In this post, I want to talk about dividends:
- what they are
- how you get them, and
- why they’re so great!
I’m even going to share with you my secret weapon to getting the highest yielding, most consistent dividend income without having to do so much of the research and leg work upfront to find these stocks!
If you’re looking for ways to put your money to work, so your money makes you even more money with almost zero effort, then trust me, you don’t want to miss this!
For now though, and for those of you who don’t know…
What is a dividend?
A dividend is a cash payment that a publicly traded company makes to it’s investors, you and I, basically as a way of saying ‘Thanks for investing in our business and believing in us’.
Companies will pay out a proportion of their profits to their shareholders at a predetermined rate, normally anywhere from 0 to 15% per share.
Obviously, this is pretty powerful. Especially at a time when bank savings accounts are paying out 0.25% (if you’re lucky!). To know you can get anywhere from 2% to 15% by investing in a dividend paying stock, you’d be crazy to keep your money in a savings account!
So, how do you get them?
Well, first of all, you need a brokerage account. Like an ISA, GIA, or something that allows you to buy stocks. You can use apps, like: Trading 212, plus500, Freetrade etc. The choice is yours! I use Freetrade (you can sign up here and we’ll each get a free share worth up to £200).
Once you have an account set up, you can start buying stocks, including those which pay dividends. How much each stock pays as a dividend can be found on sites like Yahoo finance (see example below)
And remember, not all stocks pay dividends. The tool I share in a few paragraphs checks all this for you.
Now, you have a brokerage account and lets say you own 10 shares of $WBA (Walgreens Boots Alliance), which is currently $40.44/share, and their forward annual dividend yield is 4.62%.
This means you’ll get a dividend of 4.62% of the share price for each share you own. This equates to roughly $1.87/share. Multiplied by your 10 shares, this comes to £18.70. Not bad, right?! Especially when you can add this to the gains on the share price that you made for that year as well! Assuming that it went up, of course!
Dividends are where big investors make $millions upon $millions per year, just by holding certain stocks that pay out good dividends. And this is where my secret weapon comes in – a service I use which helps with identifying the best, safest and highest yielding stocks available on the market at any given time.
This is vital, because the amount that companies pay out, if they pay out at all, varies significantly.
There’s also other things you need to consider. It’s not as straight forward as just buying any stock that has a good looking yield. Some of these things include:
- Their Payout Ratio: the percentage of their profits which are paid out each year. You want this to be reasonable. A company taking out debt in order to pay their shareholders dividends is never a good sign! It means it’s unsustainable at their current revenue levels and at some point they’ll have to cut or cancel their dividend entirely. NOT what you want!
- The fundamentals of the business: you need to be sure the stock price won’t decrease by more than the value of the dividends you’re set to receive that year, or else you’ll be down overall. Ideally you want the price to go UP!
- The dividend yield and yield history: is this sustainable? It’s great if you can find a 3-5% yielder whose increased their payout every year for 10 years, but does their revenue growth back this up? Will their future growth sustain this payout in your opinion?
Why Are Dividends So Great?
Because they are free money! Simple as that really.
You invest in a stock that;
1) pays a dividend, and
2) you believe will grow in value while you are invested in it
And they will give you money, generally every quarter as a thank you for being invested in their company.
The second reason they’re great, is that they supercharge the compounding effect of your investments.
If you’re seeing 10% gains on your investment portfolio now, once you add a few, well selected dividend stocks, you can immediately add an extra 3, 5 even 10% to this. That additional few percent, compounded over years could be worth tens, if not, hundreds of thousands of pounds (depending on the size of your investments).
Which Stocks Should You Invest In?
Well, this is never a straight-forward question to answer. And I always stress to do your own research!
However, there are thousands of stocks and ETF’s out there that pay dividends, and few people have the time or know-how to do that amount of research. I used to do a huge amount of research myself, checking all the information above and more to ensure my investment was worth while and to guarantee I’d see a return on my investment.
This online tool is saving me soooo much time, and helps me find dividend paying stocks that maintain and sustain their yields.
Click the image or here to take a look and sign up for their free list, which they will email direct to your inbox.
I don’t earn anything from you signing up by the way. This is just a tool I use myself that has made a massive difference to my portfolio gains that I feel others should be aware of.
Top Dividends have a team of people who scour the entire stock market for the best, highest yielding dividend stocks so that I don’t have to. They narrow down the search for me. They then send this list out to their subscribers so they can make an informed decision.
What I do, is take this list, research some of the stocks myself, and make a decision about which stocks, if any, I will invest in that month.
Of course, they do offer paid memberships, which is what I have (the monthly one – just $29 per month ~£22.60). And if you sign up to that, I will make a small commission.
Although, they often have offers running for a trial month though, which I signed up for. I think it was about $10 for the first month, cancel any time type-of-thing. And I had every intention of cancelling after that first month. But honestly, the lists they had were the kind of next-level, useful, insightful information I’d not seen anywhere for that kind of price!
The return on investment for me has been multiple times that £22.60 each month that I’m currently paying. So, well worth the subscription for me. Take a look yourself, get their free list, and if you think it’s value added, you can make your own decision about whether or not you’d like them to do the hard work for you or not! Some people love doing the research themselves!
It’s worked absolute wonders for my dividend gains. I’m seeing multiple dividend payments every month appear in my account. I then re-invest that money back into those very stocks which yielded those gains, which increases the next dividend I receive from that company, and so on. This compounds every quarter!
You can sign up to my Private Stock group, which has a dedicated Dividend channel where we share upcoming ex. Dividend dates for all US & UK companies.
In this channel you can ask questions about anything to do with buying/selling/receiving dividends.
PLUS you’ll get 24 hour access to me and other experienced investors, my live buy and sell alerts, weekly portfolio disclosures, my watch-list, rapid stock analysis and much more.
Click the image below and lock in 20% off your monthly membership FOR LIFE.
(There’s only 4 spaces left)
If dividend investing is not already a part of your investment/early retirement strategy, I implore you to strongly consider it!
If you want to see what stocks I’m invested in, I share a disclosure of my investment account each week on my twitter. So, make sure you follow me their and subscribe to this blog so you don’t miss those.
You can see the previous month’s disclosure here.
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