What are Dividend Stocks?
Hello, friends today I will discuss each and everything about dividend stocks. But before proceeding further for dividend stocks lets understand dividends.
What are the dividends?
Dividends are the amount of profit earn by the company. Dividends are distributed among the shareholders on an average time interval.
Dividend Paying Stocks
Dividend Stocks or Dividend-paying stocks are the stocks which generate a regular passive income for the shareholders.
If you love to invest in the stock market then you should invest in dividend stocks as these are genuine passive income sources.
How to Buy Dividend Stocks?
Dividend stocks are very easy to purchase. You can buy them similar to other stocks.
- I am sharing all the basic steps to buy dividend stocks.
- Open a brokerage account with the help of a broker.
- Add some fund to the account.
- Find a list of reliable companies that pay dividends.
- Buy dividend paying stocks
Benefits of Buying Dividend Stocks
- Dividends Stocks are safe stocks.
- Dividend-paying stocks pay you a regular income on the basis of 3 months or as per the company criteria.
- A recurring revenue model is generated to obtain profit.
- 5-10 % profit assurance on your investment.
How to Maximize Dividend Stocks Earning?
Dear friends if you are thinking that you will be millionaire overnight with dividend stocks then maybe you are not right.
I am not saying that it is not possible! of course, it is possible but you have to move from stock to forex or from fiat to crypto. We have share many methods on how to make money with crypto in my previous article.
But here we are discussing dividend-paying stocks. So I will share some tips to get maximize profit from dividends.
- Long Term Investment
- Use Dividend Compounding
1. Long Term Investment
The long term investment is the best way to gain maximum profit from our investment. And this is suggested by warren buffet. Warren Buffet is the fourth richest man in the world.
He says that his maximum earning come to him after his 58th birthday and this is the result of long term investment.
2. Dividend Compounding And Power Of Compounding
Compounding is the process of earning profit from your profit. Let’s understand, you invest in a company and earn a 10% profit in the first 3 months.
Then after the next three months, you will earn a profit on your profit along with your initial investment.
All successful investors use compounding to maximize earning simultaneously while initially, they invest a little amount.
The dividend is a safe investment process and you can earn regular passive income from dividend-paying stocks.
Dividend compounding is a process where you can invest your dividends to buy some more stocks. Compounding can improve earning significantly.
You have often heard that money can be earned by money only. And this thing becomes more meaningful when we use compounding.
How To Earn Money From Dividends By Compounding?
The process is very simple First of all you have to buy dividend stocks.
Whenever you get a profit at the end of the first year, you have to reinvest it again.
The meaning is simply that you have to increase your initial investment each year by reinvesting your dividends.
Maximum investment and maximum profit and maximum reinvestment increase the possibility of the highest return.
Suppose you purchase 100 shares of Indian Oil and price was rs- 50/share.
Then your total initial investment is Rs: 5000/- for the first year.
Suppose you hold that amount for 1 year and you receive 1.5 rupees on each share then your total earning become 150 rupees.
Suppose that dividend increase 5% each year since you purchase shares then your initial 5000 rupees investment will become 13776 rupees.
And suppose the share price increase 10rupees each year then after 20 years your share price will become 400 Rs.
Your net share profit will become 300X100=30000 Rs. Then your total earning will become 13776+30000=43776 Rs after 5 years.
But should leave the share value as it is not sure it may be high or low depending on the situation. Only calculate the dividends then your total earning is 13776 Rs which is a good amount for 5000 rupees investment.
Dividend Reinvestment Plans
Dear friends if you want to take advantages of compounding investment then you should choose the proper dividend reinvestment plan.
I never prefer to take earning on quarter basic. It is much profitable to reinvest your dividends on the same day.
Same day reinvestment provides a higher yield. So instead of withdrawing money, you should choose your appropriate DRIP.
Actually, DRIP is similar to mutual funds. Or you can say that another name of the mutual fund is DRIP.
For selecting drip you can choose a company, a broker or any agency which is good for you as per your
DRIP plans may be very beneficial for you as you may get a discount on the new purchase. Sometimes you get additional features on purchasing DRIP.
Sometimes we get more profit as there is no additional broker. And one more interesting thing is that you get multiple options and you don’t require any special knowledge for this reinvestment plans.