What are Dividend Stocks and How Can I Pick Them?
Investing with Dividend stocks
If you are like me, you like to be in control of your money. I will also guess that wherever you invest your money you expect more in return when the time comes for you to collect. That is why at least one dividend stock should be in your portfolio !
What is a Dividend Stock?
In short, a dividend stock is when the company from where you bought stock pays you back for owning shares in their company. The payment received will be in cash or extra shares. The company will decide its payout ratio to its shareholders and then reinvesting the surplus profits back into the company.
Investing in dividend stocks is a great avenue for residual income. Dividend stocks are great for those who are looking to create extra income for their families.
Popular Mistakes in Dividend Investing
The first popular mistake that people often make is getting too excited too quickly and skipping the research altogether. Often we hear experts on television that report a certain stock is going to soar and now is the time to buy! What they say is important to listen to but not enough to act on.
You need to know the company that you are investing your money with; after all, it is your money! Do not just buy a dividend stock because of its yield or because it is a dividend either. Focusing on what the potential a company can do in the future is where your attention needs to be.
Do not forget about your stock. Do more research at least on a bi-weekly basis on the companies you invest in. You can then be ready for any changes that may occur that were unforeseen.
Understanding a Good Dividend Stock
Look up, study the company’s financial statements, and research the following:
- Does the company have continual rising dividend payments?
- How the company compares with the overall industry?
- How is it coping with the current economic conditions we are currently experiencing?
- Do you feel the current stock price is a good value for where the company going?
- Is there enough cash flow to sustain the company?
Stocks Paying Dividends:
- Coca-Cola (KO)
- Clorox (CLX)
- Colgate Palmolive (CL)
- Allstate (ALL)
- Abbott Laboratories (ABT)
- Chevron (CVX)
The truth is there are hundreds of stocks that pay dividends and you will just have to make that part of your homework. The cliché of having a diversified portfolio is true. Dividend paying stocks should be just one of many branches you should have when investing your money. While trading, don’t make drastic moves, be patient, and you will be fine. Happy trading!!