Investing in High Dividend Stocks
By Eric Hammer
High dividend stocks used to be considered the perfect "grandma
investment." They were the kind of stocks your elderly grandmother
held in her portfolio because while they didn't appreciate nearly
as much as some other stocks, they also tended not to lose as
much value and they provided a nice little income in the form
of dividend checks distributed to investors each year.
However, as the market has become increasingly volatile, it's
become a bit more fashionable to consider investments in high
dividend stocks as a way of making real money in the stock market.
The idea is to find stocks that will at least hold their value
and are likely to grow, if more slowly than some other stocks,
while at the same time paying out respectable enough dividends
to earn good money from them even if the growth doesn't necessarily
happen.
Keep in mind however that like all forms of stock investing,
high dividend stocks are not without risk. A company could lose
money for a year and pay nothing in dividends (dividends are
only distributed if there is profit left over after the cost
of running the business is subtracted). The principle could lose
value as well if that happens, so it's not a risk free investment
by any means.
In fact, whereas high dividend stocks used to be considered
safe if boring investments, today they can be just as volatile
as any other kind of investment.
How Much Can You Make?
As with any stock investing strategy, it's simply impossible
to predict how much, if anything you could make by investing
in high dividend stocks. If you make the right picks, your returns
could be huge. However, making the wrong picks could cost you
dearly as well.
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Remember that this is not a get rich quick scheme and it's
not something to jump into with your eyes closed, hoping for
the best possible outcome. You need to do your homework on any
stock investments you are interested in, even when you invest
in high dividend stocks just as you would if you invested in
anything else.
Read up on a company's fundamentals - what are they investing
in and why are they able to offer those high dividends? What
is their market outlook? Is there heavy competition in their
field?
One area where you will often find high dividend stocks is
in REITs (Real Estate Investment Trusts) because the law requires
that they disburse money that isn't spent. However, as we all
know, the real estate market has been hurting lately and there
are no guarantees that REITs will do well enough to be paying
out dividends (though things do look promising for the medium
term).
Qualifications / Requirements
All you need is the ability to read stock charts and to spend
plenty of time reading about a company's fundamentals. If you
are able to understand an earnings report, then you are qualified
to invest in high dividend stocks. Of course the other thing
you'll need for this is money so be prepared to invest when you
find the company you are interested in.
First Steps
Start by reading more about high dividend stocks at the resources
below. Then, do your homework - research companies that you are
interested in investing in and figure out if you believe they
are ready to continue growing. Finally, make an investment and
be prepared to wait out short term ups and downs.
Resources
Check out these helpful resources to learn more about high
dividend stocks:
Dogs of
the Dow - An investing advice site which offers some tips
on which stocks they believe will go up in value and which are
also high dividend stocks.
Dividend
Detective - A website devoted to finding the best high dividend
stocks for investment. They give away some content for free,
however the best stock tips are available only behind a pay wall.
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