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60000 A Year Is How Much An Hour (Make Money)

60000 A Year Is How Much An Hour (Make Money)

Wondering 60000 A Year Is How Much An Hour?

How much do you need to earn per hour to make $60,000 per year?

How to calculate it?

Keep reading as I have gathered exactly the information that you need!

Let me tell you how much sixty thousand dollars brings you per hour!

Are you ready?

Let’s get started!

60000 A Year Is How Much An Hour 

You’ve applied for a job offering you possibly 60000 per year or you’re just curious to know how much a 60000 income a year represents on an hourly basis.

Let’s see how much a salary or earnings of 60000 represents on an hourly basis if you work full-time or part-time.

40 Hour Workweek

Assuming that you consider the average workweek to be 40 hours (representing 2,080 hours worked in a year) to make $60,000 per year, you need to earn an hourly salary of $28.85.

The calculation is simple and it is based on the following elements:

  • Average workweek = 40 hours
  • Number of weeks in a year = 52 weeks
  • Annual salary = $60,000

To know how much you need to earn an hour to make $60K, you’ll need to divide $60K by 52 weeks and then by 40 hours giving you $28.85.

As a result, you will need to make $28.85 per hour in order to make 60000 in a year.

37.5 Hour Workweek

Some companies consider that a full-time workweek is 37.5 hours consisting of five 7.5-hour workdays (amounting to 1,950 hours in a year).

If you want to know how much 60000 makes per hour based on a 37.5-hour workweek, then you’ll need to divide 60000 by 1950 working hours in a year to get $30.77 per hour.

Working Part-Time

Now, if you work less than 40 hours a week, how much would 60000/year represent on an hourly basis?

Let’s assume that you work 30 hours a week, 60000 a year is $38.46 per hour.

If you work 20 hours a week, 60000 a year is $57.69 per hour.

If you work 10 hours a week, 60000 a year is $115.38 per hour.

60000 A Year Broken Down

If you earned 60000 per year, let’s see how much you would make per day, per week, every two weeks, and per month.

60000 A Year Is How Much Per Day

To make 60000 a year, you must earn $164.38 per day.

To calculate this, you will need to take 60000 divided by 365 days to get $164.38 per day.

Alternatively, if you want to know how much you’d earn per day on the business days (or every day consisting of 8 working hours), you’d earn $230.80 per day.

60000 A Year Is How Much Per Week

To make 60000 a year, you must earn $1,153.85 per week.

To calculate this amount, you must take $60K and divide it by 52 weeks in a year to get $1,153.85.

60000 A Year Is How Much Biweekly

To make 60000 a year, you must earn $2,307.69 on a biweekly basis.

To calculate this figure, you take $60,000 and divide it by 26 weeks to get $2,307.69 biweekly.

60000 A Year Is How Much Per Month

To make 60000 a year, you must earn $5,000 a month.

To calculate the monthly figure, you need to divide $60 000 by 12 months to get $5,000 per month.

60000 A Year Is How Much An Hour After Taxes

Let’s see how much is left in your pocket after taxes if you make 60000 a year.

Considering everyone’s tax situation is different and that generally taxes are complicated, I’ll illustrate how much is 60000 a year an hour after taxes based on a general example.

Let’s consider the following elements to calculate the hourly rate:

  • Average workweek = 40 hours
  • Number of weeks in a year = 52 weeks
  • Annual salary = $60,000
  • Total Tax Rate: 20%

In this case, you’ll need to take 60000 divided by 52 weeks, then divided by 40 hours, then multiplied by (100% – 20% = 80%) giving you a total of $23.08 per hour.

In other words, if you have a total tax rate of 20% (federal and state taxes combined), then you can expect to earn a net salary of $23.08 for every hour that you work.

Here is how much you can expect to make per hour net of taxes based on different tax rates:

  • Tax rate of 10% = $25.96
  • Tax rate of 15% = $24.52
  • Tax rate of 20% = $23.08
  • Tax rate of 25% = $21.63

How You Can Earn 60000 Per Year

There are many ways you can earn $60,000 per year.

The way most people will earn $60000 per year is by finding a job, putting in the necessary number of hours per week to earn a total of $60K in the year (an active income).

However, one great way to earn an income and build wealth is by finding ways to generate passive income.

Imagine having different sources of passive income generating $60,000 for you, wouldn’t that be amazing!

This means that you could choose to do what you want with your life while earning money passively.

This may sound too good to be true but it’s not, it’s definitely possible. 

Let me be straight up about it, I’m not talking about a get-rich-fast scheme or some sort of scammy method of making money. 

I’m talking about real proven ways wealth investors have built enormous wealth over their lifetime.

I’ve dedicated this entire blog to the notion of passive income, building financial independence, and wealth.

I personally have different sources of passive income generating me a significant amount of money without much effort of my own (relatively speaking).

If you’re interested to get some ideas on what you can do to generate passive income, check out my post on what is passive income and passive income ideas to get started!

Go ahead and take control of your life and finances!

60K A Year Is How Much An Hour Takeaways 

So, there you have it folks!

$60K a year is how much an hour?

The average working person is likely to work 40 hours a week when working on a full-time job.

If you had a job paying you a total salary of $60,000 per year, this translates into an hourly rate of $28.85.

Of course, $28.85 is the gross amount that you’ll earn.

Unfortunately, we all need to pay taxes and so you’ll need to pay your taxes as well.

Depending on the tax rate applicable to you, you’ll need to take off a percentage from your gross earnings to get the net hourly rate.

For example, if your total tax rate is 15%, then you’ll be earning $24.52 net in your pocket.

I hope that I was able to provide you with the essential calculations so you know how much to expect per hour if you were to earn 60000 per year.

Good luck!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

60000 A Year Is How Much An Hour Overview

  • You are looking for a job and you see one offering a $60000 salary per year, but how much does that make per hour
  • 60000 per year breaks down to $28.85 per hour (gross), $230.80 per day (8-hour workday), $1,153.84 per week, $2,307 biweekly, and $5,000 per month
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VTSAX vs VTI (Similarities And Differences: Index Fund Investing)

VTSAX vs VTI (Similarities And Differences: Index Fund Investing)

Looking for VTSAX vs VTI?

Should you invest in VTSAX or VTI?

What are the main similarities and differences?

Keep reading as I have gathered exactly the information that you need!

Let me explain to you the essentials you need to know on VTSAX and VTI!

Are you ready?

Let’s get started!

VTSAX vs VTI Overview

VTSAX is the Vanguard Total Stock Market Index Fund whereas VTI is the Vanguard Total Stock Market ETF.

What Is VTSAX

VTSAX refers to the Vanguard Total Stock Market Index Fund Admiral Shares.

This fund is designed to provide investors access to the entire U.S. equity market.

The fund invests in small-caps, mid-caps, and large-caps selected based on growth and value investing investment strategies.

The VTSAX is a passive index fund allowing it to maintain a low expense ratio resulting in higher returns to investors over time.

The key features attracting investors to VTSAX is its well-diversified portfolio of US stocks, the low cost to manage the fund, and its potential tax efficiency. 

What Is VTI

VTI refers to the Vanguard Total Stock Market ETF.

It was created in 2001 and is a well-diversified exchange-traded fund (ETF) owning different types of US stocks.

The VTI ETF invests in large-, mid-, and small-cap US companies adopting a passive management style based on an index-sampling strategy.

Since the VTI is a passive index fund, it has a low expense ratio allowing the fund to generate higher returns to the investors over time.

The objective of the VTI fund is to track the performance of the CRSP US Total Market Index.

VTSAX vs VTI Performance

VTSAX is a fund that is heavily invested in the US equity market.

Over the years, it has shown a good and consistent return to its investors.

Also, VTI has generated a higher return than the S&P 500 since its inception giving investors access to a well-diversified and market capitalization-weighted index.

Generally speaking, investing in VTI and VTSAX is a safe bet.

Both of these investment options are similar being total stock market index funds allowing investors to be exposed to the US stock market.

They both have similar dividend yields and annual returns.

Voth VTI and VTSAX allow investors to access a well-diversified portfolio and follow a stock market investing approach.

VTSAX vs VTI Benefits And Risks

Overview of Benefits

Investors looking to choose between VTSAX and VTI will find that both of these investment options offer similar benefits.

Both VTI and VTSAX are well-diversified, are passively managed, and offer a low expense ratio.

If you’re looking to start investing in the stock market and want to benefit from immediate diversification in the US equity market, both Vanguard VTI and VTSAX are good options.

The benefit of investing in either VTI or VTSAX is that you will be exposed to less risk compared to investments in individual bonds or stocks. 

Also, from a pure mathematical and statistical perspective, investing in funds and ETFs that match index performance is shown to offer good performance with an investment horizon that is long enough.

If you feel like investing in an individual stock, be sure to do your research to identify one that matches your investment criteria (there is stock research software that you can use for that).

Also, be sure to open a good brokerage account where you can possibly create a virtual portfolio to see how well you do before you jump into stock investing.

Overview of Risks

Investors investing in the VTSAX are exposed to the entire U.S. stock market.

As a result, the market volatility in the broader stock market can affect the value of the VTSAX fund.

If the overall market does well, the fund will do well.

However, if there’s an economic downturn, recession, or adverse market events, the value of the VTSAX fund will also follow suit.

Similarly, investing in VTI does expose the investor to a certain level of risk.

In essence, the VTI ETF is exposed to the overall market risk.

In other words, the value of your investment in VTI can increase to the extent the broader market is doing well.

However, if there’s an overall economic downturn and market volatility, you are likely to see a drop in the value of your investment.

VTSAX vs VTI Similarities And Differences

ETF vs Mutual Fund Real Time Pricing

The first aspect that differences VTI and VTSAX is that VTI is an ETF whereas VTSAX is a mutual fund.

ETFs are traded in a similar way as stocks are traded on the market.

Both ETFs and stocks are priced in real-time allowing investors to buy and sell these securities during the open market hours.

On the other hand, mutual funds are not priced in real time during the stock market open hours but their price is calculated based on the Net Asset Value at the end of the day.

VTSAX vs VTI Minimum Investing

The way you invest in VTSAX and VTI is slightly different.

Since VTI is an ETF, you’ll need to invest your money in such a way allowing you to purchase a certain number of whole shares of VTI.

Just like stocks, you can establish your investing budget, calculate how many whole shares that can represent, and invest (your minimum investment budget is essentially the value of one VTI share).

On the other hand, investing in a mutual fund like VTSAX allows you to invest any nominal value in the fund as you are able to buy fractional shares of the fund.

If you want to invest in VTSAX, you’ll need to be mindful of the fact that you have to respect their minimum investment threshold of $3,000 (which can be a limiting factor for some investors).

VTSAX And VTI Automatic Investing

VTSAX allows you to set up and automatically invest and withdraw from the fund on an ongoing basis whereas you do not have the option with VTI.

If you want to purchase additional shares of VTI, you’ll need to invest manually every time.

VTSAX vs VTI Tax Efficiency

When comparing the VTSAX vs VTI tax efficiency, we can conclude that you may get higher efficiency by investing in VTI.

