable market is through discipline, not wealth. That's according to Money Morning Chief Investment Strategist Keith Fitz-Gerald, a seasoned market analyst with over 30 years of investing experience.
With the Dow Jones Industrial Average down nearly 5% this year, dividend stocks are the most stable way to make money in this volatile environment.
These companies provide steady income regardless of how the markets move.
That's why we've gathered a list of the best dividend stocks to buy in 2016...
Call it the "Summer of Pain." All the major indexes are down for the year, flirting with textbook "correction territory."
Utility stocks, as tracked by the Utilities SPDR ETF, have been among the hardest hit. The XLU ETF is now off an eye-watering 20% from its February 2015 highs.
The trouble is, the utility sector is a massive favorite among income investors, thanks to its stability and generous yields. XLU, for instance, pays close to 4%.
Preferred stock and common stock are the two main types of stock that companies issue to investors.
But we frequently hear the same question from our readers: What's the difference between preferred stock vs. common stock?
Here's a breakdown of the two types of securities...
REITs are companies that own or finance income-producing real estate, and investing in REITs is an effective strategy for earning passive income.
Still, many investors believe REITs will underperform as an interest rate hike lingers on the horizon.
Here's why that couldn't be further from the truth...
Many people are surprised to learn that dividend income and reinvestment can account for nearly 90% of total stock market returns over time.
That's right. Not a quarter... Not half... But 90%.
But the potential returns we can bank with this simple method can be much, much higher...
Master limited partnerships have seen immense growth over the last decade. The sector has grown 260% over the last decade.
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Here's how master limited partnerships work and why they're profitable...
A high-dividend ETF is an exchange-traded fund that lets investors own a handful of dividend stocks with good yields.
"Good" yields are about 2.5% or higher.
You can get three high-dividend ETFs right here - yields as high as 6.3%...
Exxon Mobil Corp. dominates the world of Big Oil in terms of market cap and brand recognition.
The $364 billion company is widely embraced by income investors thanks mostly to the healthy XOM dividend.
Monthly dividend stocks are growing in popularity. They offer investors all the benefits of traditional dividend-paying stocks, like predictable income, capital appreciation potential, and a buffer against market volatility.
But they send out payments each month rather than on a quarterly basis.
A growing number of companies recognize the value of delivering dividends to shareholders on a more frequent schedule.
Here are four monthly dividend stocks to consider...
There was a time when small-caps didn't offer any of the market's best dividend-paying stocks, but that's changing.
The number of issues in the S&P SmallCap 600 Index presently paying a dividend has jumped 10.2% since the end of 2013. Now some of the best dividend-paying stocks in the small-cap sector include a health REIT yielding 4.61%, a natural gas company yielding 3.92%, and a regional bank yielding 3.53%.
Thanks to regular, and potentially higher cash payouts, small cap investors can now get a steady stream of income along with growth prospects.
You can get in on the profits. Here are five small cap dividend dynamos...
At Money Morning, we're big proponents of dividend reinvestment. It's a strategy that will help you amass tremendous wealth over time.
Reinvesting dividends is the practice of buying additional shares of a stock using the dividends themselves to pay for your purchase. It results in long-term compounding, and that's key to building a fortune.
Here's a look at just how valuable dividend reinvestment is to your portfolio...
