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How to Invest in Dividend Stocks

UPDATED: March 2022

How to Invest in Dividend Stocks – If you’re a retiree or want a stable income from your investment portfolio, consider investing in dividend stocks. During uncertain times, the revenue generated from dividends ensures that your portfolio offers steady returns on your investment. Due to this reason, many investors are suddenly shifting their attention to dividend stock investments, and we recommend you should do the same.

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What Are Dividend Stocks?

Any stock that regularly pays shareholders dividends is known as a dividend stock. They are generally well-established and large companies with predictable earnings and revenues and want to return their earnings to shareholders through dividends.

The industries that commonly pay out dividends to shareholders are generally energy companies, financial companies, utilities, and healthcare companies. If you’re thinking about how to invest in dividend stocks, consider companies paying higher dividends, which should be around 2% per year.

How to Invest in Dividend Stocks?

There are several methods you can employ when investing in dividend stocks. It is best to use a broker or brokerage firm’s services, as they have more experience in dividend stocks investing. Here is the process you should follow:

1. Research Quality Stocks that have Low Volatility

The first step involves finding dividend stocks worthy of investment. You can do that through a stock screener that your broker will provide. All you need to do is enter your requirements into the screener, and it will provide a list of options. You must ensure that the company you decide to invest in has famous product lines, a well-established reputation, steady revenue growth, and strong management. Also, check the price volatility of the dividend stock.

2. Evaluate the Stock

Once you have selected a company that pays out high dividends, evaluate the stock before adding it to your investment portfolio. The best way to go about is finding stock quotes from reputable financial websites like Bloomberg and MarketWatch. You should compare the company to its competitors and figure out where the stock stands concerning the market. You also need to check the dividend payout ratio to learn whether the company will remain profitable in the future.

3. Decide How Much You Want to Invest

When you have researched and evaluated the stock, you must decide how much you want to invest in the dividend stock. The best advice is to diversify your investment, which means not putting all your eggs in one basket. Dividends aren’t guaranteed, and a company’s financial status can quickly change in these uncertain times. Therefore, you should purchase multiple dividend stocks in different companies so that you have a diverse portfolio.

4. Purchase Stock from the Company or Through Your Broker

The last step is simple; all you need to do is purchase the dividend stock you want from the company or buy it through your broker. You can purchase the stock through a direct stock purchase plan commonly known as the DSSP. Most companies don’t offer them, but the larger, well-established companies do have this option. You can purchase the company’s stock without any fees and are best for investing in companies for several years.


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