The reason why VTI has a higher tax efficiency than VTSAX is that it’s an ETF (compared to mutual funds).

Typically, mutual funds and ETFs can be structured as open-ended investments or closed-ended investments.

In most cases, ETFs are closed-ended investments.

This means that the fund issues a fixed number of shares for the public to invest in.

On the other hand, mutual funds can be either open-ended investments (where an unlimited number of shares can be issued to the public) or closed-ended (limited number of shares).

ETFs offer a great tax efficiency than mutual funds as the investor may not need to be exposed to as much capital gains.

When an investor of mutual funds intends to sell, generally the mutual fund will sell some of its underlying assets to provide the investor with the cash equivalent of its investment.

This triggers a capital gain to all investors in the fund.

On the other hand, an ETF is traded from one person to another and so an investor can obtain the cash value of its shares by simply selling the ETF to someone else.

In this case and unlike a mutual fund, the ETF does not have to sell its underlying asset to find the money to pay the investor.

VTSAX vs VTI Expense Ratio

Both the VTSAX mutual fund and VTI ETF have a passive investing approach resulting in low expense ratios.

As of the writing of this post, the expense ratio for VTSAX was 0.04% whereas VTI of 0.03%.

As you can see, the expense ratios are nearly identical and the difference can be negligible from the investor’s point of view.

VTSAX vs VTI Holdings

As of the writing of this post, here are the largest holdings of both VTSAX and VTI:

VTSAX Holdings:

  • Apple Inc.
  • Microsoft Corp.
  • Alphabet Inc.
  • Amazon.com Inc.
  • Tesla Inc.
  • NVIDIA Corp.
  • Meta Platforms Inc.
  • Berkshire Hathaway Inc.
  • JPMorgan Chase & Co.
  • Home Depot Inc.

The VTSAX mutual fund’s portfolio is more heavily invested in the Technology, Consumer Discretionary, Industrials, Health Care, and Financial industries.

VTI Holdings:

  • Apple Inc.
  • Microsoft Corp.
  • Alphabet Inc.
  • Amazon.com Inc.
  • Tesla Inc.
  • NVIDIA Corp.
  • Meta Platforms Inc.
  • Berkshire Hathaway Inc.
  • JPMorgan Chase & Co.
  • Home Depot Inc.

Just like VTSAX, the VTI fund is also heavily invested in Technology, Consumer Discretionary, Industrials, Health Care, and Financial industries.

VTI vs VTSAX Takeaways 

So, there you have it folks!

You are wondering which investment is the better one between VTI and VTSAX?

In essence, both VTSAX and VTI are similar investment options allowing the average investor to generate a good return consistent with the broad US stock market.

By investing in either VTSAX or VTI, you are investing in a slice of the US economy.

Both funds are passively managed giving you low expense ratios that are comparable.

You may find some differences that may impact your choice, such as:

  • VTI prices are established in real time just like stocks whereas VTSAX prices are calculated at the end of the trading day
  • You do not have a minimum investment obligation for VTI whereas you have a $3,000 minimum investment threshold for VTSAX
  • The VTI ETF is a slightly better option from a tax efficiency point of view compared to VTSAX
  • VTSAX is the only investment option that you can set up for automatic withdrawal and investment 

In the end, it comes down to your personal preference to choose between VTI and VTSAX based on their slight differences.

In general, they are both safe investments that have a track record of providing investors with a consistent return.

Good luck with your investing!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

Choosing Between VTSAX vs VTI

  • If you’re looking to invest in either VTI or VTSAX, you are looking at two comparable investment options
  • Both funds offer you a nicely diversified portfolio of US equities tracking the broader stock market, have low expense ratios, and can give you a nice steady return over time
  • Since you are investing to track the stock market, you’re exposed to the inherent risk affecting the economy at large
  • Although you won’t have the ability to invest in an alpha stock that will rise tremendously in value, you will also not be exposed to the risk of losing a lot of value if you were to invest in one single stock
  • As an investor, investing in VTSAX or VTI will provide you with similar risk and reward profiles 
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Rich vs wealthy 
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What Are Dividends (Complete Overview: All You Need To Know)

What Are Dividends (Complete Overview: All You Need To Know)

Wondering What Are Dividends?

What are dividends in stocks?

How does it work?

Keep reading as I have gathered exactly the information that you need!

Let me explain to you the meaning of dividends and why it’s so important!

Are you ready?

Let’s get started!

What Are Dividends 

Dividends refer to distributions corporations make of their profit to their shareholders.

In other words, investors who purchase shares of a dividend-paying stock expect to receive a regular distribution of cash paid by the company out of its retained earnings.

Although most dividend payments are made in cash, a dividend can also be paid to shareholders in the form of stock (this is called a stock dividend).

A cash dividend is when the payment is paid in “cash” whereas a stock dividend is when the company issues additional shares of stock to the shareholder representing the value of the dividends.

Companies that pay dividends tend to pay at a regular interval like monthly, quarterly, or yearly (quarterly being the most common payment frequency).

However, if a company pays a one-time dividend, we call that non-recurring dividend as a special dividend.

There are many companies out there that do not pay dividends to their shareholders as the company board considers that reinvesting its profits back into the business or paying off debt will bring more value to the shareholders.

On the other hand, other publicly listed corporations tend to regularly pay dividends to their shareholders signaling that they are financially strong, well-established in their industry, and capable of growing the business while paying dividends to their shareholders at the same time.

Dividend Definition

What is the definition of a dividend?

According to Investopedia, a dividend is defined as:

A dividend is a distribution of cash or stock to a class of shareholders in a company.
Author

The “cash” comes from the company’s net income or its retained earnings.

The shareholders of the company are typically common shareholders or holders of preferred stock.

The company is generally a corporation listed in a stock exchange that is well established generating consistent returns.

Dividend-Related Dates

What are the different dates related to dividend payments?

There are four important dates related to dividends:

  • Dividend announcement date
  • Ex-dividend date
  • Dividend record date 
  • Dividend payment date

The dividend announcement date (or dividend declaration date) is when the board of directors formally announces that the company will pay dividends subject to the approval of the shareholders.

The ex-dividend date refers to the date as of which a new shareholder will not be entitled to receive the next dividend payment (to be entitled to receive dividends, you’ll need to buy the stock before the ex-dividend date).

The dividend record date refers to the cutoff date where shareholders of record will be eligible to receive dividends based on the number of shares they held on the record date.

Finally, the dividend payment date refers to the day the company is expected to actually pay dividends to its shareholders.

Why Dividends Are Important

Dividends are important in many ways.

For companies, paying dividends allows them to signal to the market that they are:

  • Financially stable
  • Have strong earnings 
  • Can generate profits
  • They can generate recurring revenues

Companies pay dividends to reward their shareholders for investing in their company.

When companies pay dividends, shareholders and the market generally see that as a positive signal allowing the company to keep investor trust.

For the investors, investing in the best high dividend stocks or other securities that pay dividends is a great way to earn an income while holding on to their investment.

Some investors are looking to complement their income by receiving dividends while other investors are looking to invest in dividend paying stocks to reinvest the dividends going forward.

When a company has a long history of paying dividends, can sustainably pay dividends and continue to grow its business, many investors will see benefits in investing in that company to earn dividend income and for the potential of capital appreciation on their investment over time.

Dividend Investing Metrics

There are a few important metrics to consider when investing in stocks for dividends:

  • Dividend yield
  • Dividends per share 
  • Dividend payout ratio
  • Earnings per share 

The dividend yield represents the percentage cash return you are expected to receive by investing in the stock.

For example, if the stock price per share is $100 paying out a dividend of $4 per year on a per-share basis, your dividend yield is 4%.

The dividend per share is a common metric that indicates how much dividends the stock pays per share (for instance $4 per share per year).

The dividend payout ratio is the percentage of the company’s profits that are paid out to shareholders.

Finally, the earnings per share refers to how much the company has earned in revenues on a per-share basis.

Dividend Yield Meaning

One of the most popular and commonly referred to dividend metric is the dividend yield.

The dividend yield is the ratio between the company’s cash dividend payment distributed to its shareholders in relation to the value of the stock.

The higher the dividend yield, the more you’ll receive in cash dividends for every stock purchased.

For example, if you are looking to purchase shares of stock at $100 per share paying $5 of dividends per year, the dividend yield is 5%.

Getting a high dividend yield, at first glance, appears to be a good thing.

However, you should be careful as in some cases the dividend yield artificially goes up when the stock is not performing well and its stock price is declining in value.

How Dividends Work

A dividend is a distribution of profits by a company to its shareholders.

Cash Dividends

The most common type of dividend payment is the cash dividend.

When a company pays its shareholders cash dividends, it is taking cash from its retained earnings or net profits and pays its shareholders.

In general, for a company to pay dividends, the dividend payment must be approved by the shareholders through their voting rights and the board of directors.

When the dividend is declared, the company will set the dividend amount, payment frequency, dividend record date, and dividend payment date.

As you know, companies need capital to operate their business.

As a result, in most cases, corporations do not pay dividends to their shareholders so that they can keep 100% of their net profits to inject back into the business, pay off debt, or fund the expansion of the business operations.

On the other hand, there are companies that generate enough returns that they can afford to take a portion of their net income and distribute it to their shareholders in the form of dividends rewarding them for their investment.

You have to keep in mind that not all companies paying dividends are necessarily profitable or represent safe investments.

In certain cases, a company may pay dividends to its shareholders just to maintain its track record of paying dividends even though they may be operating at a loss.

In other cases, a company may only want to get rid of funds available in its retained earnings as a means to defend itself from a hostile takeover.

Special Dividends

Special dividends are dividends that are paid to the shareholders on a one-time basis.

Imagine a special dividend to be like a bonus payment issued to the shareholders by the corporation.

A company that typically does not pay dividends may decide to make a one-time payment of dividends to its shareholders to distribute accumulated cash.

Alternatively, a company that regularly pays dividends to shareholders may also choose to pay a special dividend if they had a great year generating a lot of profits (for example, in 2004 Microsoft paid a special dividend of $3 per share to its shareholders).

Stock Dividends

Stock dividends are dividends that are paid to shareholders in the form of stocks (instead of cash).

When a company issues additional shares in lieu of cash dividends to compensate the shareholders, the shareholders will end up with additional shares in their portfolio.

Some shareholders may choose to sell the stock dividend to realize the cash value whereas other shareholders may keep the stocks in their portfolio.

What Types of Securities Pay Dividends

What are the different types of stocks and securities that pay dividends?

Dividends on Common Shares

Fundamentally, companies are not obligated to pay dividends to their common shareholders.

However, if the board of directors determines that the company will pay dividends to a certain class of stock, then the shareholders will receive a “dividend” payment as determined by the board.

When the board “declares” a dividend, it will set the amount of dividend per share, the record date, and the payment date.

Dividends on Preferred Shares

Other types of shares, such as preferred shares, may entitle their shareholders to dividend payments for so long as the preferred shares are outstanding.

In essence, in some cases, companies issue dividend payment preferred shares obligating the corporation to pay dividends as per the rights and privileges granted to the preferred shareholder.

