Dividend & Conquer
Money doesn’t grow on trees, but it does grow through dividend investing.
Divvy, Divvy
What are dividends? Dividends are distributions of profit from a company to its shareholders. When companies earn an excess of profit, it is able to pay a portion of those gains to their shareholders. Any additional profit left over goes back into the company.
Why are dividends so important? Dividends help to build growth for your assets due to the gains provided. If you invest enough money, you could gain a sizeable amount of profit income monthly. As time goes on, the power of compounding interest will help your net worth skyrocket.
What is the frequency of dividend payouts? Companies offer dividends to their shareholders monthly, quarterly, bi-annually, or annually. You can research online into a company to see what their dividend yield is, payout frequencies, and dividend amounts.
How do I purchase stocks? Your company’s retirement account may have the option to buy stocks and invest in specific funds. You can open up IRA Retirement accounts and purchase stocks there. Companies like RobinHood, WeBull, and M1Finance offer trading and buying. I’m sure you have CashApp; did you can buy stocks there?
Do I buy a bunch of Gamestop and AMC stock like everyone else did? Both companies do offer dividend payouts; however, it is hard to label them as stocks you would hold onto forever. In 2020 you could have bought a share of either for around $5. In 2021, the internet rallied to beat the hedge fund and investment firms at their own game, shooting the value of these stocks “to the moon”. If you sold your $5 stock when the price inflated to $300, you would have made a $295 profit. I never bought into GameStop but did for AMC. Credit to one of my boys who told me about AMC and I made a profit last year. I personally think it takes a lot of time and energy to buy stocks and then gauge the right time to sell them. Buying and holding onto good dividend stocks allows for good account growth.
Do I need to throw all of my eggs in one basket? I’m sure there are investors out there who have their entire life’s savings invested in a only handful of companies or set of funds. I cannot advise on the perfect approach as there are so many options. The list below only scratches the surface.
- Individual Stocks (Stock Market Ticker Symbols): think about the big brands and household names — Apple (AAPL), Nike (NKE), Johnson & Johnson (JNJ), Home Depot (HD), Target (TGT), Exxon Mobil (XOM), PepsiCo (PEP), and Coca-Cola (KO) as examples of companies with so much income and market capital that they are able to pay out dividends.
- ETFs (Exchange Traded Funds): Funds that you can buy which are a pool of some of the top companies in the stock market, the entire stock market as a whole, or industry/sector-specific. One ETF can hold hundreds of stocks, bonds, and securities inside of it. Certain ETF funds may only have companies specific to energy, health care, technology, consumer goods, etc. Examples: SPDR S&P 500 ETF (SPY), Vanguard 500 Index Fund (VOO), Vanguard International Stock ETF (VXUS), and Invesco (QQQ). Investing in ETFs can be beneficial if you prefer to invest in multiple companies instead of a singular one. You still gain dividends from owning ETFs.
- REITs (Real Estate Investment Trusts): Stocks and ETFs that provide dividends based on profits in the real estate market. Realty Income (O) and EPR properties are examples. An alternative is E-Real Estate, where you invest money into pieces of real estate, instead of owning the entire property. Fundrise is a company that allows you to invest in e-real estate.
Ay, Tee, and Tee
I love to use AT&T (T) as a straightforward example of dividend investing. They have offered their investors consistent and strong dividend returns for years. They offer $.52 in dividends per share and payout quarterly (every three months). Always remember that share prices and dividends vary from company to company, and are dependent on the market cap, value, and profit that particular company has. You would need to invest a lot of money in a company (or companies)to really see your money grow.
General Example: Let’s say you bought 30 shares of AT&T stock at $30 each. You have invested $900 into the company (and technically now a part-owner of the company). Let’s imagine their dividends paid out $.50 a share. Every three months (quarterly), AT&T awards its shareholders with that dividend return. 30 x .50=15; which means by owning 30 shares with a $900 investment, you just gained $15 in dividends. You could use that profit to buy stock for another company, or you can reinvest it back into AT&T. That $15 gained is worth half of the $30 price of a stock, meaning you now own half of one stock. Over the course of a year by reinvesting, you would have gone from owning 30 shares of AT&T to 32 shares. 100 shares at $30 would be a $3000 investment, with $50 in dividends every quarter. 10,000 shares at $30 would be a $300,000 investment, with $5,000 in dividends every quarter. So on and so forth.
Editor’s Note: As of 2022, due to AT&T’s recent business changes and company mergers, it plans to cut its dividend payout from $.52 down to $.24. This is a big bummer as it’s been a good option for investors to hold onto for so long. When you invest in a single company, remember to pay attention to it daily or weekly to see how they’re performing. There is always a risk of losing profit whenever you invest.
Dividend Queens & Kings
Creating generational wealth requires smart decisions in the present. It’s okay to be a consumer, but also play the other side of the fence. If you shop from a certain company often, do research on their stock prices. Chances are that they offer dividends to their shareholders. You could spend $200 on [name brand] headphones, or instead use that money to buy shares of that company. Become an owner and consumer. Kick back and relax as you watch everyone else blow their paycheck while you gain a little profit. Accelerated growth of your net worth leaves you with peace of mind. Good luck on your journey my fellow Dividend Queens and Kings!
Disclaimer: I am not a professional financial advisor and this article is opinion-based. Always do your due diligence and seek a professional for guidance.
