How to Buy Stocks to Increase Income

Buy stocks with growing common stock dividends to increase your passive income.

Many do not pay enough attention to one of the biggest advantages of owning stocks. You can increase income through buying stocks that pay growing dividends. As you begin your stock research to increase income, it is important to remember to diversify. Do not have more than 5% of your total investment account value in one stock. Below are a few examples of companies that have helped their shareholders increase passive dividend income each year as well, as some tips to look for other companies.

Instructions

1. As a rule of thumb, you are looking to buy stocks that have a current dividend rate of at least 2%, preferably higher. Invest in company stocks that you know, respect, understand, and trust. You are also looking for company stocks that have a history of raising their dividend amount per share regularly, hopefully at least once a year. Dividends are a great way to create and grow passive income.

2. 

   Example 1 - Johnson & Johnson (JNJ), healthcare industry:
   1999 dividend was $.55 per share
   2008 dividend was $1.84 per share

   If we bought 1000 shares at the start of 1999, our income would have been $550. By 2008, we have seen the income increase to $1840. That is a 234% increase of passive income in 10 years.

3. Example 2 - Coca Cola (KO), beverage industry:
   1998 dividend was $.60 per share
   2008 dividend was $1.52 per share

   If we bought 1000 shares at the start of 1998, our income would have been $600. By 2008, we have seen the income increase to $1520. That is a 153% increase of passive income in 11 years.

4. 

   Example 3 - Procter & Gamble (PG), consumer products industry:
   1999 dividend was $.57 per share
   2008 dividend was $1.60 per share

   If we bought 1000 shares at the start of 1999, our income would have been $570. By 2008, we have seen the income increase to $1600. That is a 180% increase of passive income in 10 years.

5. Example 4 - Exxon Mobil (XOM), oil & gas industry:
   1999 dividend was $.82 per share
   2008 dividend was $1.60 per share

   If we bought 1000 shares at the start of 1999, our income would have been $820. By 2008, we have seen the income increase to $1600. That is a 95% increase of passive income in 10 years.

6. 

   If you are able to buy stocks that help you increase income each year, you are more likely to hold the company stocks for the long-term - another component of investment success. Stocks that enable investors to increase passive income also help to fight the erosion of purchasing power, inflation.

7. Dividends paid by the company stocks that you own can be taken in cash or reinvested back into the company to buy additional shares. Reinvesting will allow your share and dividend growth to compound. Please remember that these are just examples. For a list of companies that have a history of increasing dividends, please refer to the S&P Dividend Aristocrats.

Tips & Warnings

• This method of investing is more about increasing passive income each year and less about growth of principal. It is likely that your principal value will grow over the long-term, but understand that in the short-term stock movements can be drastic and unpredictable and can lose value.

• Educate yourself by reading books about investments written by professionals. Pay attention to books that are related to income and dividend growth.

• Consider working with a qualified financial advisor who has experience in selecting companies with growing dividends.

• Be certain to understand the risks and fees associated with any investment you choose to make. Also, understand that stock dividends can be cut completely or reduced with prior notification. Please keep diversification in mind at all times.