How to Buy and Sell Stocks to Increase Dividends

When most people think of making a profit with stocks, they envision the stock price rising and not much else. Most overlook dividends as a source of profit and income growth in the stock market. An investor has to know some basic rules in order to buy and sell stocks to increase dividends.

Difficulty: Challenging

Instructions

1. Identify the dividend yield of each stock you want to buy or sell. The dividend yield is the annual dividend amount per share divided by the price of the underlying stock. The dividend yield helps you determine what the rate of return the dividend supplies, given the price of the stock.

2. Research the stocks you currently own to determine the amount of dividend you receive from each stock. Some stocks do not offer any dividends at all and in a market downturn, the stock may show nothing but losses due to this market activity.

3. Rank each stock based on each one's dividend yield. Take note of any announcement by the companies that they are increasing, decreasing or canceling their dividends.

4. Sell the stocks that have a dividend yield below 1 percent or no dividend depending on your dividend return goals. Be sure to research each stock thoroughly before selling.

5. Buy the stocks on your list with a high dividend yield. Make sure the dividend yield is at least 3 percent so that they are worth the investment.

6. Decide if you want to reinvest the dividends or keep the dividend as cash. You can use the dividend to purchase more shares of the underlying stock but in a down market you may not want to reinvest in a stock that is declining.

Tips & Warnings

• Investors unsure of how the stock markets operate should consult a financial professional for advice and guidance when purchasing any amount of stock.