Read on Twitter
Dividends have become QUITE the talking point here on "Money Twitter".
"Dividends aren't for young people"
"Get money, buy income"
So many opinions..... so which is it?
Let's walk together.
"Dividends"
A Thread
"Dividends aren't for young people"
"Get money, buy income"
So many opinions..... so which is it?
Let's walk together.
"Dividends"
A Thread
1.
First, what are dividends?
Dividends are cash payments that a corporation awards its shareholders, as sort of a "thank you" for investing in them.
Dividends are paid out of the company's free cash flow (it's net cash from operations minus its capital expenditures).
First, what are dividends?
Dividends are cash payments that a corporation awards its shareholders, as sort of a "thank you" for investing in them.
Dividends are paid out of the company's free cash flow (it's net cash from operations minus its capital expenditures).
2.
Dividends are paid (usually) every 3 months. But the payout can also happen once, twice per year, or even monthly.
A dividend stock's "yield" is the percentage of the share price the dividend is paying you each year (dividend amount / share price).
Dividends are paid (usually) every 3 months. But the payout can also happen once, twice per year, or even monthly.
A dividend stock's "yield" is the percentage of the share price the dividend is paying you each year (dividend amount / share price).
3.
So if you buy a stock with a share price of $100, and it pays you $5.00 per share in dividends every year,
The yield would be $5.00 / $100 = .05 (5%)
Dividends are so highly debated because they give you so much FLEXIBILITY.
So if you buy a stock with a share price of $100, and it pays you $5.00 per share in dividends every year,
The yield would be $5.00 / $100 = .05 (5%)
Dividends are so highly debated because they give you so much FLEXIBILITY.
4.
You can basically do one of three things with dividends:
-You can spend them as cash.
-You can reinvest them back into the company for more shares (more dividends)
-You can reinvest them into OTHER companies to build new positions without selling your existing shares.
You can basically do one of three things with dividends:
-You can spend them as cash.
-You can reinvest them back into the company for more shares (more dividends)
-You can reinvest them into OTHER companies to build new positions without selling your existing shares.
5.
So let's circle back and address the 2 phrases that I have seen on Twitter in recent weeks.
First: "Dividends aren't for young investors"
This is a woefully bad take.
Why?
Because dividend growth stocks do the most work the longer you hold them.
So let's circle back and address the 2 phrases that I have seen on Twitter in recent weeks.
First: "Dividends aren't for young investors"
This is a woefully bad take.
Why?
Because dividend growth stocks do the most work the longer you hold them.
6.
In other words, your EARLY years are the BEST times to buy strong dividend payers - and hold them for a LONG time.
Dividend investing is a strategy that requires vision, and patience.
You won't get rich overnight, but you can get filthy rich over the course of decades.
In other words, your EARLY years are the BEST times to buy strong dividend payers - and hold them for a LONG time.
Dividend investing is a strategy that requires vision, and patience.
You won't get rich overnight, but you can get filthy rich over the course of decades.
7.
Now, let's look at: "Get Money, Buy Income"
In this mindset, your income is producing wealth - the role of dividends is to sustain that wealth.
Dividends serve this purpose beautifully because it's very easy to find secure, stable companies to invest in.
Now, let's look at: "Get Money, Buy Income"
In this mindset, your income is producing wealth - the role of dividends is to sustain that wealth.
Dividends serve this purpose beautifully because it's very easy to find secure, stable companies to invest in.
8.
In this low rate environment (bonds and bank accounts pay squat)
A company such as AT&T ($T) is a fine investment if your GOAL is to simply maintain what you already have with a nice income stream
AT&T won't make you rich, but they won't bankrupt you - that's the point
In this low rate environment (bonds and bank accounts pay squat)
A company such as AT&T ($T) is a fine investment if your GOAL is to simply maintain what you already have with a nice income stream
AT&T won't make you rich, but they won't bankrupt you - that's the point
9.
So what am I getting at?
Dividends are NOT all the same - but that's the cool part.
You can invest in different types of dividend paying stocks to suite your needs.
Want to build wealth? Go for dividend growth.
Want to sustain wealth? Find a stable, high yield stock.
So what am I getting at?
Dividends are NOT all the same - but that's the cool part.
You can invest in different types of dividend paying stocks to suite your needs.
Want to build wealth? Go for dividend growth.
Want to sustain wealth? Find a stable, high yield stock.
10.
Questions? Shoot them over to me with the button below!
Otherwise, follow along until next time @theefinanceguy
RT to help a friend
Questions? Shoot them over to me with the button below!
Otherwise, follow along until next time @theefinanceguy
RT to help a friend
