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The Secret to Dividend Investing
When a company makes a profit, they often redistribute some of that profit to shareholders of the company. This is called a dividend, and many people invest solely as a means of passive income through dividends. Not all companies issue dividends and not all companies that do are equal. For one to succeed at dividend investing, one needs to have the right strategy.
Some people look for stocks that pay the highest dividends as they believe that that must be the best strategy since that's how they'd get the most money back as a dividend. This, however, could not be further from reality. Most stocks that are offering a high dividend are doing so because they kinda have to. Usually, they are paying that dividend because the stock price is falling so fast that they increase dividends to try and keep some shareholders from selling their positions. If a company is offering an 8% dividend yield but their share price is falling by 20% every year, then investing in that company makes no financial sense because one is still losing more money than they are making.
The secret to dividend investing is to find stocks that offer a reasonable dividend while still having room for growth. An example of this is Home Depot. Home Depot is a company that does offer a pretty nice dividend while also continuing to grow as a company. In fact, they recently hit an all time high in stock price. They are projected to experience more growth by Yahoo Finance as well. Companies like these should be the desire of dividend investors.
One can also get exposed to various amazing dividend companies by investing into the Schwab US Dividend Equity ETF. This ETF has a dividend yield of almost 3% (at time of writing) and is also up 24% year to date (at time of writing). This ETF has pretty nice returns which is amazing considering the fact that its dividend yield is relatively high. Investors of this ETF can enjoy being exposed to many amazing dividend stocks without having to personally build a portfolio.
Dividend investing is a very popular investment strategy when done correctly.
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