If you want to make your investments profitable and continue strengthening your assets, you need to start earning money with dividedin two.
Actually, you don’t have to be an expert to understand the role that dividends play in your level of income, or in your investment plans.
In fact, the payment of dividends offers you a safe return. Therefore, you will be able to make constant reinvestments and get the most out of compound interest.
What are dividends?
Before presenting you five steps that you can follow to earn moneyro with dividendos, it is necessary that we address its most elementary definition.
According to nerdwallet, a medium specialized in the stock market, Dividends are regular earnings payments made to investors who own shares in a certain company.
However, it is important to emphasize that not all stocks pay dividends. That is why you have to know the market before making any financial decision.
In theory, yes buy shares of dividends from a certain company you will receive payments on a regular basis.
In other words, you will earn a return on investing in stocks. For example, if you own 20 shares in a company, and the company pays $3 in cash dividends per year, you would be earning $60 per year.
Start earning money with dividends in 5 steps
If you are an investor, the dividends are comparable to an income that you will receive regularly after becoming the owner of a company.
Collections can be made in cash. This mode is known as “Cash Dividends”.
According to FindCash, This form of payment is very beneficial for shareholders, because it occurs periodically.
On the other hand, you can choose not to receive payments and in exchange you will be issued new shares in the company. This practice is known as “Stock Dividends”.
Now that you master this basic information we will share five steps to follow to win money with dividends:
1. Buy stocks that pay dividends
A moment ago we told you that not all stocks pay dividends. To find out which ones do pay, you can consult the data of:
- Industries or sectors rich in dividends.
- Lists of the best dividend growth stocks.
- Investment newsletters.
- Investment websites (reliable and specialized) in special dividend investments.
- Mutual Fund ETFs that focus on dividends.
Once you know the companies that could offer you the most profitable dividends, after buying shares, you will need to complete these assignments:
- Investigate how the company makes money.
- Analyze historical dividend growth.
- Determine the annual forward dividend yield.
- Consult the valuation of the shares.
- Assess the safety of dividends.
- Know the financial position of the company.
- Calculate the dividend payout rate.
How to invest in stocks that pay dividends
There are a couple of alternatives for investing money in dividend stocks. But one of the most popular and effective is anchored to index funds.
Currently, you can invest in index, mutual, or publicly traded funds. Stock Exchange.
Index funds (ETFs) give you access to a selection of dividend stocks within a single investment.
This means that through a single trade you can build a portfolio of dividend stocks.
After making your investment of money, the fund will pay you regular dividends, and then you can treat them as income, and even reinvest them.
One of the biggest advantages that dividend funds offer you is immediate diversification.
Basically, if a stock held by the fund cuts or suspends its dividend, you still have the income from the other stocks.
if you are a beginner investor It is very likely that you are wondering how to make a smart investment.
In that case, you should know that the actions that offer you dividend yields greater than 4% have a considered risk.
For their part, those that offer returns of more than 10% tend to set off many alarms, because they may indicate unsustainable payments.
2. Reinvest the dividends received
This step is based on a simple goal: to generate more dividends from the dividends you already have.
That is, instead of using your own money to buy other stocks, you will use the income generated from your dividends to achieve that goal.
In the same way, you can reinvest the dividends, automatically, in the same shares that paid them to you.
For this you can rely on a trusted stockbroker; as long as it is specialist and professional.
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Additionally, you can accumulate your dividends in cash and then make a global reinvestment in one or more dividend shares.
You can check the list containing the stocks with the highest dividends in the index S&P 500 to have a clearer vision of your reinvestments.
The actions of Citi Group, Verizon, AT&T, Best Buy, Hasbro Y Ford Motors, These are just some of the ones that were on this list in September 2022.
3. Invest for higher returns
Investing to obtain higher returns is another of the steps you can take to earn money with dvidendos.
Why? It turns out that the dividend yield of a certain stock indicates the value of annual dividends you will receive (based on your investment amount).
For example, if you invest $500 in a stock with a 3% dividend yield, you could earn $15 per year in dividends. (The calculation would be $500 x 3%).
The key is to invest in higher dividend yielding stocks, as they will bring you more dividend income.
However, you must remember that yield percentages greater than 4% are of concern.
Before buying a stock you must evaluate the security of its dividend. If your performance is very high, it could be because:
- The payment would be unsustainable.
- Investors are selling their shares. This lowers its price and increases the dividend yield.
Experts explain that verification of the payment index is one of the fastest strategies to measure the safety of a dividend.
This information is usually available at finance websites and also in many corridors on-line.
In general, investors lean towards payout rates of 80%, or even a little less.
4. Grow your dividends
Another of the steps that you can take to earn money with dividendos is to make investments that allow them to grow.
To do this, you must design and analyze an investment strategy, in shares, that have a history of increasing their dividends per share.
This is a good mechanism to drive organic dividend growth and also to boost profits. passive income thereof.
You only need to invest in those types of stocks with a history so that the dividends start to generate every year, while you sleep, and without making additional investments.
5. Make holding swaps in your portfolio
Over time the prices of certain shares will offer better returns.
As if that weren’t enough, some companies that pay dividends can also increase their dividend rates faster than other companies.
You must be aware of the market so that you are able to take advantage of these types of situations or changing scenarios.
Why? It’s simple, because they offer you new opportunities to earn money.was with dividends.
They can also create the ideal circumstance for exchanging the current holdings of your investment portfolio for new ones.
Another thing that can happen during these trading conditions is that you take money from a stock you’ve already invested in and then add it to another stock.
With these strategies you can increase the dividend yield you already have in your investment portfolio, increase the dividend growth rate (or both).
Invest in stocks that pay dividends
make money withno dividedEndos are not reserved for the most experienced investors only.
If you think you want to invest in dividend-paying stocks, and you don’t have a lot of experience, it’s wise to contact a stockbroker to don’t risk your money.
These types of investments offer you many advantages; starting because dividends become new sources of income.
In addition, its periodic payments give you profitability and give you the opportunity to benefit as much as possible with compound interest. (Also known as the “eighth wonder of effortless wealth creation.”)
Continue reading: 5 Best Long-Term Investments to Build Wealth
