A Few Tips on Dividend Investing
Investing in dividend stocks is pretty popular because it allows people to invest in the stock market and make a consistant monthly cash flow without having to spend a lot of time trying to trade the market.
It is a lot easier to go find a list of dividend paying stocks and get into the strongest stocks on that list, then it is to spend hours trying to pick the tops and bottoms in a selected group of stocks. It is also much less stressful.
So, what are some factors you can use in order to get into the best dividend stocks? Well one thing you can look at is the dividend yield ratio. This simple formula compares the amount the company is paying on dividends with the price of the company.
For instance if the stock is paying out $5 in dividends every year and is trading at $100 that means that the dividend yield ratio would be 5%. This can help an investor find a stock that meets their minimum desired rate of return.
So, if you want to make at least 5% a year one way you can do that is by looking for dividend stocks that have at least a 5% dividend yield ratio. This isn’t a guarantee that you will make at least a 5% return because the market does have its ups and down, but it is the closest thing to a guaranteed return that you can get.
There are also other more complex ratios such as the dividend payout ratio and the Gordon growth model which you can use if you want to look more into dividends.
But just remember, a stock that pays high dividends does not mean that it is a good investment. Looking at the company can also help you reach your investing goals. So while dividends are not the only thing to consider when making a long term investment they can be very helpful.
Tags: dividend investing tips, tips for investing in dividends
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