There are two ways you can make money on a stock: capital appreciation and dividend yield. Capital appreciation is the increase in the share price and the dividend yield is what the company elects to pay out annually. For example, if a company’s share price increased five percent in 2015 and paid an annual dividend of five percent, the annualized return would be 10%. Adding high-quality dividend stocks to your retirement portfolio is the best way to ensure consistent growth.
Things to keep in mind before asking the question of how to invest in dividend stocks:
Things to keep in mind before asking the question of how to invest in dividend stocks:
- When it comes right down to it, investing in dividend yielding stocks is more about common sense than finding under-the-radar stocks. That is, look for places where people spend their money when times are good and bad.
A stable business that increases its annual five-percent dividend on a consistent basis is more attractive than a business with an eye-watering 15% annual dividend that doesn’t. In fact, companies that grow their dividends are more attractive than those that simply pay a high dividend.
