When You Should Buy Dividend Stocks
There are essentially two ways to make money in the stock market: through dividends or through buying stocks at low value and selling them when they reach a higher value. Dividends are taxable payments made to investors and are based upon earnings per share and the payout ratio determined by management. Dividends can be paid in many forms. Typically, dividends are paid in cash, but they can also be paid in property and stock. A company’s ability to pay dividends indicates its financial health, confidence in its products, and the market it serves.
When looking to invest in a company that has the potential for dividend pay-outs there are a few things that you need to know. You will want to check a companies history and look at a few specific things. First, you should look for a company with a consistent pay-out record. Consistent dividend payments are indicative of a healthy company that is capable of cash now and in the future—which is generally, a safer investment.
Second, you should understand important dates that relate to dividend pay-out. The declaration date is the date in which dividend payments are announced. This is usually done through a press release to notify investors of impending dividends. Next is the ex-dividend date, this is the date in which the stock will trade without the dividend. This date is important because if you want to sell your stock, but still receive the dividend you must wait until this day or after to do so. Additionally, if you don’t own the stock but want to get in on the dividend you must buy before this date. After the ex-dividend date comes the date of record which is the date that you must be recorded as the owner of the stock by if you wish to capitalize on the dividend pay-out. Finally, after the date of record comes the payable date. This typically occurs about six weeks after the date of record and marks the point in which dividend payments are mailed or transferred.
Companies that pay-out dividends regularly usually have system to their pay out. The dividends are generally paid out quarterly in cash to investors. If you have employed the services of a stock broker then your dividends will be paid out to them and they will take their commission and then give you your pay-out. If you have invested on your own a check will be mailed to you directly.
Understanding all of the inner workings of dividend pay-outs is essential to getting a good money return for your investments. Knowing this information can help you pick a company to invest in that will give you a good return. It is important for any investor to do their homework even if they have employed the services of a broker. Understanding your investments is the key to making money with them