Lesson 26 of 43 (Dividend Investing): A Step-by-Step Guide to Picking the Best Dividend Stocks

  • Dividend yield is a powerful metric to measure how much you’d make in dividends each year compared to how much you’d have to invest.
  • Historically, dividends have made up roughly 40% of the stock market’s total returns.
  • Stocks with high dividend yields (but NOT the highest yields) perform well over time.
  • We walk through a step-by-step guide to finding the best dividend stocks, including screenshots and direct links to a stock screener that’s pre-filtered for high-potential dividend stocks.

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:

  1. What are dividend stocks?
  2. What should you know about investing in dividend stocks?
  3. Which dividend stocks perform best?
  4. How do you find the best dividend stocks to buy? (A step-by-step guide)

What Are Dividend Stocks?

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).

What Should You Know About Investing in Dividend Stocks?

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…

This is just a preview from our free course: How to Invest in Stocks: Learn How to Buy Stocks, Make Money, and Avoid Mistakes
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