When you look at what stocks to buy there are so many, it is confusing and overwhelming. Where do you put that bit of cash you’ve set aside in your ‘pay yourself first’ monthly drill? Downturns or slowdowns in the economy don’t help the equation.
Often the downturns in a stock can be a good time to invest. Depending on how much money you have to invest, how comfortable you are and the results of your research on the stock, your entry may be a smooth or a nervous one. As long as you have done your homework, buying stocks can enhance your retirement income. Investing in a stock that returns a dividend is a good way to start.
What is a dividend stock?
The basis of a dividend stock is simple. Dividend paying companies distribute a portion of their earnings to investors. For each share of stock purchased, you receive apayment, often quarterly. The dividend goes into your investment account, or if your dividend amount is enough, you may reinvest to purchase one or more additional shares.
But how do you choose from all the stocks that are out there? And where do you put your money?
Dividend stocks are usually found in companies that are well-established and financially stable. The companies are often part of industries that generate a steady flow of cash, such as utilities, banks, and those in household goods. Technology stocks are included in this group, however, they can be subject to volitivity that may make them a higher risk.
Investing in dividend stocks can be a good strategy for people who want to see their investment grow over time. With consistent income, and stock price increases, investors may also see an increase in the dividend amount.
Benefits
- A steady income from the dividends, and one to consider for retirement.
- Reinvestment in the stock through the dividends received make it easy to grow your stock purchase
- Using low volatility so you can let your investment grow without having to actively watch how your stock is performing – a six month or yearly review may be all that is needed
Risks
As with any investment you must do your research. Companies are not required to continue paying dividends, and may cut or cease the dividend payout.
Unless you are well-seasoned investor and you know your way around the stock market, you should get professional advice, before embarking on your investment journey. Educating yourself through online blogs, financial material or courses is also a good strategy to help you make informed decisions.
- Stocks rise and fall so learn when not to buy a stock
- Learn how to tell a profitable company from a non-profitable one
- Learn about the stock market before you start investing so you will go in understanding how it works
This information here is to point you in the direction of dividend stocks as a specific type of investment. It is not a recommendation to go out and buy.
Resources
https://www.investopedia.com/terms/s/stockdividend.asp
https://time.com/personal-finance/article/what-are-dividend-stocks