As such, some investors will invest in the purchase of preferred shares as they know that the company must pay them dividends over time.

Dividends on Mutual Funds And ETFs

In addition to common shares and preferred shares, other types of securities can also pay dividends.

There are mutual funds and exchange-traded funds that are specifically designed to pay dividends to their shareholders.

Mutual funds and ETFs can invest and hold different types of securities.

Those that invest in quality dividend-paying stocks will receive dividends and then pass on the dividends to the mutual fund or ETF holders.

Dividends on REITs and MLPs

You’ll find real estate investment trusts (REITs) and master limited partnerships (MLPs) that are types of securities that pay dividends to their shareholders.

Real estate investment trusts are legally required to pay 90% of their taxable income in the form of dividends where 20% of the dividends must be paid in cash.

In other words, REITs are top dividend payers as they are required by law to pay dividends to maintain their legal classification as a REIT giving them tax advantages.

Other Types of Dividends

There are different types of dividends that can be paid to shareholders in addition to cash or stock dividends.

A company may choose to pay an asset to shareholder in the form of a dividend (asset dividend).

An asset can be a physical property, real estate, investment in securities, or other types of assets.

In addition, a company can also pay other types of securities as dividends such as options, warrants, or shares of a spin-off company.

What Are The Best Dividend Paying Stocks

What are the types of companies that are the best dividend paying companies out there?

The best dividend paying stocks tend to be companies with the following characteristics:

  • They are larger corporations 
  • Well-established in their industry or sector
  • Have predictable profits year-over-year
  • Have reached a maturity stage

As an investor, you’ll notice that companies operating in the oil and gas, banking and financial, healthcare, pharmaceuticals, utilities, and basic materials tend to pay dividends.

You’ll notice that companies do not pay dividends or very low dividend yields to shareholders when they operate in the technology space or biotechnology.

These companies operate in industries that require a lot of investment in research and development, innovation, and business growth leading their board of directors to favor retaining all their earnings to reinvest back into the business than to pay dividends.

What Are Examples of Dividends

Let’s look at a couple of examples of dividends to better illustrate the point.

Example of High Dividend Stocks

A high dividend-paying stock is a relative concept as it depends on the investor and the stock that you are considering to buy.

A lot of investors like to see a high distribution of cash on their investment and so they tend to favor high dividend stocks.

Imagine that a company operates in an industry where on average the dividend-paying companies pay dividends at a yield of 2%.

If a company operating in that industry pays dividends of 3% or 4%, you can consider that it’s a high dividend stock in relation to that industry.

If the company’s share price is $100 per share, a 3% yield means that the company distributes $3 of dividends per year on each of its common stocks ($0.75 per quarter).

Example of Best Dividend Paying Stocks

What is an example of the best dividend paying stock?

The best dividend paying stocks are the ones that have the following features:

  • They have a long track record of paying dividends
  • They have demonstrated the ability to increase dividends over time
  • The company’s revenues have grown over the years 
  • The company is well-established in its industry or is a leader
  • The company has predictable revenues 

For example, companies like Coca Cola or 3M are two examples of companies that are considered “dividend aristocrats” as they have a long history of paying dividends to their sharheolders.

Both of these companies are industry leaders and have a strong and healthy financial position allowing them to not only have enough capital to operate their business but also pay dividends to their shareholders.

What Are Dividend Payments Takeaways 

So, there you have it folks!

What are dividends in stocks?

What are the distributions to shareholders by a corporation called?

The distributions that corporations make to their shareholders are called “dividends”.

Dividends refer to a payment in cash or stock that corporations make to their shareholders out of their profits or retained earnings.

Dividend investors like to invest in stocks that pay dividends as they can receive a steady stream of income in the form of dividends by holding on to their stock.

Public companies and private corporations can pay dividends to their shareholders.

Corporations typically do not have any legal obligation to pay dividends to their shareholders (although there are exceptions).

Also, holders of different classes of stock may not be entitled to receive dividends in the same way.

For example, preferred shareholders are entitled to receive dividends on their stock whereas common shareholders are not guaranteed to receive any dividends unless the board of directors declares dividends.

In the end, investing in stocks that pay dividends is a great way to earn a passive income while holding on to your investment.

I hope that I was able to explain to you what are dividends, what are stocks with dividends, how dividends work, the type of dividends, and their features.

Good luck in growing your wealth!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

Summary of What Are Dividends In Stocks 

  • Dividends represent cash or stock payments made by corporations to shareholders distributing profits or retained earnings
  • Dividends are generally paid in cash where the board of directors of the company set the payment frequency (monthly, quarterly, or annually), the amount per share, the record date, and the payment date 
  • There are different types of dividends such as cash dividends (the most common form of dividend), stock dividends, special dividends, preferred dividends, or other
Cum dividend 
Dividend capture strategy 
Dividend declaration date 
Dividend income
Dividend growth investing
Dividend payment date
Dividend payout ratio
Dividend record date
Dividend reinvestment plan 
Dividend tax 
Homemade dividends
How to buy dividend stocks 
Ordinary dividends 
P/E ratio
Retention ratio 
Special dividends 
Spillover dividends
Spin-off 
Spin-out 
Stock options
Warrants 
What are qualified dividends
What are stock dividends
What is investing 
What is leverage
Author
Best brokerage account 
Convertible preferred stock dividend
Dividend investing strategy 
Do all stocks pay dividends
Gordon growth model 
How to buy stocks 
How to make money dividend investing 
Long-term capital gains 
What are dividend stocks
What are master limited partnerships 
What is a diversified portfolio
What is a business development company 
What is a mutual fund 
What is a REIT
What is a Roth IRA
What is an ETF
What is an IRA
What is an MLP
What is dividend investing 
What is ex dividend date 
Why do companies pay dividends 
What is dividend yield
Author

Dividend Investing Strategy (All You Need To Know)

Dividend Investing Strategy (All You Need To Know)

Looking for Dividend Investing Strategy?

What are the different types of dividend investing strategies?

How does it work?

Keep reading as I have gathered exactly the information that you need!

Let me explain to you the dividend stock investing strategy and how it works!

Are you ready?

Let’s get started!

What Is A Dividend Investing Strategy 

A dividend investing strategy is a type of strategy where the investor buys shares in dividend-paying stocks and holds on to the shares to collect dividends in the future.

The objective of the dividend investing strategy is for the investor to receive income in the form of dividend payments paid by the stock in his or her portfolio.

There are many publicly traded companies, mutual funds, or other securities that pay dividends to their shareholders.

It’s important to remember that companies do not have any obligation to pay dividends to their shareholders.

On the other hand, others choose to distribute their net profits or money held in retained earnings in cash to their shareholders on a monthly, quarterly, or even yearly basis.

A dividend strategy for investing is a type of strategy that consists of identifying companies that pay dividends and making strategic investments in those companies to earn an income and make money.

What Are Dividends

Before we get into the specifics of the dividend stock strategy for investing, it’s important to know what a dividend represents.

In essence, cash dividends are distributions of profit made by companies to their shareholders.

Typically, a company’s board of directors will declare dividends setting out the dividend record date, amount, and payment date.

When that announcement is made, investors can purchase shares of that company and be entitled to receive dividends all the way to the ex-dividend date.

Key Dividend Metrics

There are a few important metrics to consider when investing in stocks for dividends:

  • Dividend yield
  • Dividends per share 
  • Dividend payout ratio
  • Earnings per share 

The dividend yield represents the percentage cash return you are expected to receive by investing in the stock.

For example, if the stock price per share is $50 paying out a dividend of $2 per year on a per-share basis, your dividend yield is 4%.

The dividend per share is a common metric that indicates how much dividends the stock pays per share (for instance $2 per share per year).

The dividend payout ratio is the percentage of the company’s profits that are paid out to shareholders.

Finally, the earnings per share refers to how much the company has earned in revenues on a per-share basis.

Dividend Yield

One of the most popular and commonly referred to dividend metric is the dividend yield.

The dividend yield is the ratio between the company’s cash dividend payment distributed to its shareholders in relation to the value of the stock.

The higher the dividend yield, the more you’ll receive in cash dividends for every stock purchased.

For example, if you are looking to purchase shares of stock at $100 per share paying $5 of dividends per year, the dividend yield is 5%.

Getting a high dividend yield, at first glance, appears to be a good thing.

However, you should be careful as in some cases the dividend yield artificially goes up when the stock is not performing well and its stock price is declining in value.

Assessing Dividend Stocks

It’s best to analyze the stock you are going to purchase so you can make an informed decision as not all dividend paying stocks can be considered safe investments. 

Since dividends are paid out of the company’s profits, it’s easy to assume that the company is profitable.

Although this assumption holds true in many cases, it’s not necessarily the case all the time.

A prudent investor should consider and assess the fundamentals of the dividend stock candidate before pulling the trigger for the purchase.

Some of the elements you may consider are:

  • Company’s revenues
  • Dividend payout ratio 
  • Company’s leverage ratios 
  • Cash flows 
  • Company’s earnings growth over the years 
  • Capital returned through dividends or share buybacks 
  • Company’s history in raising dividends over the years 

Types of Dividend Investing Strategies

Let’s look at the different types of dividend investing strategies that investors may consider.

Dividend Growth Investing

The dividend growth investing strategy is a type of dividend investing strategy where the investor is looking to:

  • Purchase different shares of stock paying dividends
  • The dividends are expected to grow at a rate higher than inflation
  • The dividend stock will be held for a long-term investment horizon
  • The company has a long history of paying dividends and growing its dividends over the years

The idea of the dividend growth strategy is to purchase company stocks that pay dividends, where the dividend cash flow is expected to be increased over time, and that the company is expected to pay dividends for a long time to come.

High Dividend Investing Strategies

A high dividend investing strategy is a type of strategy where the investor is looking to:

  • Find stocks that pay a high amount of dividends
  • Is prepared to sell the stock if the stock price drops in value 

For the investor, the main consideration is to earn high dividend cash for so long as the company offers a high yield.

However, if the investor considers that the company may reduce or slash dividends, then the investor is prepared to quickly sell the stock.

Dividend Income Investing

The dividend income investing strategy is a type of dividend stock portfolio strategy where the investor is looking to:

  • Purchase shares of stock that regularly pay dividends
  • The shares offer a high enough dividend yield while remaining safe
  • The investor wants to pocket the cash flow

The main objective of a dividend income investing strategy is to purchase dividend shares that pay dividends so the investor can complement his or her income (for example retired investors tend to adopt this strategy).

Dividend Capture Investing 

Dividend capture is a type of dividend investing strategy where the investor’s objective is to invest in stocks that have declared dividends by buying the stock right before the ex-dividend date and selling it after.

The objective of the investor is to buy the stock and be considered a shareholder of record on the dividend record date entitling him or her to receive dividends.

As such, the investor is taking a long position in a stock for a short period of time to “capture” the dividends.

Dividend Reinvestment Plan

A dividend reinvestment plan is a powerful dividend investing strategy that provides you with the benefits of dividend investing and also allows you to take advantage of the compounded growth mechanics. 

