Dividends are a form of passive income when you buy certain stocks on the stock market.
For example, if you own McDonalds shares, they pay you 2.76% every year just for owning their stock.
In this post you will learn how dividend stocks work and if it’s a good way to make money.
Related:Get 2 free stocks (worth up to $1650) when you sign up for Webull! Learn more
Who Is It For?This is for anyone wanting to invest long term in a relatively low risk, low maintenance way.
You need to consistently invest money for a long time until you can live off of dividend income. The good news is dividends are a true form of passive income and 100% legitimate. It just takes many years for it to be worthwhile.
What Is It? High-dividend stocks provide a guaranteed income source for investors, no matter how new to the game you might be. Basically, companies will occasionally pay out what are known as dividends to their shareholders. Why? Simply to say thank-you for holding their stocks. These payments generally come on a quarterly basis, though sometimes corporations will pay one-off dividends to shareholders.
What’s in it for corporations? Sometimes they’ll pay these dividends just to attract more shareholders, and the attention of Wall Street. That can lead to increase investing and a higher profile on the market.
Many of the best high-dividend opportunities come from household names you hear every day. These include Coca Cola, Target, and even AT&T, who are known for offering some of the most excellent yields above 5%.
How Does It Pay?You need to invest a significant amount of money so that your dividend payouts can also be significant. If you do not have lots of money, use the strategy of continuous investment until your portfolio is large enough.
Let’s say you own 100 shares of AT&T at $30 per share. At their 5% dividend rate, each quarterly payout would earn you $150. That figure is calculated by taking 5% of a single $30 share ($1.50) and multiplying it by your 100 shares.
With any investment there is risk. You can also lose money if your shares go down in value.
- Far less risky than other stocks— dividend stocks are generally established companies with a long track record
- Guarantee of at least some payout to counteract stock market fluctuations
- Once you do your initial research it doesn’t take much time to manage your portfolio
- Takes a lot of money and time to become wealthy from dividends
- Limited range of corporations that pay dividends
The StrategyBefore you invest ANYTHING you need a good understanding of the stock market because you don’t want to lose money.
If you’re a beginner, I recommend this 45 minute investing course made by Business Casual. If you click on that link and make an account you will get the course for free.
You can also practice investing with the “Investopedia Simulator”, where you can buy and sell stocks with fake money for good experience. You should also educate via YouTube videos, podcasts, ebooks, books and learn from prominent investors such as Warren Buffett.
How To Buy Dividend StocksTo buy dividend stocks you need to open a brokerage account. There are MANY brokerages that come in all shapes and sizes.
If you’re a beginner, find one that is user friendly, trustworthy and has no commission fees. Here are some popular options by country:
- 🇺🇸 Webull – New members get 2 free stocks worth up to $1650
- 🇨🇦 WealthSimple Trade – Bonus $10 free when you buy $100 worth of stocks/ETFs
- 🇮🇳 Zerodha – India’s most popular broker
Remember that any investing in the stock market comes with risk. Do your research and be patient as you develop the instincts for the stock market.
The Bottom LineHigh dividend stocks are 100% passive income, but it will take many years of growth before it’s big income for you.
That said, starting now can give you the chance to build on your growth as time goes on—and could ultimately lead to impressive passive income gains that can help cover your lifestyle costs.
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