How to Make Money With Dividend Investing
The classic type of dividend investing involved buying shares of blue chip stocks and collecting dividends for years as the shares go through stock splits and dividend increases. For example, an investor who bought $10,000 worth of McDonald's stock at the beginning of January 1990 is collecting almost $3,000 per year in dividends in 2011. A new investor with less money to invest can accelerate the dividend growth process using the investment principals of compounding earnings and dollar cost averaging.
- Difficulty:
- Moderately Challenging
Instructions
-
-
1
Research lists of dividend paying stocks for companies with a history of increasing dividend payments. Good resources are the list of Dividend Aristocrats managed by Standard & Poor's, the list of Dividend Achievers managed by Mergent, Inc. and the Big List: High-Dividend Stocks on the Dividend Detective website. These lists are composed of stocks with histories of consecutive annual dividend increases.
-
2
Narrow your list to companies with stock direct purchase -- DPP -- or dividend reinvestment -- DRIP -- plans. This type of plan allows low purchase amounts and the automatic reinvestment of dividend into more shares. A company will provide the details of a stock purchase plan in the investor relation pages of the company's website.
-
3
Review the list of stocks with direct purchase plans for plan fees and minimum investment amounts. Select one or more plans with low investment costs and from stocks you would like to own long term.
-
4
Complete application or applications for the stock investment plans you have selected, send in the initial investment amount and establish a regular continuing investment program. The majority of stock purchase plans allow you to set up regular, automatic investments from a checking or savings account.
-
1
Tips & Warnings
Investing in a dividend paying stock and reinvesting the dividends will allow a stock purchase plan to grow with additional investments plus the earned dividends. The initial yields of dividend stocks may be low, but growing dividend payouts will increase the yield on the amount invested over time. Dividend reinvestment is a long term investment strategy.
Stocks can go up and down in value with market conditions and the performance of individual companies. Dividend reinvestment plans have no guarantees concerning long term results. Do your own research and understand the risks involved.
Related Searches
References
Resources
- Photo Credit Jupiterimages/Photos.com/Getty Images