In essence, some dividend paying companies offer their shareholders a dividend reinvestment plan either themselves or through their stock transfer allowing you to fully reinvest your dividends to buy more shares.

The longer you keep your investment and reinvest your dividends, the more shares you accumulate in the stock allowing you to get more dividends at the next dividend payment and to magnify your total return if the stock price goes up.

Your Dividend Investing Strategy Objectives

What is the best dividend investing strategy to adopt?

In essence, the type of dividend investing strategy that is the best for you will depend on your investment objectives along with the timeframe that you have in mind.

Here are some of the main investing objectives pursued by dividend investors.

Total Returns

Many dividend investors consider that the best dividend strategy is aimed to generate a higher total return.

In essence, if you purchase quality stocks that have the potential to pay you dividends for many years to come, increase their dividend payments, and where the stock price will appreciate, you will generate a very good overall return (or total return).

For example, imagine you buy the stock today for $50 paying you $2 of dividends per year. 

If you keep the stock for 25 years, you will not only collect $2 per year (and possibly grow every year) but your stock price may appreciate to $200, $300, $400 or more.

This way, not only do you receive a good return through the dividend cash flows but also benefited from a strong stock price appreciation.

Steady Income

Dividend investors are attracted by the idea of getting a steady stream of income over time.

Older investors may want to access the cash dividends to pay for their living expenses whereas younger investors may want to reinvest all their dividends for greater returns.

In both cases, the investor is looking to receive a constant and passive stream of income.

Dividend strategy investing is a great way to earn passive income when you’re looking to have your money work to make more money for you.

Reduced Risk 

Investing in dividend stocks generally tends to be a safer type of investment than investing in other types of stocks like penny stocks or growth stocks.

If you invest in companies that have a long history of paying dividends, operate in profitable industries, have a track record of showing strong revenue growth over the years, and have the potential to generate important returns in the future are good investment candidates.

Many dividend paying companies are well-established companies in operation for years having steady and growth revenues allowing them to pay dividends to shareholders over time.

These types of dividend stocks will provide you with less financial risk exposure and less price volatility than other types of stocks like growth stocks.

High Dividend Yields

Dividend investors will also tend to favor stocks offering higher dividend yields.

In other words, the higher the dividend yield, the higher the proportion of the cash dividends paid to the stockholder in relation to the stock price.

Although the dividend yield should be a factor to consider, it’s important not to fall into the “newbie” dividend yield trap.

A high dividend yield may not necessarily mean that the stock is worth purchasing as the yield may have artificially gone up due to a drop in the stock price, bad financial results, or economic factors affecting the stock.

Retired investors will want to get quality and safe dividend stocks with the highest yield possible so they can have a higher retirement income.

Younger investors should favor companies that pay consistent dividends over a long period of time so they can take advantage of the yield but also the capital appreciation on their investment.

Dividend Stock Investing Strategy Takeaways 

So, there you have it folks!

What does dividend investing strategy mean?

What is a good dividend investment strategy?

Although there are different types of dividend investing strategies that may be adopted, in most cases, the dividend strategy investing consists of buying shares of stock that pay dividends and holding on to them for dividend income.

The main advantage of this strategy is that the investor will receive cash distributions in the form of dividends and can potentially earn additional returns if the stock price appreciates in value as well.

Dividend investing is a great way for passive investors to make money and build wealth over time.

According to the Hartford Funds analysis, more than 78% of the total returns of the S&P 500 index have come from dividends since 1970.

This means that if you had invested money in a portfolio similar to the S&P 500 index, you would have generated over three quarters of your returns from dividends.

A dividend portfolio strategy is a very good approach to make money over mid-term to a long-term investment time horizon and is one of my personal favorite investment strategies.

I hope you now have the essential knowledge in dealing with strategies for dividend investing so you can develop your wealth over time.

Good luck!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

Dividend Investing Strategy Summary

  • A dividend investing strategy is a type of investment strategy where the investor invests in dividend paying stocks to attain his or her investment objectives over a course of an investment time horizon
  • Many investors aim for purchasing quality stocks that have the ability to pay dividends consistently over time and offer a relatively high yield
  • There are different types of dividend investing strategies such as investing for dividend income, for growth, to reinvest the dividends, or to capture the dividends 
  • Dividend stocks tend to be safer investments but it’s important that you make a well-informed investing decision as not all dividend paying stocks are safe or viable to invest in
Best brokerage account
Book closure 
Cash dividend vs stock dividend 
Compounding effect 
Dividend aristocrats 
Dividend capture 
Dividend growth investing
Dividend payout ratio 
Dividends per share
Dividend record date
Dividend reinvestment plan 
Dividend tax
Ex-distribution
Growth investing 
Investment returns 
Ordinary dividends 
P/E ratio
Qualified dividends
Retained earnings 
Special dividends
Stock dividends 
Stock splits 
Total return 
Value investing
Author
Convertible preferred stock dividend
Do all stocks pay dividends
Gordon growth model 
How to invest in dividend stocks
How to make money dividend investing 
Long-term capital gains 
What are dividends 
What are master limited partnerships 
What is a diversified portfolio
What is a business development company 
What is a mutual fund 
What is a REIT
What is a Roth IRA
What is an ETF
What is an IRA
What is dividend investing 
What is ex dividend date 
Why do companies pay dividends 
What is dividend yield
What is stock dividend
Author

What Is Ex Dividend Date (All You Need To Know)

What Is Ex Dividend Date (All You Need To Know)

Wondering what is ex dividend date?

What happens on the ex dividend date?

How does it work?

Keep reading as I have gathered exactly the information that you need!

Let me answer your question of what is the meaning of ex dividend date and why it’s important!

Are you ready?

Let’s get started!

What Is Ex Dividend Date 

Ex-dividend date refers to the date as of which the stock trades without entitling the shareholder to the next dividend payment declared by the company.

In other words, if you buy shares before the ex-dividend date, you will be entitled to receive the next dividend payment that is expected to be paid.

However, if you buy shares on the ex-dividend date or after, you will not get the next dividend payout.

There are three important dates that you’ll need to understand to ensure you know all about the dividend distribution process:

  • Dividend declaration date
  • Dividend record date
  • Dividend payment date 

When the board of directors “declares” or “announces” that the company will pay dividends, that’s the declaration date where the dividend payment date and record date are confirmed.

The dividend record date is the date that you must be an official shareholder of the company to be entitled to receive dividends.

The dividend payment date is the date that the company will actually distribute the dividends to those who had shares on the record date.

Ex-Dividend Prior To The Record Date

The record date is a date that is used by companies to determine which shareholders will be entitled to receive dividends.

This is important as there are companies where thousands, if not millions, of shares are traded every day and it’s crucial to properly allocate dividend entitlement.

When a dividend is declared by the board of directors, a record date is indicating that those who are officially holding shares of stock on the record date will be entitled to receive dividends.

Then, based on the rules of the stock exchange where the stock is being traded, the ex-dividend can be set when you know the record date.

The ex-dividend date is generally right before the record date.

If the rules of the stock exchange state that a stock trade settles in two business days, then the ex-dividend date will be one business day prior to the record date.

Transaction Settlement Rules

For many publicly traded companies, there are thousands, if not millions, of shares being traded every day.

As a result, if you want to purchase shares and be entitled to dividends, you must buy your shares early enough so that your transaction has fully settled by the record date.

For your transaction to settle before the record date, you must buy the shares the day before the ex-dividend date or sooner.

If you buy your shares of stock on the ex-div date or after, then your transaction will not have time to settle in time for you to be a shareholder of record on the record date.

Why Ex-Dividend Date Is Important

If you are investing in stocks to earn dividends as a source of income, you must have a very good understanding of what is an ex-dividend date.

By having a good understanding of the ex-dividend date, you can plan your stock trades in advance so you make sure your transaction has time to settle by the dividend record date.

In other words, you’ll need to plan your stock purchase prior to the ex-dividend date.

It’s worth mentioning that typically on the ex-dividend date, the stock price drops by an amount roughly equivalent to the dividends that the company had declared.

For example, if a company declares a $1 dividend to be paid on April 15th to the shareholders of record on March 15th (where the ex-dividend date is March 14th), then the company’s stock price will drop by approximately $1 as of March 14th to reflect the fact that those shares are not entitled to the next dividend payment.

It may be harder to notice the stock price adjustment for small dividend payments but you should be able to notice a slight stock adjustment when larger dividends are declared.

What Happens On The Ex-Dividend Date

If you are not yet a shareholder of a company and are looking to buy shares, as of the ex-dividend date, you will lose out on the opportunity to be entitled to receive the next dividend payment.

This means that you will miss the next dividend payment and you’ll need to hold on to your shares until the next dividend record date to receive any dividends.

If you are already a shareholder of the company, since you had shares prior to the ex-dividend date, you will be entitled to receive dividends on those shares for the upcoming dividend payment.

One interesting thing that happens on the ex-dividend date is that the stock price drops slightly to reflect the loss of the “dividend value” of the shares.

For example, if the stock was trading at $40 per share and the company declares a $1 dividend, then on the ex-dividend date, perhaps the stock price drops by $0.85 to reflect the loss of value of that $1 dividend payment.

Ex-Dividend Date vs Record Date

What does ex-dividend date and record date mean?

There are two dates that are important to consider when investing in dividends:

  • Dividend record date
  • Ex-dividend date (or ex-date)

The dividend record date refers to the day that shareholders on “record” on that day will be entitled to receive dividends.

The record date allows the dividend paying company to know to whom it must issue dividends.

On the other hand, the ex-dividend date is typically a business day prior to the record where an investor buying shares on the ex-dividend date or after will no longer be entitled to dividends.

The reason that is the case is that by buying the shares on the ex-div date or after, your transaction will not have enough time to settle allowing you to be formally recognized as a shareholder on the record date to be entitled to receive dividends.

What Is An Ex-Dividend Date Example

Let’s look at an example of an ex-dividend date to better understand the concept.

If a company declares dividends to be paid to shareholders on April 15, it will also specify the record date for that dividend entitlement (for instance March 15).

This means that those who are shareholders of the company on March 15th will be entitled to receive a dividend payment on April 15th.

For you to be a shareholder of record on March 15th however, you’ll need to purchase your shares before the ex-dividend date.

If a stock trade settles in two business days, then you must buy your stock two business days before March 15h.

If you buy your shares one day before March 15th, you are purchasing them on the ex-dividend date as your shares will no longer entitle you to the April 15th dividend.

In fact, the purchase of the stocks one business day prior to March 15th will settle one business day after March 15h (and you’d miss the dividend record date).

What Is The Ex-Dividend Date Special Rule

In certain cases, there are special rules that apply to the determination of the ex-dividend payment.

Particularly, if a company intends to pay dividends worth more than 25% of the stock price, a special rule will apply to the setting of the ex-dividend payment.

In such cases, the ex-dividend date will be “deferred” by one business day after the dividend is paid.

A special rule will also apply if the company intends to pay stock dividends instead of cash dividends.

In that case, the ex-dividend date is established on the first business date after the stock dividend is paid.

