The Joys of Dividend Investing
Making Money While You Sleep!?
Dividend investing is one of the more common types of investing for everyday people. I myself, do quite a bit of dividend investing. The best part about it is you can make money while you are asleep! There are few better feelings than waking up and finding yourself a dollar richer. The ultimate goal is obviously getting much more than a dollar each day, but once you get that first bit of money, you will be hooked and the snowball will start rolling.
What Are Dividends?
When you buy a stock, you are actually buying a portion of a company. It is a very small portion, but a portion none the less. Companies are constantly trying to improve and make more money. Who are they trying to make more money for? If the company feels like it has enough money to operate and expand, it may give out what we call "dividends" to the owners or shareholders. Just because you own a very small portion of a company, they will pay you for being an owner. This isn't the case with every stock, but many companies do it to attract investors.
Most stocks will pay this dividend every three months or quarterly. Some companies will even pay dividends out each month. These payments are generally 2-3% annually. So a stock that is worth 100 dollars would pay 2 to 3 dollars throughout the year. This doesn't seem like much, but with the more money you invest, the more you will get paid.
The Start of the Journey
I started dividend investing with just 50 dollars. It isn't that much and it didn't make me much money. Even though it didn't make very much money, I remember getting a small payment of 50 cents. That 50 cents felt so amazing! My money was actually making me money.
It had taken me a couple of months to get that first payment, but I had slowly been putting in a little bit more money 25 dollars at a time. Soon I was getting payments every month. Each month I was getting more and more dividends and it's addicting. With the dividends that I was getting, I just reinvested into more stocks to get more dividends. This is the addicting part is. You more you put towards dividend investing, the more you make and the more you make, the more you can put in. This snowballs until you feel like taking the dividends for yourself and for your own income.
The Ultimate Goal
The ultimate goal for most dividend investors is to have enough money invested that the dividends will pay for all of your living expenses. This requires a large sum of money, but the more time you have to let your portfolio grow, the more magic compound interest can work. This is achievable for most everyone. Just invest a small amount in dividend-paying stocks and you can start on your journey. It's not only a smart thing to do, it's an enjoyable thing to do.
Sometimes companies will pay a dividend of around 10% of the share price. At first glance, that sounds awesome. Why would I buy a stock that pays 3% when I could buy a stock that pays 10%. In most cases, a stock that pays 10% won't be able to sustain that for very long. Soon they will have to cut the dividend and the share price will drop and you will lose a little bit of money. Look for stocks that not only pay a dividend but are growing and increasing in profit. Many stocks that pay a two or three percent dividend will increase their payment each year and will be much better in the long run.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.