How To Invest In Dividend Stocks

This is gonna be your full beginners ultimate guide on dividend investing first of all we're gonna go over what are dividends we're going to be talking about why companies actually pay a dividend we're going to be giving you the rundown on how to choose specific dividend stocks we're going to be talking about the examples of strong dividend stocks we're also going to be going over the power of dividend investing and not only that but ladies and gents I'm also going to be hooking you up with a bunch of free stocks now before I actually get into this PowerPoint presentation if you guys are interested in picking up a copy be sure to check out the newsletter Down Below in the description and I can email you guys one there as well alright so to kick this video off what are dividends what basically Dividends are just payments made by a company to its shareholders from its profits or reserves now the payments are normally typically made in cash but can also be in the form of additional.

Shares or other assets and are normally paid out quarterly so normally companies do this as a way of distributing some of their profits to their shareholders now shareholders are owners of the company and once a company is listed on the public stock exchange this is pretty much that saying you've heard where it's like oh I just bought like a single fractional share of Chipotle so that makes me an owner they're technically not wrong when they say that and this is pretty much just a way that a company rewards individuals for deciding to invest their money into their company now the reason why companies end up paying dividends is because it normally attracts investors to a company because there are individuals who solely look at companies that pay dividends as a source of regular income dividends is also a good sign that a company is normally financially pretty healthy and stable and that they have confidence in being able to pay out even more future earnings now not all companies pay dividends some may actually choose to use their profits for other purposes where it could be reinvesting back into the business or paying off debt or even buying back more shares but generally we have seen a lot of these companies choosing to pay dividends because they know just how many more investors that it would tract now dividend investing doesn't need to just happen within the stock market as an example ladies and gents I also co-own a restaurant here in Rockville.

 Maryland and I also receive a monthly or quarterly check from the owner's profits and to me those are pretty much like dividends too I've gone ahead and invested my hard-earned money and then every few months or every month depending on when I want to get paid I get paid a lump sum of how much the owner's profits end up being now although by definition Dividends are more equated into the stock market you can also take for example if you bought a certain crypto and then they air dropped where they literally just put extra crypto into your account for holding that crypto that could be a form of a dividend payment to back up just a little bit though hopefully that gave you a better idea of what Dividends are and how they can work universally in different markets sticking to what we know within stocks let's talk about what makes a dividend stock particularly good so this is going to be made up of four different factors it's going to be one of the dividend in yield to the dividend history three the financial stability and for the industry and the market Trend so dividend yield is pretty much just the annual dividend payment as a percentage of the Stock's current market.

Price so as an example to make it easy if a stock has a five percent annual dividend yield and they're priced right now at a hundred dollars per share you would be paid five dollars annually or a dollar 25 cents quarterly per share that you own going into a dividend history this pretty much just indicates the company's commitment to returning value to shareholders from what they've done with their track record of consistently paying and increasing dividends over time now there are going to be some companies that have been paying out dividends for a very long time while on the other hand there are some companies that have just recently started to do this in case you didn't know but a company always has the option of pausing or opting out from paying shareholders dividends just in the case that they need additional cash to run their business operations or if a company is doing really well and they decide okay we got too much extra profit let's give it out to our shareholders then that is another option too going into Financial.

Stability this here is crucial to its ability to see whether or not if a company would continue to pay dividends over the long term as an investor you always want to evaluate factors such as the debt level the cash flow and the profitability to ensure that the company has continued resources to sustain those dividend payments last but not least what makes a dividend stock good is going to be the industry and the market Trend now there are some industries that are way more stable than others and there are certain market conditions that may affect a company's ability to pay a dividend since dividend stocks are long-term Investments you're most likely going to be able to hold these positions during Bull and Bear markets finding a reliable company that will stay in business which is going to be consistent in getting your payments into your wallets every single quarter or every month depending on when they pay you out now if you find a company that is able to have a good dividend yield they have a good history they have good Financial stability they're within a good industry and Market Trend always make sure that you also look at the stock price there are a lot of people who get so caught up in companies that pay the most amount of dividend for the lowest stock price that they may be at but if a company is eventually just gonna end up tanking and in the last two to three years they've just continuously gone down in price the dividends you get from them is Gonna. 