If you want to sell your shares and be entitled to your stock dividend, you must sell your shares the first business day after the stock dividend is paid.

Otherwise, you’ll sell your shares and sell away your rights to the stock dividend as well.

Dividend Capture Investing Strategy

Understanding how ex-dividend dates work is very important if you are adopting a dividend capture investing strategy.

Dividend capture is a type of investing strategy where the investor invests in shares of stock right before the ex-dividend date and sells the stock right after the ex-dividend date in order to be entitled to the dividends.

If the investor is able to “capture” the dividend and sell the shares at the right price, he or she will make a small profit on the transaction.

If you are looking to adopt a dividend capture investing strategy, there are different trading software tools and systems that you can get to track them.

The NASDAQ also offers a dividend calendar allowing you to track the upcoming dividend payments.

What Is Ex-Dividend Date Takeaways 

So, there you have it folks!

What is ex-dividend date?

Will you get dividends if you buy shares on the ex-dividend day?

If you want to know whether or not you will be entitled to receive dividends, you should consider two important dates: the “record date” and the “ex-dividend date”.

To be entitled to receive dividends, you must be a shareholder on the company’s books by the record date.

As a result, you’ll need to buy your shares at least one business day before the established record date so your transaction settles and you are booked as a shareholder by the date of record for the dividend.

If you purchase your stock after ex-dividend date, you will not be entitled to the next dividend payment.

Here is a quick example of a typical dividend distribution:

  • Dividend declaration date: Monday August 9th 
  • Ex-dividend date: Friday September 15th 
  • Record date: Monday September 18th 
  • Payable date: Tuesday October 18th 

If you buy your shares on Friday September 15th, your transaction will only settle after the record date of September 18th and you will not be entitled to dividends.

If you buy your shares by Thursday September 14th, then you’ll be a shareholder of record by Monday September 18th and you will receive dividends.

I hope that I was able to answer your question on what is the ex dividend date, how it works, and why it’s important.

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

What Is Ex Dividend Date Summary

  • The ex-dividend date or “ex-date” refers to a certain number of business days before the dividend record date (typically one business day)
  • If you want to purchase shares of stock and be entitled to receiving the next dividends, you need to make your purchase before the ex-dividend date
  • When you buy shares before the ex-date, your trade will have time to settle so you are considered a shareholder of record on the dividend record date 
  • The record date is the date used as the cut-off for the shareholders of the company who will be entitled to dividends depending on the number of shares they held on that date 
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Do all stocks pay dividends
Ex-distribution
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What is NASDAQ
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What is passive income
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How To Buy Tesla Stock (All You Need To Know)

How To Buy Tesla Stock (All You Need To Know)

Looking to find out How To Buy Tesla Stock?

How to buy Tesla stock directly?

What are the essential elements you should know!

Keep reading as I have gathered exactly the information that you need!

Let me explain to you how to buy Tesla stocks step by step!

Are you ready?

Let’s get started!

How To Buy Tesla Stock 

How do you buy shares of stock in Tesla?

I will provide you with a step-by-step explanation of how you can buy shares in Tesla allowing you to invest in electric cars.

Before we get started, here is a little background information on the Tesla stock:

  • Tesla was founded in 2003
  • Its official name is Tesla, Inc.
  • It’s based in Palo Alto, California
  • Its IPO was in 2010
  • The IPO stock price was $17 per share
  • In August 2021, it had a 5 for 1 stock split 
  • The company builds electric-powered vehicles 
  • The company also operates energy storage products, solar systems, and works on renewable energy 
  • In 2020, Tesla sold just under 500,000 vehicles 

Now, I will show you how to buy Tesla stocks online.

Step 1: Review Tesla Stock Performance

The first thing you should do before purchasing Tesla stock is to review the stock performance to ensure it meets your investment requirements.

This is a key step before making any investment decision.

When a lot of people talk about a particular stock, you want to make sure that you remain grounded and invest based on your investment values as opposed to investing based on emotions or by making rash decisions.

You can assess whether you should buy stock in Tesla by looking at things like:

  • Tesla’s annual reports (Form 10-K)
  • Tesla’s quarterly reports (Form 10-Q)
  • Information provided by the Tesla investor relations website 
  • Information in the SEC database
  • Information found on Tesla on finance websites
  • Reviews performed by brokerage firms and financial analysts 
  • Tesla stock news 

If you take the time to look at all the available data on the Tesla stock, you will then be in a much better position to decide if investing in Tesla will make sense in your particular situation.

You should also consider various Tesla financial ratios such as:

  • Tesla price per share
  • Tesla year to date change in stock price 
  • Tesla Price-to-earnings ratio (P/E ratio)
  • Tesla EPS
  • Tesla PEG ratio
  • Tesla EBITDA
  • Tesla risk score 
  • Tesla dividend yield (if any)

There are many more financial ratios and financial metrics that you can find or calculate. 

This will really depend on your personal appetite and interest to consider detailed stock information to make a purchase decision.

Step 2: Open Brokerage Account

The next step on how to purchase Tesla stock is to open a brokerage account so you can eventually place your purchase order.

A brokerage account is a type of account that you’ll need to open allowing you to buy and sell stocks, mutual funds, ETFs, or other securities traded in different securities markets.

Typically, most online brokerage firms offer their clients a wealth of information and content to help you further research the stock you want to purchase and get more data to make an informed decision.

If you are looking to buy Tesla stock for any purpose and to hold the stock for any time period, you’ll need a standard taxable brokerage account.

On the other hand, if you are looking to invest in Tesla in an account giving you special tax advantages, you may want to see if you should open an individual retirement account (IRA) or others.

Different brokerage firms will provide you with different products and services, so you’ll want to look around to find the best online brokers that will suit your needs.

Pay careful consideration to:

  • How much it will cost you to purchase shares (commission-free trading or trading fees)
  • How much fees you may need to pay on an annual basis (account fees)
  • How much financial data is made available to you, so you can choose the best brokerage account to buy your Tesla stock
  • Whether you can buy fractional shares (fractional share trading)
  • If you have commission-free trading
  • If you have real-time market data
  • If you can do margin trading

You can also ask the brokerage firm to offer you a demo of their trading account or give you limited access so you can try things out.

Step 3: Set Your Investment Budget

Once you’ve done your research on the Tesla stock and have opened your brokerage account, the next step is to decide how much money you will want to invest in the stock.

Are you looking to make a small investment or a large one?

Depending on your investment strategy and your investment budget, you should come up with an amount of money that makes sense for you to invest.

For example, if you earn $3,000 per month and can save $200 at the end of the month, you may decide to keep $100 for an emergency fund and use $100 to invest in the Tesla stock.

If you only have $100 to invest in Tesla stock per month, you’ll then need to look at the stock price to see how many shares you can buy.

Step 4: Find The Number of Shares To Buy

The fourth step in how to invest in Tesla stock is to consider the value of the Tesla shares per unit so you can see how many shares you should buy.

For example, if you have a budget of $100 per month to invest in Tesla stock but the stock price per share is above $100, you will not have enough to buy one share.

You’ll have two options at this stage.

Option 1 is for you to accumulate your Tesla investment budget month-over-month so you have enough to buy one share and then you’ll invest in the stock.

The other option is that you can verify with your brokerage firm if you can purchase fractional shares in Tesla.

There are some brokers that offer you the possibility of purchasing fractional shares.

This means that if you have $100 to invest in a stock that is priced at $500 per share, you can actually purchase 0.2 shares of the stock by investing $100.

See if you have this option available to you when opening your brokerage account.

Step 5: Place An Order

Now, you are ready to place a purchase or buy order for your Tesla shares.

Every stock has a ticker symbol. 

Tesla’s common stock ticker symbol is TSLA for its shares trading on the Nasdaq Exchange that is open from Monday to Friday from 9:30 a.m. to 4 p.m. Eastern Time.

To place an order, you’ll typically need to transfer your investment funds from your bank account to your brokerage account.

Generally, you can link your bank account to your brokerage account allowing you to move money from your bank to your brokerage account.

Once you’ve transferred the necessary funds, now you are ready to buy your Tesla shares.

What you need to do is to:

  • Log into your online brokerage account
  • Enter the TSLA ticker symbol to show you want to buy Tesla shares
  • Indicate the number of shares you are looking to buy
  • Specify your trade instructions by putting purchase price limit orders, market orders, or stop orders
  • Place your trade

Step 6: Evaluate Your Stock Returns

Just like any investment, after you’ve invested in the Tesla stocks, you should review the performance of your investment from time to time.

Some investors will not have a lot of time to devote to tracking their investment returns and progress whereas others may put more time.

It’s important that you monitor your stock performance at least on a yearly basis to ensure that the TSLA stock still fits your investment strategy.

One way investors assess the performance of their investment is to compare it to industry benchmarks like S&P 500 or the Nasdaq Composite Index.

If your Tesla shares perform better than your benchmark, then you’re on the right track.

However, if your Tesla common shares perform below your benchmark, you’ll need to assess factors like the overall economic conditions, Tesla’s latest financial results, latest news and information relating to Tesla, and more.

If you are confident that the stock will perform at levels you expect in the future, you may want to keep the stock.

Otherwise, you should consider at some point in time selling your stock to either realize your profit or cut your losses.

How To Invest In Tesla Takeaways 

So, there you have it folks!

Are you asking yourself the following question: How to buy stock in Tesla?

Well, the good news is that it’s not very difficult.

Here are the steps how to buy stocks in Telsa:

  • Research the Tesla stock
  • Open your brokerage account (be sure to compare different stock trading platforms)
  • Decide how much you will invest in Tesla shares 
  • Based on your investment budget, calculate how many Tesla common shares you need to buy (if you can’t buy one whole share of stock, consider brokerage accounts allowing you to buy parts of a share or fractional shares)
  • Place your purchase order (make sure you’ve transferred the necessary funds in your brokerage account)
  • Evaluate your Tesla share performance over time 

Now, you should have a clear idea of how to invest in Tesla shares from the start of the process to the end of the process.

Good luck in your journey to develop your wealth!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

How To Invest In Tesla Stock Summary

  • The first step on how to buy a Tesla stock is to do your stock research, analyze the market conditions, and look at Tesla’s financial reports, and earnings 
  • The next step how to trade Tesla stock is to open a brokerage account matching your trading needs (for most people, a simple trading account should be just fine)
  • Then you’ll need to decide how much money you want to invest in Tesla motors and with that information you’ll be able to calculate how many shares you need to purchase
  • The last step how to invest in Tesla motors is to place your TSLA stock trade and then monitor your stock’s performance  
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Passive income generator 
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Rich vs wealthy 
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What Is Dividend Yield (All You Need To Know)

What Is Dividend Yield (All You Need To Know)

Wondering What Is Dividend Yield?

How do you define dividend yield?

What are the essential elements you should know!

Keep reading as I have gathered exactly the information that you need!

Let me explain to you the meaning of dividend yield and why it’s important!

Are you ready?

Let’s get started!

What Is Dividend Yield 

The dividend yield is a financial measure expressing how much dividends a company pays out to shareholders in relation to the stock price.

