So, you have just heard about dividend investing? And you are thrilled about the concept behind it. The fact that you can make money money while you sleep is a mind-boggling idea. Though, there are several things to keep in mind before you start dividend investing.
We like to note that this article is not financial advice! Whatever you read here is for entertainment purposes only. Take everything you read in this article with a grain of salt. Lastly, please continue to research more about dividend investing before you invest! A possible good resource for dividend investing is Andrei Jikh’s YouTube Channel.
How To Begin Dividend Investing?
The first step to start investing into dividend stocks is to first open a brokerage account. There are many brokerages out there, some popular ones include Fidelity, Charles Schwab, TD Ameritrade, and Vanguard. Though, many young investors are using investment apps, such as, Robinhood and WeBull.
What To Look For When Buying Dividend Stocks
Research The Company
When picking dividend stocks, there are quite a few things that you have to lookout for before purchasing a dividend stock. One of the most important things to look out for any stock, not just for dividend stocks is the company’s management and business model. You want to try and find a company that not only have good management, but also have an ideal business plan to help the company grow or at least remain afloat.
You would also want to check the valuation of the stock as well. Check to see if the stock is currently overvalued or undervalued. Be sure to also check if the company any debts, if a company has a huge amount of debt, it would probably be wise to avoid the company for the time being. Another thing you would want to look out for is the P/E ratio of the company. Typically any P/E ratio that is low for example around 20 or less is considered a good P/E ratio.
If the company is undervalued, have good management, good business model, low debt, and a good P/E ratio, then it might be the perfect dividend stock for you.
Look at the Dividend History
Another thing to look for is the dividend history of the stock. Typically a good dividend stock are those who increase their dividends every single year. With having consecutive dividend increases every year, you might see that that company is doing pretty well, since they are able to increase their dividends.
Don’t Chase High Dividend Yields
Also, for dividend stocks, it is wise not to chase for high dividend yields. This is because the company might not be able to pay the same dividend yield in the future or else they will be either losing money, which is a bad business practice. High dividend yields attract many investors, though many dividend investors think long term. Instead, dividend investors want consistent growth or a steady dividend income for each stock, where stocks do not typically cut their dividend income. Again, one of the main goals for dividend investors is to find a stock that consistently increases their dividend income every year.
How Do You Collect Dividends?
When you start dividend investing, you might be asking how do you collect your dividend income. Well, the best part is that your brokerage collects the dividends for you and all of your income will be in your brokerage account. So there is no need for you to chase around your dividend income.
In fact, some brokerage have the ability to have your dividend income reinvested through DRIP or Dividend Reinvestment Plan. Which allows you to easily reinvest your dividend income back into the stock.
How Can I Easily Track My Dividend Stocks?
The best way to easily track your dividend stocks is to use our dividend portfolio tracker. Our dividend portfolio tracker allows you to easily track your stocks and upcoming dividend earnings all in one place. The portfolio tracker can simplify the lives of many investors who needs a place to easily track all of their investments under one dashboard. With updated stock prices to our custom built spreadsheet, you can now ditch your ordinary Excel Spreadsheet for a much more intuitive method in tracking your positions.
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Article by: James Matterhorn, The Dividend Portfolio premium member since 2020
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