how to buy stocks online | DIVIDEND STOCK INVESTING FOR DUMMIES

With the stock market performing so poorly for so long, those that have invested in dividend stocks might be doing a little better than the rest of us. Dividend stock investing is buying stocks that repay a small percentage amount back to the shareholders either on a monthly or quarterly basis. 

When a company makes a profit, they can do several things with it. They can keep it as a safety net and invest it themselves, they can put some of it into R & D (research and development), or they can give some of it back to the shareholders. Probably more companies DO NOT pay any of it back to shareholders and thus don’t have dividends.

The amount of a dividend is voted on by the board members and is different for each company. It can go up or down over time and it can even be done away with if a company starts losing money or needs the money for some other use. The bottom line is that no dividend for any company is guaranteed to around forever.

That has never been made clearer than in this recession that has seen many companies lower their dividends or stop them altogether because of tough times. With so many corporations losing money or having their profits drop drastically, the first place they look is to cut the dividends if they pay them. That is why high dividend stocks may not be a good a bet as you might initially think.

Many stock investors like the idea of buying only companies that have dividends because it is a small hedge against the stock’s price going down. Usually companies in older industries and more conservative industries are the ones that pay dividends. Since the time the tech boom has created so many new start up companies, we have seen that most technology companies (which just happen to be the most speculative) do not have a dividend.

Whenever you first learn how to buy stocks online, you will be able to see where it show if a company pays a dividend. It will most likely look something like this: Dividend & Yield  .010 (.47%). This would mean that you get 10 cents for every share you own and that amounts to .47 of a % compared to the share price at that time.

If you have the choice of buying two companies that you think are about equal in their future prospects, you might make the decision based on the dividend payout. For example, if one of those companies pays a dividend and the other doesn’t, you might choose the one with the dividend as the better value. Likewise, one dividend may be much more than that paid by the other company.

Dividend stock investing is smart for those that like to see some money coming into their portfolio every quarter. If you have mostly stocks that do make these quarterly payments, it makes a down market like we have now just a little bit more palatable.