In other words, when you calculate the dividend yield, you are calculating the percentage of dividend payments made by the company to its shareholders over the market value of the stock.

For example, if a company pays $4.00 dividends per share annually and the stock price is $100 per share, the dividend yield is 4% ($4 / $100).

There are many investors that adopt a dividend investing approach where they purchase dividend paying securities (or funds owning dividend paying securities) where they can get an attractive dividend yield.

There are some industries or sectors that tend to pay higher dividends compared to other industries, such as utilities, energy, and consumer staple.

Dividend Yield Assessment

The dividend yield provides you with a simple calculation of how much you’d expect to receive in cash return paid in dividends if you were to invest in a stock at the current stock price.

The yield is expressed as a percentage between the company’s annual dividend payments over the stock price per share.

If a company’s yield is going up, it can be the result of:

  • The company has increased the amount of cash dividends paid per share
  • The company’s stock price going down
  • The company increasing dividends per share and stock price going down

If you’re looking at the dividend yield to make an investment decision, it’s important that you don’t just assess the dividend yield in an isolated fashion.

You should consider the dividend yield along with other financial data and measures to assess if the company you intend to invest in is financially strong and can sustainably pay dividends.

Dividend Yield Definition

According to Investopedia, the dividend yield definition is as follows:

The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price.
Author

So what does dividend yield mean in stocks?

Well, the “dividend yield” in stocks represents a percentage expressing the relationship between the amount of money a company pays out in dividends in relation to its stock price.

How Dividend Yields Work

Let’s see how dividend yield works and why it’s important.

In essence, the dividend yield represents a financial measure of how much a company pays dividends to its shareholders compared to its stock price.

Since stock prices are constantly moving, the dividend yield is also a constantly moving percentage figure.

Let’s look at two scenarios where one scenario is a company showing a high dividend yield and another scenario where the company has a low dividend yield.

High Dividend Yield

For example, if a company pays $4 of dividends per share, per year, and its stock price is currently $100, its current dividend yield is 4%.

However, if the stock price rises to $200 and the company’s dividend payment (in dollar figures) does not change, then its dividend yield drops to 2% ($4 / $200).

Conversely, if the stock price drops to $50, the company’s dividend yield will rise to 8% ($4 / $50).

As you can see, a high dividend yield does not necessarily mean that you are investing in a quality dividend stock.

If the stock price is declining due to bad company earnings forecasts or other adverse economic factors affecting the company, investors should not focus on what appears to be an attractive dividend yield to invest in that stock.

Investors should do more research to assess whether the company’s fundamentals remain strong and the stock is truly undervalued before investing.

Low Dividend Yield

There are instances where companies have a zero dividend yield or a very low div yield figure.

Dividend stock investors may wonder whether investing in a company with a low dividend yield be worth it.

In fact, companies with low dividend yields can be very good companies with rising stock prices resulting in a lower dividend yield percentage.

If an investor does not look at other company financial metrics, he or she will miss out on the opportunity to invest in a company with strong fundamentals, growing revenues, growing stock prices, and a smaller dividend yield expressed in relation to an increasing stock price.

You should also be mindful of certain industries where dividend yields are low.

For example, in the technology space, companies either pay no dividends at all (thereby a dividend yield of zero) or pay a small amount of dividend resulting in a small div yield.

What Is Dividend Yield Formula

The dividend yield formula is as follows:

Dividend Yield = Dividends Per Share / Price Per Share
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To calculate dividend yield, you’ll need to look identify two key figures:

  • Dividends per share 
  • The company’s stock price 

To get a more accurate sense of the company’s dividend yield, many investors will use the trailing 12 months dividend figures (the amount of dividends paid out by the company during the past four quarters).

Once you’ve added the company’s dividend payments over the course of the past four quarters, you’ll divide that figure by the current share price to get the current dividend yield.

As a quick shortcut to calculating a company’s dividend yield, you can also take the last dividend per share figure paid by the company in the last quarter and multiply it by four (where you assume the same dividend payment has been paid over the course of the three quarters prior to that payment).

What Is Dividend Yield Ratio

The dividend yield ratio is a number expressed as a percentage of the amount of dividends paid by a company in relation to the company’s stock price.

In essence, a high dividend yield ratio means that the company pays out a higher amount of dividend on a per share basis.

A low dividend yield means that a company pays out a small amount of dividends on a per share basis.

For an investor, the dividend yield provides a simple calculation of the rate of return a stockholder expects to get in the form of cash dividend by investing in a stock.

An investor looking to invest in dividend stock will look at a few key financial measures to assess the quality of the stock, such as:

  • The dividend yield
  • The dividend payout ratio
  • The earnings per share 
  • The retention ratio 

What Is Dividend Yield Example

Let’s look at an example of a dividend yield to better illustrate the concept.

Imagine you have a company with the following financial figures:

  • Q1 dividend: $1.00
  • Q2 dividend: $1.00
  • Q3 dividend: $1.50
  • Q4 dividend: $1.50

The current stock price is $100.

In this example, the total dividends paid by the company in between Q1 and Q4 is $4.50.

As a result, the current dividend yield is $4.50 divided by $100 equalling 4.5%.

The dividend yield for this stock, as of this moment, is 4.5%.

Now, imagine the stock price doubles and goes up to $200 per share.

The dividend yield will drop from 4.5% to 2.25%.

If the stock price drops to $50 per share, the dividend yield will double and go up to 9%.

What Is A Dividend Yield Takeaways 

So, there you have it folks!

What does dividend yield mean?

How do you define dividend yield?

The “dividend yield” refers to the annual dividend payments made to shareholders by a company expressed as a percentage of the current stock price.

For example, if you are looking to buy a stock that offers you a $4 yearly dividend per share and has a stock price of $80, then the dividend yield is 5% ($4 / $80 = 4%).

If you’re looking at the dividend yield to make an investment decision, you should be mindful of the fact that the dividend yield will go up or down as a function of the stock price.

If a stock is doing good and its price per share is rising, your dividend yield will go down (leading amateur investors to think that the stock is not worth investing in).

On the other hand, if a stock is doing poorly and its price per share is rapidly declining, the dividend yield will be artificially high (again, misleading amateur investors to think the stock offers great cash flow).

You calculate dividend yield by taking the total annual dividends and dividing them by the stock price.

Depending on the industry, sector, or company, your dividend yields may vary.

Now that you know the div yield meaning, the current dividend yield definition, and how it works, go ahead and use this figure (along with others) to select the dividend stocks to grow your wealth.

Good luck!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

What Is Dividend Yield In Stocks

  • The dividend yield refers to the ratio of a company’s annual dividends paid to shareholders divided by the company’s stock price
  • Since the stock price fluctuates over time, the dividend yield will also fluctuate as a percentage 
  • When the stock price goes up and dividend payment remains the same, the yield goes down (and vice versa)
  • Investors tend to often look at the dividend yield to get an initial impression of how much cash flow they can expect to receive by investing in the stock
  • It’s important that investors assess the dividend yield along with other measures such as the company’s dividend payout ratio, earnings per share, earnings growth, along with other fundamentals 
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Do all stocks pay dividends
Earnings per share
Gross dividends 
High dividend stocks
How to invest in stocks 
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Special dividend 
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Active income
Diversified income
Dividend income 
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Examples of Passive Income
Gross income
How to buy Tesla stock
How to make money blogging 
How to make money in real estate 
How to make money in stocks 
How to make money with affiliate marketing 
How to make passive income 
Income statement 
Income streams
Interest income 
Net income 
Passive Income Apps
Passive Income Books
Passive income generator 
Passive income ideas 
Passive Income Meaning
Passive Income Strategies
Passive income types 
Residual income 
Rich vs wealthy 
Unearned income
What is passive income
Author

Dividend Payout Ratio (All You Need To Know)

Dividend Payout Ratio (All You Need To Know)

What is a Dividend Payout Ratio?

What is a good dividend payout ratio?

How do you calculate it?

Keep reading as I have gathered exactly the information that you need!

Let me explain to you what dividend payout ratio means and why it’s important!

Are you ready?

Let’s get started!

What Is Dividend Payout Ratio 

The dividend payout ratio refers to the measure of the amount of cash a company pays out to its shareholders in relation to the company’s net income.

In other words, with the dividend payout ratio, you can determine what is the percentage of earnings the company distributes to its shareholders in the form of dividends.

For example, if a company has $1,000,000 in net income and chooses to pay $10,000 in dividends to its shareholders, then the company’s payout ratio is 2% ($20,000 over $1,000,000).

When a company has a high dividend payout ratio, it means that it is distributing a lot of its earnings as dividends to its shareholders and keeps a smaller portion to reinvest in its business.

On the other hand, if a company does not pay any dividends and reinvests all of its net income back into the business, it will have a dividend payout ratio of zero.

Historically, according to the Wellington Management and Hartford Funds research, a safe dividend payout ratio is approximately around 41%.

Assessing Dividend Payout Ratio

Investors and finance professionals look at a company’s dividend payout ratio to get a better sense of the company’s ability to pay dividends over time.

When analyzing a company’s dividend payout ratio (DPR), you can tell how much the company is paying dividends to its shareholders in relation to its net income.

Looking at the company’s historical dividend payout ratio or the average dividend payout ratio in the industry can provide a good indication of how the company is doing over time and in relation to its peers.

For example, a company that regularly pays dividends and that has a track record of steadily increasing its dividends payout ratio is one that is financially mature and healthy.

On the other hand, a company that is reducing its payout ratio or that is payout ratio has been declining compared to the industry average is one that may have more difficulty sustainably paying dividends over time.

Retention Ratio

The opposing concept to the dividend “payout” ratio is the “retention” ratio.

In essence, when a company chooses to distribute money to its shareholders in the form of dividends, we can use the ratio of the dividends to calculate how much it is paying out.

On the flip side, the amount of money the company chooses to keep in the business can be calculated by the company’s retention ratio.

If a company does not pay any dividends to its shareholders and retains all its net income, it will have a 100% retention ratio and a 0% dividend payout ratio.

Why Is The Dividend Payout Ratio Important

The dividend payout ratio is an important ratio to consider when evaluating a company’s stock for investment or to assess the company’s financial position.

One of the most important pieces of information that the “dividend payout ratio” provides is a glimpse into the company’s cash management and financial maturity.

For instance, a well-established company generating consistent business income can choose to pay a good dividend payout ratio and still continue earning enough money to build its cash reserves, pay off debt, or invest in growing the business.

On the other hand, a company with a very low div payout ratio (or even zero) is a type of company where its management considers that reinvesting most (if not all) of its earnings back into the business will generate a better return to its shareholders.

Typically, startups, new ventures, and rapidly growing companies do not pay any dividends as they need all the money they can get to finance their growth and expansion.

Dividend Payout Formula

What is the dividend payout formula?

Here is the dividend payout formula:

Dividend Payout Ratio = Dividends / Net Income
Author

As you can see from this formula, to get the ratio between the dividends paid and the company’s net income, we’ll need to divide the amount of dividends paid by the company’s net income.

