In today’s episode I want to share with you some basics about dividend investing as well as the power of dividends and how they can benefit you and build wealth for you over the long term.
We’ll cover topics such as, what is a dividend? How much can you make with dividends? Why do companies decide to pay dividends? And more.
We are also going to take a look at some examples of basic dividend investing portfolios and we’ll see how the rich becomes exceptionally wealthy by just putting their money in these dividend-paying stocks.
Finally, I am going to introduce to you my latest course “Passive Dividend Investing” which will show you exactly how to invest in high paying dividend stocks and grow your capital through dividend appreciation, so that you can manage your investments yourself, instead of relying on third parties to do it for you.
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Posted at: http://tradersfly.com/2018/01/power-investing-dividend-stock/
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Hold on sport. What about taxes, costs per trade, inflation, companies who cook the books and then get busted, and so on? What's your effective ROI, providing the company doesn't go under? You can't borrow against your shares. If there's an emergency, then you have to cash in some of your shares. There goes your income. How long would it take to recover? We don't have millions to invest. Stocks should only be a small part of one's portfolio. Too risky.
Not debating, I’ve heard a lot of strong cases, just asking to learn, my mortgage takes half my income, I’ve got about $24k left of a 30year note, maybe 30 working years how’s it possible. to save/invest $20k a year that’s massive in my thinking
Great video, I personally started with 1200 bucks a little over a year and a half ago with dividend stocks and now have18000 in the stock market all in Div paying stocks making me 1000 a year and growing (plus appreciation and div increases each year) by continuing to buy each month, nothing better then waking up to free money in my account each and every month for the rest of my life, sure It’s not a lot yet but it’s still free money that I don’t have to work for and there’s nothing better than that
Can you help me understand the relationship between rate of return and dividend rate?
Lets say I buy $10,000 of some ETF.
The annual rate of return is 7%.
The annual dividend is 3%.
How does it work?
The rate of return is 7%, so that means on $10,000, that equals $700.
The annual dividend rate is 3$, so that means on $10,000 that equals $300.
So they subtract the $300 from the rate of return and pay this $300 as cash and the remaining $400 is the value by which the ETF grew?
Or does the value of the ETF grow by $700 and they pay an additional $300 as cash for the dividend payment?
Also what happens if the annual rate of return is less than zero, for example if the market goes down and the rate of return is -5%. How does that affect the dividend? Do they still pay the 3% dividend as cash?
Please advise, thanks
Judging from some of the stupid comments below I can see why wealth isn't for everyone. Smart people plan for the long haul by putting their money to work for them. Poor people can only see today, and therefore will always be poor. Using this strategy will make anyone who is disciplined enough to invest, a millionaire with the passing of time.
Some knowledge of economics is required to understand how and why dividends on aggregate increase over time. Are you to match this performance by buying an income fund or try to outperform the average.
Dividend paying stocks are not great the first year - maybe a 3% annual return - 3K on 100K investment. But typically a lot of dividend paying companies increase their payments by an average of about 5-10% per year (and occasionally cut it too!). So without putting a single penny more in the investment, the following year you'll get 3.25K (7.5% growth).
Given that growth this is your returns with just dividend growth.
