Dividend Stock Investing

Dividend stock investing, or just plain dividend investing, is simply investing in stocks that pay dividends. But what are the best dividend stocks?

That depends on a lot of different factors, of course, the chief of which is your own objectives and investing or trading philosophy.

What's your investing style or philosophy? I call mine Leveraged Investing, a hybrid version of option trading and value investing with a strong reliance on high quality dividend paying companies.



Morningstar's recent dividend-related video . . .

Changes Coming to Dividend Taxation with Josh Peters - June 2010
Generate real cash and build wealth with Morningstar Dividend Investor.



Dividend Articles, Pages, and Resources

What Is a Dividend? - A dividend payout represents a portion of a company's earnings or profits which are paid out to the company's shareholders (usually) in the form of a cash payment. Learn about the 3 types of dividends, the purpose of dividends, and more.

Dividend Dates - There are basically four dividend dates to be aware of when tracking your distributions: Dividend Declaration Date, Dividend Record Date, Ex-Dividend Date, and Dividend Payment Date. Learn about each here.

Calculating Dividends - Calculating dividends is fairly straightforward although there are different categories and metrics involved. Learn to calculate in terms of: Total Payments, Current Yield, Effective Yield, and Adjusted Yield.

Dividend Growth Rate - The dividend growth rate (the annual rate at which a dividend paying company increases its distributions) is of crucial importance to the long term dividend investor. Learn why dividend growth is important and how to accelerate the process.

Why Dividend Growth Investing is Superior to Growth Investing - See impressive real-world examples of the power of dividend growth and the advantages of this type of investing over traditional growth stocks.

Dividend Payout Ratio - The dividend payout ratio is calculated by dividing a company's dividend by its net income. The resulting number tells you what percentage of a company's net income is required to service or cover the dividend. This page explores identifying an ideal payout ratio as well as dividend warning signs.

Dividend Safety - Dividend safety is paramount to long term investing success. Current yield, future growth rates, payout ratios - none of these matters if you can't count on the security of your income investment. There are both fundamental analysis factors as well as pragmatic common sense questions to ask yourself when assessing the safety of a company's payout. This page also includes a solid 7 minute video from Morningstar's Josh Peters on the subject.

Reinvesting Dividends - Reinvesting your dividends is a tremendous method to generate compounding returns on stocks that pay dividends. It simply requires that you use the proceeds of your dividends and purchase additional shares of stock. All else being equal, additional shares of stock will generate more money in dividends which in turn will purchase more shares of stock which then generates even more money in dividends . . . and so on and so on.

Dividend Reinvestment Plans - Covers conventional Dividend Reinvestment Plans (DRIPs) and comparable online broker versions of dividend reinvestment plans.

Dividend Reinvestment Program - Learn how to create your own customized dividend reinvesting program. Covers conventional dividend reinvesting as well as more customized approaches.

Dividend Achievers and Dividend Aristocrats - If you love dividend stock investing, then you love these kind of stocks. Dividend Achievers and Dividend Aristocrats are trademarked terms and form the basis of indexes that track the performance of dividend paying companies with a long histories of increasing their dividend payouts each year. For Dividend Achievers, that's a history of increasing annual dividends for 10 or more years, and for Dividend Aristocrats, that's a history of 25 or more years.

How to Become Your Own Dividend Aristocrat - See a demonstration of an options-enhanced alternative that achieves a similar effect to long term dividend growth through the continual reduction of your cost basis.

Best Dividend Stocks - So what are the best dividend stocks? Are the best ones those with the highest dividend yields? Or are they the ones that pay a robust but stable dividend, have a history of dividend growth, and a healthy and sustainable dividend payout ratio? Learn why the best stocks that pay dividends are no different than the best stocks without a payout, and why your investment choices should always focus on quality and price over everything else.

High Yield Stocks - Who doesn't love high yielding stocks? There are basically three categories of high yield dividends: Dividend yielding stocks where the share price has fallen signficantly; naturally high paying dividend stocks such as REITs, BDCs, MLPs, and Royalty Trusts; and regularly yielding stocks that become high dividend stocks over time either through the dividend growth rate or certain strategic and conservative option strategies.

High Yield Dividend Stocks: An Early Warning System? - Sometimes a company's current dividend yield tells you all you need to know whether a business is a good investment. Learn what the Market might be saying when a company's dividend yield shoots up.

High Dividend Growth vs High Yield - Which are the better long term investments - stocks with a high yield and little if any dividend growth, or low yielders with a record of strong dividend growth? Compare the numbers, understand the factors, learn to make your own reinvested dividend calculator, and more.

High Dividend Stocks and Option Trading - Learn about the role of options in a high dividend stock portfolio.

Dividend Capture - The Dividend Capture strategy is a temptingly simply strategy to flit from one dividend paying stock to another, owning shares just long enough to qualify to receive the payout. Who needs a paltry four quarterly payouts when you can manufacture dozens, scores, even hundreds of payouts each year? Unfortunately, the strategy is difficult, if not impossible to implement effectively and successfully. Learn more here.

Dividend Absorption - Looking for a viable options-based alternative to the Dividend Capture fantasy? Learn an options strategy that allows you to exploit a company's dividend cycle and even "absorb" a stock's quarterly dividends without ever owning the shares.

Valuing Dividend Stocks - Learn why dividend paying stocks are easier to value than non-dividend paying stocks plus the importance of having an accurate feel for a company's worth.

When Should You Sell Your Dividend Paying Stocks? - Should you sell your dividend paying stocks, and if so under what conditions?

Option Trading Strategies for Dividend Growth Investors - The biggest problem with dividend growth investing - or investing in companies that increase their dividend payouts every year - is that it take way too long to generate outsized high yield income. Learn how option trading can accelerate the process so you don't have work until you're 105 to live off your dividends.



More - Dividend and Yield FAQs

Is it a Good Idea to Reinvest Dividends?

Do Reinvested Dividends Lower My Cost Basis?

High Yield Safe Investments




Morningstar Dividend Investor - Your guide to stocks that earn today and gain tomorrow.

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Warren Buffett Zero Cost Basis Portfolio Current Equity Holdings:

KO - 100 shares
MCD - 30 shares
JNJ - 25 shares
GIS - 25 shares
PAYX - 25 shares

Open Market Purchase Price: $11,134.23

Less Booked Option Income: $6625.74

Tot. Discount: 59.51%
Adj. Div. Yield: 8.27%

LEARN MORE HERE