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17 February, 2020 / Mon, 3:14 am

Date: 30.07.2019.

Dividends - Want to get involved in the stock market

High-dividend stocks provide a guaranteed income source for investors

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stock-market

Want to get involved in the stock market but don’t know where to get started? We’ll help you get a handle on how you can jump into earning from high dividend stocks without investing all of your savings. Smart investing can be a safe, lucrative way to begin turning your money into more money and advancing your financial future.

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%.

Who is it for?

If you’re interested in investing and the stock market but slightly terrified by the risk, dividend stocks are for you. It’s a great way to get a taste for investing and enjoy the feeling of receiving payouts while making some real income.

How does it pay?

Let’s say you own 100 shares of AT&T (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.

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.

Pros

  • Far less risky than other stocks—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

Cons

  • Takes a lot of money and time to become wealthy from dividends
  • Limited range of corporations that pay dividends

How to Get Started

You should start with learning about the stock market until you have a good understanding of investing. You can practice investing with the Investopedia simulator, where you can buy and sell stocks with fake money for good experience. You should also educate yourself via YouTube videos, podcasts, ebooks, books and learn from prominent investors such as Warren Buffett.

Once you develop your knowledge and feel ready to invest search and sign up for a low-fee brokerage like Questrade.

Remember that any investing in the stock market comes with inherent risk. Do your research and be patient as you develop the instincts for the stock market.

Summary

High dividend stocks are a 100% passive income strategy, though it will take many years of growth before they can become a major wealth builder. 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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