Why Invest In Dividends?
Mey here on another beautiful Monday morning here in Ala Moana Hotel enjoying time working next to my Mom (author of the sci-fi novel Veluli: Amac-1 (Volume 1)
Do you invest in the stock market?
Do you invest because you are hoping the stock prices will go up and you will sell high?
…or do you just do it because your investment advisor tells you to…
…or do you not have an adviser and had no idea what you are investing in?
…this article is dedicated to you, to give you some good advice on stock investing that actually makes sense for a change…
…it assumes that you are like the average person, who has really no idea what their stock fund is investing in, and just wants to make sure that their money is safe…
…so read until the end and get ready to learn the common sense way of investing – in stocks that make you money in dividends…
What Are Dividends?
…dividends are a portion of a company’s profits that are paid to you as a shareholder in their company…
…when you buy a stock, you are becoming part owner of the company in return for your cash investment…
…when the company is profitable, they can take a share of their profits and pay their shareholders…
…for example, say a company made 100,000 profit this month…
…and they have 50,000 shares…
…they could pay $2.00 per share in a monthly dividend…
…say you own 1,000 shares…
…you would make 1,000 shares x $2.00/share/month = $2,000.00 per month in dividends…
How Do I Make Dividends?
…when you buy shares in a profitable company that has chosen to pay it’s shareholders dividends…
…some companies are actually pretty profitable and do not pay dividends (at the time of publishing, Google is one of the most notable, and Apple too until recently)…
…some companies pay pretty consistent dividends, and are proud of that and publish it on their website (like IBM)…
…some companies are required by law to pay their profits in dividends like Real Estate Investment Trusts (like Annaly)…
…you want to choose a company that is profitable and consistently pays dividends…
Why Invest In Dividends?
…so if dividends make money, why do people still invest in companies that don’t pay dividends?
…that’s actually a pretty important question…
…if the stock doesn’t pay dividends, then buying it can only be profitable if you can sell it for more than you bought it for…
…people who invest like this are less concerned with dividends…
…this strategy has a lot more risk…
…check out this quote from Daniel Peris to understand why…
“…of the market’s annual total return of 9.7% since 1926, 8.6% of it (which amounts to 89% of the annual figure) came from dividends.” (page 16 of The Strategic Dividend Invester, 2009)
…so if you are investing in stocks that don’t pay dividends, you’re really gambling that a stock’s value will go up…
…and if you think about it, it makes sense, after all, wouldn’t you want to get paid part of the profits of the companies that you have invested in?
…how else are you going to make a profit from your investment?
Conclusion
…this post was inspired partly from my own dividend investing strategy and my intention to create a consistent passive cashflow…
…and also by reading the first Chapter of what one of my investment adviser friends calls the Bible on dividend investing, The Strategic Dividend Investor
…if you are serious about making money in your investing, I suggest you buy this book and read it immediately…
P. S.
…I blog about financial freedom because it’s my goal to help people have their time back…
…so they can spend less time working and more time enjoying their families and friends…
…I am a blogger and I do it for a profit as well, where I pay our family all of our profits…
…interested in making money for yourself, with better odds than gambling on the stock market?
CLICK HERE, enter an e-mail where I can contact you at and watch the free video…