How to Collect Dividends

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Dividends are cash payments to shareholders.
Dividends are cash payments to shareholders. (Image: Cash image by Greg Carpenter from <a href='http://www.fotolia.com'>Fotolia.com</a>)

Some publicly traded companies choose to give a share of the company’s profit back to the shareholders. That profit share is paid out as a dividend. If you are interested in investments that pay you a cash dividend, the stock market offers many viable options. Depending on your investment goals and risk tolerance, it is best to build a diversified portfolio that may include dividend-paying stocks. For income portfolios, it is best to have a mix of fixed-income securities and dividend stocks.

Open an investment account. Any major brokerage provider gives you the ability to purchase shares of stock and receive a dividend disbursement. The most popular discount brokers by customer satisfaction are Fidelity, E-Trade and TD Ameritrade. The most popular full-service brokers are Edward Jones, Raymond James and UBS. Each brokerage firm has a unique fee structure and offers different levels of customer service and investment support. Make sure your firm’s offerings match your needs.

Pick a stock. You can use tools such as a stock screener, offered by most brokerage firms and for free on sites like Google Finance, to find stocks paying a high dividend yield. Top dividend dividend stocks today include Walmart, General Electric, World Wrestling Entertainment, Home Depot, Altria, and Reynolds Tobacco. Depending on how the company performs, dividends are subject to change.

Enter your stock trade. Go onto your stock brokerage website and enter the ticker symbol and number of shares you would like to purchase. You can generally trade stocks over the phone for an additional fee. Make sure you have funds in your brokerage account to cover the cost of your stock trade.

Collect your dividends and monitor your investment. Most companies pay their dividends each quarter. That means you will receive a dividend payment for each stock four times a year. Depending on how you set up your account, your dividend may be deposited into your brokerage account, it may be used to purchase more shares or you may receive a check in the mail.

Tips & Warnings

  • Investing comes with risks. Be aware that your investment may lose value.

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