Years Dividend return
So with the same 100K investment after 24 years you are now getting a 18K return
But there's a second factor at work, which is DRIP investing. So typically when a dividend is paid, the price of the shares go down by the % paid. So not only does it reinvest the 3% to buy more shares. If you look at this table
Share price 100
Initial yield 3%
Number shares bought 3000
Dividend growth 9.00%
Div/share Num shares Dividend Yield on cost
1 3 1000 3000 3.000%
2 3.27 1031 3371.37 3.371%
3 3.5643 1065.8 3798.83094 3.799%
4 3.885087 1105 4293.021135 4.293%
5 4.23474483 1149.3 4866.992233 4.867%
6 4.615871865 1199.5 5536.738302 5.537%
7 5.031300333 1256.6 6322.331998 6.322%
8 5.484117362 1321.8 7248.90633 7.249%
9 5.977687925 1396.6 8348.438956 8.348%
10 6.515679838 1482.7 9660.798496 9.661%
11 7.102091024 1582.3 11237.63863 11.238%
12 7.741279216 1698.2 13146.24036 13.146%
13 8.437994345 1833.8 15473.59403 15.474%
14 9.197413836 1993.4 18334.12474 18.334%
15 10.02518108 2182.5 21879.95771 21.880%
16 10.92744738 2408.1 26314.38603 26.314%
17 11.91091764 2679.4 31914.11273 31.914%
18 12.98290023 3008.5 39059.05535 39.059%
19 14.15136125 3411.2 48273.1235 48.273%
20 15.42498376 3908.9 60294.71904 60.295%
21 16.8132323 4530.5 76172.34895 76.172%
22 18.32642321 5315.8 97419.6005 97.420%
23 19.9758013 6320.2 126251.0594 126.251%
24 21.77362342 7621.8 165954.203 165.954%
25 23.73324952 9332.7 221495.2978 221.495%
Now that is where the real money is made. You only put in 100K and not a single penny more, but are now getting 10% return after 10 years, but that's where it starts to really grow. At 15 years you are getting 15% and 20 years 60%. For that initial 100K investment you are getting a 60K a year return. At that point you could stop reinvesting and just live off the dividends.
It's all about time and not touching the money for the first 20-25 years. Best to do this for your children, gift them 20K when they are born so when they finish college they are getting a dividend of 45K a year.
Yes there are and there's even some that pay 20% but unfortunately when you're dealing with higher the dividend the more risk that the stock usually has because they try to make it up for it in their dividend to attract people
Timothy Yeav stock appreciation is the growth in stock price over any given time period. For example, as of today F is around $9.50, if 3 months from now the stock is at $10.00, then the stock appreciates .50 cents per share or 5.3%. Then to calculate total return, You’d add the dividend received per share to that .50 cent gain. Hope this helps!
A share of a dividend paying stock that increases dividends is an accelerating, compounding investment. As a trader and investor I see my mission to accumulate shares of these dividend growers at the smallest cost basis. For example, when I see the right opportunity in such a stock I will buy 101 shares and then when the price of the stock has lifted as little as 1% above my cost basis I sell 100 shares and hold the remaining 1 share forever - a free micro-annuity that compounds (I have a DRIP that manages fractional shares for me) at an accelerating rate. Trading + dividends = early retirement.
After paying down most of my Debt I am literally able to put 80% of my check every 2 weeks into the stock market. I don't know why people are looking for secret ways to build wealth. Love this guys work keep it simple man.
👍 funny thing about your comment is that the stock market is the “secret way to build wealth” at least when it comes to dividend stocks 🙂 seriously try to talk to a random person about stocks or div paying stock and they look at you like a deer in the headlights like your from another planet 😂 most people have no clue and are perfectly happy that way
+Jorel Boston It also depends on what you love. I love the thought of security more than a nice shoe collection. Some women are addicted to shoes. I'm addicted to dividend stock. I find the challenge of growing my account fascinating and exciting the same way a gamer would get excited about becoming a top player. Most successful investors don't see it as a chore. The stock isn't their savings. It's their splurge.
Heck, you don't even have to do that. If you have 401k and then buy dividend stock on your own just 50 dollars or so a month you'll grow. I don't even reinvest dividends. I used to, but now I let them build in my brokerage account so I have some liquidity and I still grow at a decent rate.
Great video. He should have been a little more realistic about 3.5mil not being alot of money. Even to rich that s alot, very few can have that in just 3 individual stocks and not an entire portfolio even if rich unless a former CEO of company but still good points. Lol
REITs are not a qualified dividend. They are taxed as ordinary income. If you have a taxable brokerage account they are not the best thing to invest in. If you have REITs in your tax advantaged accounts then whatever
60% per year is great but you’ll have to sell all your shares to get your money and once the money is gone from selling your shares then what? And that is if your stocks are still up by 60% by the time you sell (unlikely) Dividend stocks continue to pay and increase payouts each year without selling no matter what the price of the stock
REITs pay very high dividends, and theyre typically monthly (not quarterly) but the capital appreciation of some REITS is hurting. Your call. I like major market ETFs personally. 12% appreciation + dividends on the S&P this year :)
Thanks Sasha, you're the greatest. Can you elaborate a bit on your decision to use a 4 hour chart? What is your insight on it? I see you using the monthly, weekly and daily chart a lot. Only in this video I saw the 4 hour chart a bit more.
