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Income With Dividend Stocks

2 July 2010 3 Comments

If you’re looking for a safe yet fruitful investment, especially during an economic recession, dividend stocks may be the answer. Investors view dividend stocks as having minimal risks and reliable profits when compared to other investing options. Dividend stocks are not as volatile as other stocks when markets are chaotic, and their value can continue to rise even during market lows.

The Basics

Dividend-paying stocks offer an excellent strategy for creating a reliable and lucrative income in years to come. As a long term investment plan, these stocks give you the flexibility to reinvest the dividends in either the same company or in other stocks. Dividend stocks are a compelling way to create a comfortable retirement income and the sooner you start investing, the more handsome that income can eventually be.

When you buy dividend stocks, the company pays you a percentage of its annual earnings in monthly, quarterly, or yearly installments. The more shares you own, the more you’ll get paid. You can receive your profits in cash, receive additional shares in the same company, or invest the proceeds in another stock altogether. Dividend stocks can offset the cost of inflation and offer quicker compounding than other investments. During bear markets, dividend stocks can be purchased at lower prices with considerably higher yields.

Because shareholder profits on dividend stocks correspond to company profits, your return is less vulnerable to emotional factors that influence stock prices. Although the value of the stock may decrease, you’ll still make money. Dividend stocks with a lower cost per share can pay you more in dividends than stocks with a higher cost per share, giving you more return on your investment.

What To Look For

Choose stocks that have a solid track record for paying dividend income to shareholders. Look for companies with at least a five year history of rising profits. Another consideration is diversity. Rather than invest in just one dividend stock, spread your investments over a variety of solid companies in different market sectors. Finally, look for companies whose dividends continue to rise even during a recession. These are the companies that are committed to paying dividends to shareholders.

Key Dividend Stats:

  • Dividend Yield: 3-10% (Anything higher is usually too risky)
  • Payout Ratio: Less than 50% (You don’t want to own a stock that pays all its profits out in dividends)
  • Dividend Growth Rate: 10% or higher (We want to see that dividend go up over time)

Where To Find High-Yield Stocks

To view an updated list of stocks currently paying the highest yields, use a free stock screener at Yahoo Finance or checkout Dividend Stocks Online dot com. Obviously you’ll want the highest possible return on your investment, but it’s better to go with a solid company offering a reasonable and consistent return than to choose a less stable company with a higher yield.

High yield stocks allow you to create an entirely passive residual income stream. A regular and consistent investing approach is advisable for maximum returns. You’ll want to continue to build your portfolio over the years in order to generate the highest possible income to enjoy down the road. Dividend stocks are not a “get rich quick” scheme but, with careful and intelligent planning, they can be a clever way to get rich eventually.

This guest post was written by Dividend Stocks Online, covering the best high yield dividend stocks for income investors.”

3 Comments »

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  • carlos said:

    Tanks for the informations.This could help me a lot.What about investor visas? I have friends who went on USA using this type of visa and have successful businesses.