Dividends are passive income. They could easily become your greatest and most profitable asset. You do nothing, you get paid.
There is really no excuse why you aren’t earning passive income.
Don’t buy an iPhone, buy Apple. You may not be able to invent a revolutionary product, but you don’t need to. You can own a tiny piece of Apple and get paid for LIFE. This is how fortunes are build. This is how people retire.
The magic of dividend is compounding. Money works for you by compounding on itself.
Before you decide to throw all of your money into one stock, you should have a plan. You should have a roadmap to your end goal. All dividend are not created equal. No 2 companies are a like.
If you choose to go down the dividend investment path you should know that it is a life long path. You want to get paid quarter after quarter. You should have a rule: whenever a dollar goes into the asset column, which is a dividend, it does not come out. You act like it no longer exists. It become your employee. That’s why you need to choose carefully. Is that business in it for the long term?
If your goal is to maximize your dividends there are some things you should know before investing.
How much is the actually dividend payment? How often do they pay? Will the dividend increase over time? Does the dividend effect the stock price? These are all questions you should ask and be able to answer before you decide to marry yourself to a stock.
Have a strategy – do you want to earn monthly or quarterly dividends? How much do you want to earn per year?
Picking the right stocks – you want stocks that have a long history of paying dividends. You want stocks that increase their dividend payout over time. You want to make sure the dividend yield is not too high. Otherwise it will affect the stock price. You want to find companies that are relatively stable.
Drip – Dividend Reinvestment Program. This is essential to building up your wealth. Some brokers offer automatic Reinvestment when you enroll in the program. Others like Robinhood, you need to manually go in and buy more stock when you get paid dividends. Remember also that you have to pay tax on dividend even if you reinvest them.
Dollar cost averaging – If you really want to increase your portfolio value, you should be putting in a set amount of money from your paycheck every month into income producing assets. Read Richest Man in Babylon for more on that topic. But the idea is that no what the price of the stock if you continually buy over time your investment will average out. Besides you are not invest for the stock price necessarily, you mainly want the dividend.
Look at Mutual Funds – If you are not interested in managing a portfolio, but want to take advantage of the strategy look into mutual funds. The same rules apply for mutual funds: Do your homework. Except with mutual funds, watch out for fees. They will eat into your gains.
Taxes – No one escapes Uncle Sam. If you don’t pay your taxes you will pay the price. You are required to pay taxes on your dividend income whether or not you reinvest the money. Dividend income is better than earned income. You will pay a much lower rate on dividend income over earned. The max you will pay is 20%
The vast majority of billionaires reached that status because of stock ownership. They decided that they didn’t want to reward a company, but have a company reward them.
You are a business, just like them. Dividend income will make you a corporation with the ability to earn even when you are not there. Dividends can compound, something you cannot do. Learn the nature of money and you will master the game.
3 Dividend Stocks I love:
O – Realty Income – consistent dividend growth
XOM – Exxon Mobil – high dividend payout amounts
T – AT&T – dominant market leader. Cash flow ability to pay out over the long term
These are some stocks that I have been successful investing with. Companies that dominate the market they are in are usually reliable dividend stocks.
Now go out together a plan and become a dividend rockstar. Also, check out our article about strong dividend stocks.