Like I said in my previous comment you need too much time for your account to grow in order to be able to live off of your dividends. A typical person works for about 40 years , ages 25 to 65 , if that person is able to save about $20,000 per year in a 401K or IRA you may have about $400,000 plus interest or dividends at the end of your working years. If you can get about a 5% dividend yield that equals about $20,000 per year , that is not enough income to live on. And how many people can actually save $20,000 per year ?? It is just too slow , that is why so many people have to keep working past 65 or 66 years old.
I am not sure I understand what you are saying. If I borrow money to invest I have to pay back that money plus interest. How can I come out ahead ?? The interest on the loan will be greater than the dividends that I collect from the stock and how can I repay the loan in one year using only the dividends ???? Does not make sense to me.
MoneyManFernando investment loans? Why not use debt to buy assets (dividend paying shares) that you otherwise can’t afford? For example, if you found a stock that pays $1 per share each year, couldn’t you take out a loan of $20,000, invest that money into the stock, then pay off the loan after one year only by using the dividends? Then you still own the stock after that so all the dividends would go straight into your pocket. Right?
Max, do you understand the concept behind dividend growth??...if you invest in a strong company that pays a reliable dividend that grows every year that $197,000 will be alot more the following year especially if you re-invest the dividends
Compounding is when it gets really interesting, a 5% yield stock can literally go sideways for ten years, and you'll still have 8% plus annualized, and this assumes little to no dividends growth(basically the return you see from the avg. REIT). This is where you run into problems when comparing a growth stock to a dividends stock, it really isn't apples to apples, to get an apples to apples comparison you have to do the math on compounded returns on the dividends stock. If you do the math on most of the DOW 30 stocks that have raised their dividends yearly for the last 20+ years, the annualized returns are actually comical high. I generally trade growth stocks, and then just fill my retirement accounts with companies with 10% plus dividends growth avg. for the last ten years. Hardly unsafe, heck even when they do take a hit on price, it only means they compound at a greater rate. An example of this would be ENB, a stock I have held for close to 20 years, and over the last year and a half or so it has taken a huge hit on price/valuation, and I couldn't care less, why? Because my annualized return on that stock is like 30% for the last 20 years, and compounding at lower prices only means I pick up more shares every quarter. As long as it keeps raising its dividends you will without question see price rise over the long run. KMB is another stock I hold that recently pulled back that I couldn't care less about. Now one thing I strongly believe is, dividend stocks should be held in tax deferred accounts. I don't believe in income investing unless you have already retired, or are trying to retire very soon/early.
Biggest problem with dividends stock, and what most dividend stans like to ignore is, growth stocks compound also, they just do it internally which is tax deferred. Berkshire hathaway for instance is a stock that I hold outside of my retirement account that I treating just like my nest egg. It just keeps compounding(or growing) tax deferred(because I haven't sold any), and with its balance sheet it really is a SWAN stock in my honest opinion.
In a time of increasing change and uncertainty, we must be clear on what will not change to not get distracted.
Strategic Portfolio Management.
1. Periodic evaluation and prioritization of the entire innovation portfolio.
2. Strategic and priority-based resource allocation.
On a strategic level, portfolio and resource management must be fully aligned.
3. Release and exit of innovation initiatives.
About the authors.
Dr. Ralph-Christian Ohr has been working in several innovation, division and product management functions for international, technology-based companies. His interest is aimed at organizational and personal capabilities for high innovation performance. He authors the Integrative Innovation Blog.
The Biggest Mistakes in Managing a Portfolio.
The Biggest Mistakes in Financial Planning Series.
by Harvey Jacobson, CHFC, MBA, CLU.
Investors who have remained consistent with their risk profiles through volatile markets have seen a substantial recovery in their portfolios since March 2009. Those who are truly behind are those who panicked and are now left with the decision of how to recover their losses. They can, but it is a much slower recovery.
This article published originally April 13, 2010, Los Angeles Daily News.
Managing an agile portfolio.
When the right people on the right teams have the right context, they naturally do the right thing.
Set the right context.