You can also calculate the dividend payout ratio by using the following formula:

Dividend Payout Ratio = (Earnings Per ShareDividends Per Share) / Earnings Per Share
Author

With this formula, you are essentially calculating the company’s dividend payout ratio by using per share figures.

There is a third method you can use to calculate DPR and the formula is expressed as follows:

Dividend Payout Ratio = 1 – Retention Ratio 
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The retention ratio is the amount of net income the company keeps as retained earnings.

How To Calculate Dividend Payout Ratio

Let’s look at how you can calculate the dividend payout ratio.

Imagine that you have a company that has the following financial position:

  • Net income: $10,000,000 per year 
  • Retained earnings: $50,000,000

This company has a lot of retained earnings that have accumulated over the past years and can use that money to finance its business without having to reinvest 100% of its net income back into the business.

The company management decides to pay dividends to its shareholders in order to compensate them for staying loyal.

The company’s board of directors declares the following dividends for the next four quarters:

  • Q1: $500,000
  • Q2: $500,000
  • Q3: $500,000
  • Q4: $500,000

This means that the company’s annual dividend payout ratio is the total of all the dividends it paid out ($2,000,000) over its net income ($10,000,000) representing a ratio of 20%.

This means that the company will 20% of its net income to pay dividends to its shareholders and keep 80% as retained earnings, to pay off debt on its balance sheet, or invest in the business.

Dividend Payout Ratio By Industry

What is the best dividend payout ratio?

The answer is that it depends on what type of company you are evaluating, which industry, the company’s future plans, and so on.

Calculating the ratio dividend payout can give an indication of a company’s dividend payment sustainability or business maturity, but it does not tell the full story by itself.

To better understand a company’s financial position, it’s worth looking at the industry dividend payout ratio to see where a company is situated compared to its industry or competitors.

Every industry will have its own characteristics.

For example, if you are assessing real estate investment trusts (REITs), you should expect payout ratios of no less than 90% as they are legally required to distribute at such high levels to benefit from various tax exemptions.

If you are considering Master Limited Partnerships (MLPs), you should expect to see high payout ratios.

On the other hand, companies in the technology space or high-tech tend to have a zero dividend payout ratio (or very low percentages) as they typically invest all their money back into growing the business.

Stock Dividend Payout Ratio Takeaways 

So, there you have it folks!

In a nutshell, the dividend payout ratio represents a measure of how much money a company is paying out to its shareholders and how much it is keeping to reinvest in the business, keep as retained earnings, or pay off debt obligations.

Companies with high dividend payout ratios are companies that pay out most of their earnings as dividends to their shareholders.

The main reason why you’d want to measure how much a company is paying dividends to its shareholders in relating to the money it makes is to see whether or not the company has the ability to sustainability pay dividends.

Having a high dividend payout ratio may seem attractive for investors as they can get a higher cash flow on their investments.

However, if a company is aggressively paying out dividends and is not using its net income adequately to fund the business operations, pay debt, or build cash reserves for acquisitions or other capital expenditures, not only the investor’s dividends may be at risk long-term but the business as well.

Now, you understand the meaning of dividend payout ratio, why it’s important, how its calculated, and what it tells you.

Good luck with your next investment!!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

Dividend Payout Ratio Meaning Summary

  • The dividend payout ratio or DPR is a financial measure of the amount a company pays to its shareholders in relation to the total amount of company earnings
  • DPR expresses the percentage of net income the company pays out to its shareholders as dividends
  • There is no such thing as the best dividend payout ratio or one that is optimal as the ratio depends on the industry, the specific nature of the company, the nature of the business, future business plan, and so on
  • Typically, companies showing a steadily growing DPR over time along with growing income levels are financially healthy and strong companies 
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Diversified income
Dividend income 
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Earned income 
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Gross income
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Interest income 
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What Are Qualified Dividends (All You Need To Know)

What Are Qualified Dividends (All You Need To Know)

Wondering what are qualified dividends? 

When is a dividend considered “qualified dividends”?

What’s the difference with an ordinary dividend?

Keep reading as I have gathered exactly the information that you need!

Let me explain to you what qualified dividends mean and why it’s important!

Are you ready?

Let’s get started!

What Are Qualified Dividends 

Qualified dividends for tax purposes are dividends that are taxed as capital gains.

As of the writing of this article, the maxim rate at which capital gains are taxed in the US is 20% whereas the maximum income tax rate is 37%.

As you can see, qualified dividends are taxed at a lower rate than income tax rates or the rates applicable to ordinary dividends.

According to the IRS, dividends are considered as qualified dividends if:

  • The dividend is paid by a US company or a qualifying foreign company
  • The dividends are not of the type listed by the IRS as dividends that do not qualify
  • The taxpayer meets the holding period (stocks held for more than 60 days during the 121-day period that beings 60 days before the ex-dividend date)

In most cases, dividends that are paid to investors are considered qualified dividends.

However, for some investors, the qualification of the dividend is important as it may have an important tax consequence for them at the end of the fiscal year.

Qualified Dividend Definition

According to Investopedia, qualified dividends are defined as:

A qualified dividend is a dividend that falls under capital gains tax rates that are lower than the income tax rates on unqualified or ordinary dividends.
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As you can see, qualified dividends have the advantage of being taxed at a lower rate than ordinary dividends.

In fact, qualified dividends are taxed at the capital gains tax rates whereas ordinary dividends are taxed at the income tax rates..

Qualified Dividend Tax Rate

What are qualified dividends for tax purposes?

Qualified dividends are taxed as capital gains.

In other words, in the United States, depending on the tax bracket applicable to you, you can expect to pay anywhere between 0%, 15%, or 20% in capital gains as of the writing of this article.

Here is the breakdown as per the Publication 550 called Investment Income And Expenses published by the IRS:

  • If you are in the 10% or 12% ordinary income tax bracket, your qualified dividend tax rate is 0%
  • If you are over 12% but below 35% ordinary income tax bracket, your qualified dividend tax rate is 15%
  • If you are in the 35% or 37% ordinary income tax bracket and with an income greater than $445,850, your qualified dividend tax rate is 20%

When your dividend qualifies as “qualified dividends”, it will appear in box 1b of the IRS 1099-DIV Form.

Ordinary Dividends

Ordinary dividends, for tax purposes, are taxed at the federal income tax rate applicable to ordinary income.

This means that as of the writing of this article, ordinary dividends can be taxed between 10% to 37% exposing you to a maximum tax rate of 37%.

Typically, ordinary dividends are reported in box 1a of the IRS Form 1099-DIV.

When dividends are taxed at the ordinary income tax rate, the investor will likely incur a higher tax liability as opposed to getting qualified dividends taxed at the long-term capital gain tax rates.

Qualified Dividend Requirements

For dividends to be considered as “qualified” dividends by the IRS, certain qualified dividend criteria must be met.

First, the dividend must be paid by a U.S. corporation or a qualifying foreign company.

A qualifying foreign company is one that:

  • Is incorporated in a US possession
  • Is eligible for the benefits of an income tax treaty with the US
  • Is traded in a US securities market 

Second, there are certain types of dividends that do not qualify as per the IRS, namely:

  • Real estate investment trust dividends 
  • Master limited partnership dividends 
  • Dividends by tax-exempt companies
  • Dividends paid on money market accounts 
  • Special one-time dividend payments 
  • Dividends that are not related to hedging activities 

Third, the person receiving qualified dividends must meet the holding period requirement consisting of holding the stock for more than 60 days during the 121-day period starting 60 days before the ex-dividend date.

What Are Qualified Dividends Vs Ordinary Dividend

Qualified dividends are dividends that are taxed at the capital gains rate.

On the other hand, ordinary dividends are taxed at the income tax rate.

As of the writing of this post, qualified dividends can be taxed at any of the following capital gains tax rates:

  • 0%
  • 15%
  • 20%

On the other hand, the Federal income tax rates can range anywhere between 10% to 37% depending on the taxpayer’s income and circumstances.

As such, depending on your tax bracket, you may see an important difference in the amount of taxes that you will have to pay to the IRS depending on if you are paying taxes on qualified dividends or ordinary dividends. 

What Are Qualified Dividends IRS Takeaways 

So, there you have it folks!

What does a qualified dividend mean?

What are qualified dividends taxed at?

Qualified dividends are dividends paid by US corporations or qualifying foreign corporations that are subject to the same tax rate as long-term capital gains.

On Form 1099-DIV, qualified dividends are reported in line 1b of column 1b.

For a dividend to be considered as a “qualified” dividend, it must meet the following requirements:

  • Be paid by a domestic US corporation or qualifying foreign corporation 
  • They are not a type of dividends considered as not qualifying by the IRS
  • The investor meets the holding period by holding the stock more than 60 days during the 121-day period that beings 60 days before the ex-dividend date

For the average investor, whether the dividend is qualified or not will not make much of a difference.

In essence, most of the dividends that are paid out to investors are considered qualified dividends.

On the other hand, for some investors with particular investing strategies or within certain tax brackets, getting paid dividends that are taxed under as capital gains or ordinary income will make a big difference.

Be sure to consider the type of dividend that you will get when you invest so there are no surprises.

Good luck!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

What Are Qualified Dividends Summary

  • Companies pay dividends to their shareholders when they are distributing business profits to reward them as investors
  • When you receive dividends, you will be most likely required to pay taxes on the sums you’ve earned 
  • When a dividend is considered as “qualified dividends”, you will pay tax at the long-term capital gains tax rate
  • On the other hand, when your dividend is not qualified dividends, it will be taxed as ordinary income 
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Convertible preferred stock dividend
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Dividend tax
Dividend yield 
Dividends per share 
Do all stocks pay dividends
Earnings per share
Gordon growth model 
Gross dividends 
High dividend stocks
How to invest in stocks 
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P/E ratio
Qualified dividends
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Value investing 
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Dividend income 
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Earned income 
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Gross income
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What is passive income
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How To Buy Dividend Stocks (All You Need To Know)

How To Buy Dividend Stocks (All You Need To Know)

Wondering How To Buy Dividend Stocks?

What should you consider when buying dividend stocks?

How do you buy the stocks?

Keep reading as I have gathered exactly the information that you need!

Let me explain to you how to buy dividend stocks so you know all about it!

Are you ready?

Let’s get started!

How To Buy Dividend Stocks 

Investing in dividend stocks is a great way to build your wealth over time while generating a steady stream of passive income.

Now, you are looking to invest in dividend stocks and are wondering how you can do so.

In this article, I will break how you can invest in dividend paying stocks so you can immediately get started!

The reason why dividend stocks are attractive to many investors is that they are:

  • Less volatile stocks
  • Offer you a steady stream of cash flows (dividends)
  • You can benefit from the appreciation of the stock price over time 
  • Companies with growing revenues can increase their dividends over time

Also, if you reinvest your dividends to buy more shares of the company over a long period of time, you will take advantage of the magic of compounding returns.

I will answer your question by telling you:

  • How to invest in dividend stocks from a strategy perspective
  • How to buy dividend stocks technically speaking

Let’s dive right into it!

