What are Dividend Stocks and Why Should You Invest?
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.
Master limited partnerships have seen immense growth over the last decade. The sector has grown 260% over the last decade.
But many investors don't fully understand their tax benefits, dividend yields, and business structure.
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...
Blue-chip stocks are typically sector leaders boasting market caps in the billions. Many also pay attractive dividends. The combination of growth, value, and dividend income continues to draw investors to blue chips.
A key argument for remaining in blue-chip, dividend-paying stocks has shifted from their value solely as an income-producing investment to their potential for future dividend growth.
Here's a blue-chip stocks list to keep you profiting in 2015...
Results of the U.S. Federal Reserve's so-called stress test were released Wednesday - and Bank of America Corp. (NYSE: BAC) passed only provisionally. As such, a long-awaited boost to the BAC dividend remains on hold.
In total, 28 U.S.-based banks passed the Fed's annual regulatory test.
REITs are companies that own or finance income-producing real estate properties. And they've been tearing up the market lately.
An REIT ETF is the best way to own a basket of these soaring securities.
Here's a look at one REIT ETF growing faster than the Dow and S&P combined...
[Editor's Note: Tom Gentile is the co-founder of Optionetics, a financial education company which he later sold to one of the world's largest retail brokerages. Tom leveraged his 25 years of experience trading stocks, futures, and options to teach more than 300,000 people the secrets to profitable, low-risk investing.
Tom is the author of a book, The Trading Index Course, which lays out the basis of his highly successful system for trading options, and he's a frequent contributor to CNBC, Reuters, Bloomberg, and FOX. We're excited to have him with us...]
Oil has been a glutton for punishment, getting rocked by sellers and dropping some 55% from the highs of last July.
Up until just a few months ago, nearly every analyst and hedge fund manager in this space was offering up his or her commentary on how oil had bottomed and how it was time to buy.
Now it seems that fewer traders are willing to make that call, offering a glimmer of hope for contrarians like myself.
Stocks that pay dividends are a top choice for income in today's low-interest environment.
Compare dividend stocks to the income alternatives. U.S. Treasury yields sit near historic lows. Nearly 22% of total developed market countries' debt carries a negative yield.
Meanwhile, most stocks that pay dividends have increased yields. And they offer investors the chance at capital appreciation.
Special dividends - separate one-time payouts in addition to a company's regular (if any) dividend - are on the rise. Special dividend payment amounts jumped 49% from January through September 2014.
Special dividends are typically larger than normal dividend payouts. Companies usually declare them after an especially strong quarter or year, or when their cash reserve grows significantly.
Here are the nine companies that announced special dividends during the week ending Feb. 6.
Dividend Investing News, Feb. 9, 2015: Stocks that sport attractive and growing dividends are still the best option for income seekers as interest rates remain low.
More than half of S&P 500 companies currently yield more than the 10-year Treasury note's 1.93%. Plus, dividend stocks offer an added bonus of potential capital appreciation.
There are 10 new IPOs this week expected to raise a combined $1.4 billion.
Leading the pack this week are two dividend stocks: Columbia Pipeline Partners LP (NYSE: CPPL) and Easterly Government Properties Inc. (NYSE: DEA). Those two offerings alone are expected to bring in 70% of this week's total.
Here's a look at the 10 upcoming IPOs this week...
Last week's Dow Jones performance is yet another reason to buy stocks that pay dividends. The index shed nearly 500 points.
Dividend payers tend to be less volatile than nonpayers and hold up better when the market slips. In 2008, dividend-paying stocks lost an average of 39% on a total-return basis. But nonpayers shed 45.4%. In 2002, nonpayers plunged 30.3%. Dividend stocks lost just 10.9%.
Here's a list of 33 notable payout hikes and special dividends from the week ending Jan. 30, 2015...