Cancel out the profit that you may make when at a certain point you need to actually realize the profit of the loss on the certain stock that you bought if a company is bad and they're going down in price and they might end up going bankrupt just because they're paying you thirty dollars in dividends for holding a share it does not mean that it is a good investment now dividends stock red flags to avoid there are four more things you need to know about within this category and it's going to be excessively High dividend yields it's going to be history of inconsistent dividend payments it's going to be companies heavily reliant on debt and then companies with weak financials or declining earnings when it comes to excessively High dividend yields high yields may actually be unsustainable and it could be a warning sign of underlying problems with the company there are been historic moments where companies will provide High dividend yields to raise even more money to look more attractive but they are just pushing out the inevitable death of that company going bankrupt don't fall victim or prey to those dividend yield numbers and make sure that you are wary about what company that you are investing in and you have full knowledge of their financials there are going to be some companies that have a history of irregular dividend payments or that have cut or suspended dividends in the past many times if that's the case the track record of their past might be an indicator of how they are in the future and you don't want to be dealing with that either now companies that are heavily reliant on debt is also another.

Huge risk of defaulting on their debt payments which could also make it difficult for them to continue paying dividends to their shareholders there are some companies that have an exception where if they do rely heavily on debt but they are positioned well where they have positive cash flow that is consistently coming in every single month this might not matter but for the most part make sure you do at least take a Second Glance within the debt sheet for any dividend comp company you decide to invest in last but not least companies with weak financials are declining earnings look if a company's earnings are declining over time it could show that it's just about a struggle it might not generate enough to pay its own bills and let alone pay the dividend to their shareholders so just know that this could always be a huge warning that the company may have to cut or suspend its dividend payments or their stock price just might continue to fall down so Brian okay we got the good we got the bad of dividend stocks I got the definition well can you tell me a few good dividend stocks that you know of so I'm gonna list you three good dividend stocks according to Warren Buffett's top performers.

Warren Buffett is one of those OG individuals where he's been able to rake in billions of dollars every single year just from his dividend income so for the first stock we have Kraft Heinz and Co this stock here is in the consumer food Staples industry it's not going anytime soon if you have ever used ketchup you'll be very familiar with this brand and they actually had a 30.48 gross profit mark margin in 2022. now the second stock here a I'm gonna call it Avi which is actually just a research based biopharmaceutical company which engages in the development and sales of pharmaceutical products this company here is well positioned in their sector and it's always reinvesting back into r d which is research and development and according to their numbers they have plenty of cash flow third stock coming from Warren Buffett's portfolio is Johnson and Johnson you guys may have heard of this but they engage in the research and development of manufactured and sale of products in the healthcare field they have very strong financials and there will always be a demand for their products in different market conditions now those dividend stocks are going to be a bit more conservative but let me show you one of my favorite dividend stocks that has actually generated me over 323 percent on just the stock price alone and this is going to be Academy Sports and Outdoors as an example this stock here is something I bought into back in I believe 2000 20 it's one of my best performing stocks currently and they're right now giving me a dividend yield of 0.47 depending on what brokerage you use you can also enable the automatic feature where if you get a dividend it automatically reinvests back into the company so you can continue to grow your Investment Portfolio now if I go into my history for this stock you'll notice that whenever I get paid a dividend it'll reinvest here and it'll tell me exactly how much in dividends. 