How To Invest In Dividend Stocks

There are different investment strategies out there offering you varying levels of risk and return profiles.

Dividend Stocks

One of my favorite investing approaches is to invest in dividend stocks.

Dividend stocks are companies that pay their shareholders dividends on a regular basis (typically on a quarterly basis).

One way to invest in dividends stocks is to individually purchase shares of stock in companies that pay dividends.

The advantage of this method is that you can do your market research and find a company that meets your investment criteria.

Generally, you want to see a good track record of dividend payment, company revenues growing over time, and a sound business model.

If you build a diversified portfolio of dividend stocks in different sectors, industries, or even markets, you can take advantage of the dividend payments paid to you over time and reduce your investment risk.

By managing your own portfolio, you will also pay no portfolio management commission or administration fees compared to an investment in a dividend fund.

On the flip side, you may need to put in a good amount of time and effort selecting your dividend stock candidates before investing in them.

Dividend Funds

Another way you can invest in dividend stocks is to buy shares or units of a dividend fund.

In other words, through investments like mutual funds such as index funds or exchange-traded funds, you can purchase shares in a “basket” of dividend paying stocks held by the fund.

The main benefit of this approach is that with your investment, you already benefit from the diversification strategy adopted by the fund or index.

By holding the dividend fund, you will receive dividends the same way that you would receive dividends if you had invested in a single stock.

The convenience of purchasing in a basket of pre-vetted stock and a managed portfolio is something that many investors value as they do not have the time or knowledge to handle it on their own.

On the flip side, the portfolio managers or fund managers will take a portion of the returns generated by the fund to cover their administration and management fees.

The fees you pay to the fund managers will chip away at the total return you could have generated by individually investing in the dividend stocks held by the fund.

Dividend Aristocrats

Another way to invest in dividend stocks is to pick stocks called dividend aristocrats.

Dividend aristocrats are companies that have a history of paying dividends year-over-year and having increased their dividend payments for at least decades.

For example, the S&P 500 dividend aristocrats are companies that have paid and increased their dividends over the past twenty-five years, have a float-adjusted market cap of at least $3 billion, and have a daily trading value of at least $5 million.

In essence, when you buy dividend aristocrat stocks, you are buying:

  • Shares of stock that offer consistent and reliable cash flow to their shareholders 
  • Companies that are highly profitable and stable 
  • Are safer investments 
  • Tend to have less price volatility 
  • Share prices steadily grow over time

Dividend Investing Strategy

There are two main types of dividend investing strategies:

  • Investing for dividend yield 
  • Investing for dividend growth 

Investing for dividend yield consists of finding quality dividend paying stocks that offer the highest yield possible (or highest dividend payment to shareholders).

In most cases, you can find dividend stocks with high yields (as compared to their peers) when the stock price drops and the company shares are undervalued.

So you’ll need to be careful about this investment approach and should invest in a stock with a high yield if you know what you’re doing.

Another approach is dividend growth investing.

This is a type of strategy where you buy shares of companies paying dividends and where the dividends are expected to go up over time at a rate higher than the rate of inflation.

In other words, buying and holding on to dividend growth stocks is more profitable the longer you hold on to the shares and earn higher dividend income.

How To Buy Stocks Paying Dividends

Now that I’ve gone over the main strategies to invest in dividend stocks, let’s look at how you should actually go about buying dividend stocks.

Finding A Dividend Stock

The first step in how to buy stocks that pay dividends is to find a quality dividend-paying stock.

Today, with all the information you have available online and on the Internet, it’s quite easy to look up things like:

  • Online dividend stock reviews 
  • Market data offered by your brokerage firm on its website
  • Financial sites 
  • Dividend stock lists 

Once you’ve selected a few stocks, you should then assess them more thoroughly.

Evaluating The Dividend Stock

The next step in buying a dividend stock is to evaluate the quality of the dividend stock candidate you have found.

This means that you need to look at the company in question, certain key financial ratios, and other fundamentals to assess whether or not you should actually invest in the dividend stock.

Some of the important characteristics you should evaluate are:

  • Dividend yield compared to its peers and across industries 
  • Dividend payout ratio 
  • Company’s revenues over time 
  • Company’s future potential

Dividend Yield

It’s important that you don’t just focus on buying stocks with the highest dividend yield. 

The dividend yield represents the percentage of dividend cash flow you are expected to receive as a function of the stock price.

A common “new investor” trap is buying dividend stocks offering a high yield without realizing that the yield has artificially gone up due to a falling stock price caused by poor company performance or financial troubles faced by the company.

Dividend Payout Ratio

Another important element to consider is the company’s dividend payout ratio.

The payout ratio refers to the percentage of a company’s earnings or profits distributed to the shareholders in dividends.

You’ll need to compare the payout ratio to the company’s peers in the industry to see how the ratio compares.

A company that has a high dividend payout ratio is one that pays out most of its earnings in the form of dividends to its shareholders.

Although this can be good for an investor, it can also be a matter of concern if the company is not reinvesting a sufficient amount of money in the business to continue growing.

Dividend Consistently

One of the most important considerations for a dividend investor is the consistency and reliability of the stock’s ability to pay dividends over time.

The idea is to find companies that can pay dividends to their shareholders for many years to come.

As such, you can invest in the stock today and earn a constant stream of cash flow for years and years to come.

This is the beauty of dividend investing as you are able to generate passive income allowing you to build true wealth.

How Much To Invest

Once you’ve analyzed the different dividend stock candidates, another key decision you’ll need to make is how much to invest in the stock.

If you are buying shares or units of a dividend fund, you’ll need to determine how much money you’ll invest in the specific fund.

On the other hand, if you are investing in individual dividend stocks, you may want to decide if you are going to buy shares of one company or will you by buying shares of several companies to further diversify your portfolio.

Buy Dividend Stocks

How to buy dividend stocks online?

The last step in the process of buying dividend stocks is to actually purchase your dividend stocks.

This step requires that you open a brokerage account with the brokerage firm of your choice.

Once your trading account is opened, you will deposit the necessary funds to purchase the number of shares that you need to buy in the stock.

There are many good brokerage accounts that offer you the ability to trade with very low commission (or none at all).

Here are the steps how to buy stocks online:

  • Log into your brokerage account
  • Transfer a sufficient amount of money to your account
  • Enter your stock symbol
  • Enter the number of shares you want to buy
  • Specify your order instructions by selecting trading parameters offered by your account

Once you have done your trade, it will take several business days for the transaction to settle.

And voila! 

You have purchased your dividend stocks.

Track Your Investments

Once you have purchased your dividend stocks, it’s important that you keep an eye on your investment from time to time.

Keep in mind that investing in stocks is a risky proposition.

There’s no guarantee that a stock will perform the way you or your financial advisor may predict. 

To ensure you are protecting yourself from the possibility that a company goes bankrupt or you lose money, you should monitor your investment.

Companies have no obligation in paying dividends.

So if you see that the company could be facing financial troubles and my cut dividends or that other economic factors may affect the stock’s ability to pay dividends in the future, you may want to consider selling off that stock in favor of another one.

How To Buy Dividend Paying Stocks Takeaways 

So, there you have it folks!

How do you buy dividend stocks?

Dividend stocks are company shares that you can buy offering you dividends representing the distribution of business profits to their shareholders.

You can buy dividend stocks by:

  • Purchasing shares of individual stocks that pay dividends and create your own investment portfolio
  • Investing in a mutual fund holding dividend stocks
  • Investing in ETFs focusing on dividend stocks 
  • Investing in dividend aristocrats 

To make the best purchasing decision, you should:

  • Select a divided stock or fund that matches your investing strategy 
  • Look at factors like dividend yield, payout ratio, company’s earnings per share (EPS), company’s price to earnings ratio (P/E ratio), dividend track record, and the company’s ability to pay dividends in the future
  • Decide how much money you want to invest in dividend stocks
  • Purchase your stocks by using an online brokerage account 
  • Consider reinvesting your dividends to increase your returns
  • Make sure you track your investment over time

Good luck with your dividend investments!

Why You Should Join My Passive Income Blog

It’s been great having you on my blog.

Just so you know a little about me!

On this blog, I focus on generating passive income in order to build wealth over time.

Over the years, I have built a portfolio of passive income sources generating me a constant, continuous, and reliable source of cash flow every month (it is awesome!!).

I made a lot of mistakes on the way and learned a lot.

Now, my mission is to teach you my secrets, guide you, and show you how to make passive income for yourself.

I don’t offer a get-rick-fast scheme or I will not make you a millionaire overnight.

However, what I can do is to provide you real and actionable strategies that you (anyone) can implement on any scale (large or small) to make money passively.

If you are willing to dedicate yourself, work hard, and make sacrifices, I can help you change your life around. 

I only focus on tried and true methods for making money and they take time, patience, perseverance, and a lot of hard work.

Hey You!
Are You Looking For Financial Freedom?

If you are looking for financial freedom, make more money, or learn how to earn cash flow from awesome passive income sources, as your first step, sign up for my Passive Income Newsletter. 

When you sign up, I will share with you my exclusive content on passive income, tell you about the tools I use, strategies that I’ve used, what successful entrepreneurs do to make piles of money, and most importantly my actionable tips to get you started!

Are you ready to live life on your own terms?

Can you make the commitment today?

If you are ready and willing to commit yourself, come with me and let’s go on a wonderful journey together…

With that being said, let’s head right back to our main topic!

How To Buy Dividend Stocks Summary

  • Buying dividend stocks is a great investment strategy where you buy shares of companies paying dividends 
  • You can buy shares in single companies that pay dividends to create your own dividend stock portfolio or you can buy shares in mutual funds or ETFs that invest in a collection of dividend paying companies 
  • To buy stocks that pay dividends, you must first find the dividend paying stock and evaluate its potential to pay dividends over time
  • Some of the key factors to consider are the company’s dividend payment history, the dividend yield, the payout ratio, earnings per share, Price-to-earing ratio, and fundamentals such as its revenues and future potential 
Average stock market return 
Best brokerage account
Best dividend stocks
Cash dividend 
Convertible preferred stock dividend
Dividend aristocrats 
Dividend blog 
Dividend capture strategy 
Dividend growth investing 
Dividend kings
Dividend tax
Dividend yield 
Dividends per share 
Do all stocks pay dividends
Earnings per share
Gordon growth model 
Growth investing
High dividend stocks
How to invest in stocks 
How to research stocks 
Index funds 
Payout ratio
P/E ratio
Qualified dividends
Roth IRA
Stock that pays dividends 
Value investing 
Yield on cost ratio
Author
Active income
Diversified income
Dividend income 
Dividend passive income
Earned income 
Examples of Passive Income
Gross income
How to make money blogging 
How to make money in real estate 
How to make money in stocks 
How to make money with affiliate marketing 
How to make passive income 
Income statement 
Income streams
Interest income 
Net income 
Passive Income Apps
Passive Income Books
Passive income generator 
Passive income ideas 
Passive Income Meaning
Passive Income Strategies
Passive income types 
Residual income 
Rich vs wealthy 
Unearned income
What is passive income
Author