In this lesson we're going to dig into one of the most steady and profitable strategies on the stock market: dividend investing.
Following our familiar format, let's walk through four important concepts:
A dividend stock is any company that pays a regular dividend to its shareholders.
Companies that pay dividends are returning some of their profits to shareholders in the form of a regular cash payment.
Beyond that, we’d narrow the definition even further to focus on companies with a dividend yield of at least 1%. Anything less than 1% is probably not worth owning (from a dividend income perspective).
Many companies (literally thousands) pay dividends to their shareholders on a regular basis.
Companies that pay dividends have decided they don’t have a high-growth area in their business to invest all their cash, so they’ll return some of it to shareholders.
These slow-growing, more mature companies tend to pay dividends while fast-growing companies tend to reinvest their cash and profits into growing their business.
Dividends are usually paid out quarterly and over a full year they typically add up to somewhere between 1% - 6% of the amount you would pay to buy a single share of stock.
As a reminder...
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