I'm getting paid so I got a payment for October 13th one in January 13th one in April 13th and it's nice to just get even free dollars while my position and my investment continues to grow throughout this recession all right so now you guys have a bit of an idea on how dividend investing works but how much money can you actually make and is this all even worth it sometimes it seems like just getting a dollar sixty cents won't compound too much but you'd be surprised to show you the true power of dividend investing on a long term scale of about 25 to 30 years let's go ahead and pick just two of the stock that we mentioned from Warren Buffett's list to do some future projections so ladies and gents to do this I went ahead and found the average stock price appreciation from the previous 10 years and also the average dividend growth of the last 10 years and used those numbers to project the 25 and 30 year investing rate for dividend growth we're going to be using the factor of an annual contribution of a thousand dollars so a thousand dollars per year and an initial investment of just purchasing a simple 10 shares so when it comes to ticker symbol a BBV with an annual yield growth in the past 10 years of 1.81 to 3.68 the average growth of dividend payments is going to be 0.155 per year in the last 10 years which is going to be 40 to 161 dollars in the past 10 years now fast forward over 25 years by reinvesting those dividends you would have an end balance of 6 million 845 209.

Dividend income of 760 C2 463 dollars Now by not reinvesting those dividends you would have an end balance of three million six hundred twenty eight thousand seven hundred forty four dollars or a total dividend income of just four hundred fifty three thousand two hundred fifty eight dollars now over thirty years of a thousand dollar annual contributions by reinvesting your dividends your end balance would be 29 million six hundred eighty six thousand dollars with a total dividend income of three million three hundred thirty eight thousand dollars versus not reinvesting those dividends you would have an end balance of Thirteen million 612 versus only just a million seven hundred twenty two thousand dollars so what this shows us is just by reinvesting those dividends you would net an additional three hundred nine thousand dollars over twenty five years of investing from just an additional five years your dividend income would be increased to over 2. 5 million dollars so ladies and gents I know for that example it could be a bit of an anomaly just because of the rapid increase in the stock price for the past ten years for ticker symbol abbv so let's use Johnson and Johnson as another example of how much the power of dividend investing could yield you so with J and J we have an annual yield growth from the past 10 years of 2.

Roi of 140 which comes out to be about 14 annually so over the next 25 years of just investing a thousand dollars annually and reinvesting those dividends your end balance would be 360 000 or a total dividend income of fifty five thousand four hundred eighty dollars by not reinvesting those dividends you would have an end balance of two hundred twenty four thousand dollars or just thirty nine thousand four hundred thirty one dollars so here we're gonna learn a few things by also taking a look at the 30-year rate of a thousand dollar annual contribution you would have an annual balance of way more it would compound significantly it would almost double for an end balance of nearly 709 thousand dollars versus an inbounds of four hundred thirty eight thousand dollars if you do not reinvest those dividends so a few things that we can learn compound interest is real it takes a bit of time 25 to 30 years is nothing to just uh cap out about because that's a long time from now but the money that you decide to invest now with those dividends you're playing a long term future plan 25 years could result in just two hundred twenty four thousand dollars where if you held it in and then kept those dividends in for another five years you'd be seeing that money double now at this point in the video ladies and gents I want to make sure that you guys get hooked up with those free stocks and here's how you can do it go to the link Down.

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Someone has of comfort will be over them because of what you've done he also mentions number three be fearful when others are greedy and be greedy when others are fearful I'm sure you guys have heard of this quote many many times but it is true especially throughout this recession or if you see people getting greedy all of a sudden be a little worried or if you see people all just afraid no one wants to invest then consider maybe this is a time for you to start averaging back into the market Peter Lynch stated behind every stock is a company find out what it's doing so this pretty much just shows us every company out here listed on the stock market exchange they're doing something they are not just pixels on a screen they are not just words on your phone that you're reading but these are real companies with real people that are trying to make an impact to whatever Market that they're in last but not least with Warren Buffett once again he States unless you can watch your stock holding decline by fifty percent without becoming Panic stricken you should not be in the stock market so this quote here is just a reminder that no matter what happens within the stock market be careful about those emotions and if you're someone who thinks you're gonna freak out sell it at the first chance you get this might not be the path for you now guys I also have some resources at the end of this it's going to be a stock research tool dividend calendar and a financial education Investopedia link if you guys want to have access to further tools and research or you guys.