Long-term investments assure good education for your kids, relaxed retirement, and of course accumulation of wealth from return on investment. There are plenty of proven investment plans that could make you richer and double your wealth many folds, but only a few guarantee steady income.
Investing in dividend paying stocks is one great method to accumulate wealth. The whole concept of stock investment revolves around buying shares of profit-making and dividend paying companies after checking their track record.
Usually, when people with money look for stock investment options, they end-up contacting stock broking firms. These companies (not all) give vague advice and make a living out of people’s money. And people lose their money and also hope of trying their hand in stock investment.
Therefore, we intend to discuss stock investments to help you give the ROI you seek for retirement.
Concept of Stock Investment and Dividends
Stock investment means to buy shares of listed companies and earn (cash or stock) dividends as ROI. Public companies give a share in ownership to investors at a given value. The value of the stock is printed on the face of the shares and is known as face value.
Depending on the face value of the shares, the number of shares held by an individual and the total earnings of a company within a financial year, companies pay a share from profits to their share holders. The profits paid to them are known as dividends.
It is calculated on percentage basis and may vary based on the profits/losses of the company.
Does Stock Investment Make You Wealthy?
It is very well known that the richest people on earth have either inherited wealth, own their own business, or invest in other businesses. So, yes, stock investment can make you wealthy.
Buy high dividend paying stocks of different companies and keep a track of the value. Increase in the stock prices and consistent flow of ROI can make the difference.
An advantage of dividend investing is that you have two options. You may keep the payouts as cash or reinvest them as company shares. Reinvesting the dividends is a very sturdy way of compounding your returns and to get your money to work for you.
When is the Right Time to Invest in Stock?
Gone are the days when earning high-interest rate from banks was considered a viable opportunity. Because today, interest rates are near-zero and dividend paying stocks are the right option to yield returns. The right time to invest in stock is when you have the money and are looking for long-term investment options.
You should buy stocks when –
- They’re cheap.
- They’re in a good position.
- There’s an upward trend or at least heavy chances of the graph moving high.
- There’s a good investment strategy in place.
- You’ve researched well about the company you’re investing in.
- You’re sure of earning dividends from them in the long-run.
It’s no secret that investors put in long hard hours of research to ensure they are making a lucrative investment. Especially when it comes to stock investments with dividend payouts they have to know the company is in good financial shape. Even though not every investment works out, you still gotta be 100% sure the investment will make you money!
Buffett’s number one rule: Don’t lose money!
Reasons to Buy Dividend Stocks
It’s a lot of people’s dream to become a investment guru and become rich by investing on a $75,000 salary. It’s possible to achieve, but no one ever said it was easy or that it would happen efficiently.
Although they still possess risk, dividends are a great source of additional income because they are generally less volatile than many stock investment options.
Anyway, here are reasons to consider dividend investing.
Reason One – Shareholders receive the dividend amount based on the current stock prices. Dividends are not calculated on the share purchase price; instead it’s calculated on the current stock value and profits earned by the company.
Reason Two – Dividends give higher returns than banks. By buying shares, you get a dividend of 5-7%, whereas, banks only give an interest rate of 3-4% (or lower) on savings account.
Reason Three – Dividends have a tax advantage. You pay a maximum of 15% federal taxes on earnings from dividends, but from interest earned and from other incomes, 40% of federal taxes are deducted straight away.
Reason Four – There is not just consistent income from dividends but also appreciation in the share value. If you’ve reinvested payouts to viable company, then value could easily go up by 30% to 70% in a span of one year.
Best Dividend Paying Companies in the Market
We’ve witnessed the volatility in the share markets around the world. Some of the fortune 500 companies had drastic fall in their stock prices. Therefore, don’t go after stock options that have a bad track record. Go for companies whose shares can be held till retirement and the ones that give good returns to their shareholders. Some of those companies are:
The companies listed above are best known for dividend stocks. But this isn’t to say to invest in these companies. It would be best to check their current status in the market. It keeps you updated and helps you make good decisions.
Remember this saying, “Don’t keep all your eggs in one basket,” before you invest your money with hopes of long-term ROI. Split your money in diverse dividend stocks and not just on one stock. Do research, find the best stocks, and invest your money. It’s never too late to have a sound dividend investment, especially when you’ve long plans.
Once you’ve your money rolling in big companies and you’ve a basket of dividend stocks, there is no doubt you’ll be a wealthy individual. You can be really proud of your decision in the coming years.