How to Use the Dividend Investment Strategy
If you are interested in gaining annual income from a stock, you can do so by using a dividend investment strategy. Because there are plenty of companies that offer cash dividends throughout the year, stock holders can benefit from these payouts. Though there are some companies that don’t offer dividends, these are often small and growing companies. However, there are many larger companies that an investor can benefit from by using the strategy of dividend investing.
What is the Reason that Companies pay Dividends?
Once a company has reached a certain maturity and stability, they will have extra money laying around. With this money, many companies take a percentage of it to disperse among their investors. By doing this, the investors are pleased and will put more money into the company, in search for more dividend payouts. Outside investors are also attracted to dividends, so when they see companies offering generous payouts, they will be more likely to buy the company’s stock because of it.
When companies can produce dividends for their investors, this is also seen as a sign of strength and positive earnings in the future. The main goal for public companies is to look as attractive as possible, so they can gain more investors. Dividends essentially feed the never-ending circle of life when it comes to investing. If you are interested in investing in a company that offers dividends, below are a few companies that have been known to offer quarterly dividends to their investors.
• General Motors (GM)
• IBM (IBM)
• Wells Fargo (WFC)
• Coca- Cola (KO)
• Phillips 66 (PSX)
There are some of the largest companies that have been known to shill out dividends for the longest. Though there are many companies that offer dividends, investing in a stable company is the smartest if you plan to receive those sweet payouts throughout the year.
If ever you run into a company that does not pay dividends or has chosen to stop paying dividends, these could be beneficial to investors as well for tax reasons. Because dividends are taxable, this means the tax rate is just as high as a marginal rate which can end up costing the investor more money. However, companies that do not offer dividends are not as attractive to investors as the companies that do.
When using the dividend investment strategy, it is important to make smart and educated movements with your stock choices. Following the trends on the ticker is not always best. Looking at a company’s entire timeline and their stability throughout it seems to be the best choice when investing in dividends.
