📈Dividend Investing for Beginners 2020📈 - How to Get Started

hello and welcome back to the dividend experiment the channel that can help you build a portfolio that pays your bills in today's video I'm going to give you a short guy that dividend investing for beginners investing in dividend-paying companies is a fantastic way to generate passive income as we've talked about before and grow your investment portfolio over the long run or over substantial periods of time by focusing on strong solid companies that regularly increase their dividends a small sum of money can grow into something significant due to the power of compounded gains if you're looking for the exciting life on the edge yacht or bus type of investing with high risks high rewards it may not be for you but it is perfect for those interested in retiring early or just want to supplement net income with a reliable source of income in this video I will cover the important things to know before you start building your dividend income portfolio so why invest in dividend-paying companies I've already covered what dividends are in another video entitled what is a dividend so if you are uncertain what they are then first go and check out that video dividends are the only way in which you can actually get money from the profits of a company you have invested in without selling your shirt one way to look at it is that if you are a farmer with a cow you can get value from the cow by killing it and selling the meat and this will give you a lot of money right now but you don't have the cow anymore alternatively you could milk the cow we'd get as much money as killing the cow and selling all the different parts of it if you wait long enough you can milk it again for more money using this analogy we see that the dividend investing is probably not going to get you super rich super fast instead you can get rich just slowly if a company is giving out a dividends it tends to be bigger and more mature so they won't skyrocket in value but will have a stable cash play that will hopefully continue to pay out for many years and these dividends will help us grow our portfolio over time be careful of the yield you can tell how much money a company will give its shareholders by looking at the dividend yield there's a percentage of the share price they'll get returned to you if you hold it for long enough let's take a look at this example it's Apple stock and as you can see it has a current yield of 1.4 6% so if you bought this stock right now assuming it doesn't change the dividend you'll receive one point four six percent every year sometimes new investors learn this and fall into the trap of thinking they should just search for companies that pay the highest dividends so let's take a look and see if we can find a high paying dividend stock okay here we go it's the online trading platform plus 500 with a massive dividend yield of almost 30% it seems like this would be a great investment you only need to wait just over three years to get back your original purchase cost and after that and everything is essentially free money but looking at these sky-high yields that has a high chance of being a trap plus 500 is actually a good example so let's look at the share price over the last year as you can see from the chart there was a major collapse in share price in early February a reason for this is that the European government and lawmakers have clamped down on highly leveraged trades which was a big part of +500 business model when this revenues falling by such a dramatic degree it's unlikely that +500 will be able to continue paying a dividend at this same level it may just reduce it or may cut it completely avoid the dividend yield trap and make sure you do plenty of research before deciding on your dividend payer what should I look at when doing research the more research the better but here are some metrics you should probably be checking out at the very least when deciding to buy dividend stocks firstly just as we just talks about the year it's not the most important thing but it's good to see how much you can roughly expect if you invest in the company it's also good to see if the company regularly increases the dividend to see how your yield on cost will grow over time the payout ratio how much of the profit is being paid out as dividends in order for a company to grow it should spend some money on research and development and expansion if it's spending too much on giving out dividends it may not be able to grow the company in the future if profits drop then a company with high payout ratio may not be able to continue paying the dividend at the same rate in the future two EPS growth our profits per share increasing over time you probably want to invest in the company that will make more money in the future rather than one that's losing money p/e ratio when a company matures it can be measured with the p/e ratio I made a video about the p/e ratio so if you're unsure what it is then definitely check out that video and total return this is simply the dividend percentage do you've gained as well as the capital gains added on to one good thing about dividend companies is that they still have potential to grow on top of paying out your dividends when do I get paid the important part of being a dividend investor is naturally getting paid so when do we get paid there are five important dates you need to bear in mind number one the trade date this is the date you put in the order to buy the shed number two the settlement date this is the date that shares actually enter your possession you don't necessarily earn the stocks the day you paid for them it can sometimes take some time for the details and paperwork to settle number three the ex-dividend date this is the first day as stock trades without its dividend if you buy shares before the ex-dividend date you're entitled to that dividend payment if you purchase the shares on or after this date you won't get paid until the next dividend cycle number four is the record date this is the date where the company decides who gets the dividend or not it depends on whether you completed the trade before or after the ex-dividend date and number five everyone's favorites the pay date this is when the dividends get paid out to you in conclusion this has been a very basic introduction to dividend investing if there's anything else you want to know then please leave a comment below and I might be able to answer it or even make a video on it later if you think dividend investing is the way forward and then please feel free to follow along by subscribing thanks for watching and I hope to see you on the next video see ya [Music] you

Channel: The Dividend Experiment

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Keywords: Dividend experiment, financial independence, early retirement, passive income, dividends, dividend investing 2019, investing in dividends, dividend portfolio uk, dividend investing, how to invest, stock market crash, stock market, dividend growth investing, investor, dividend, stocks, investing, stock market trading, best dividend stocks, stock market for beginners, dividend investing for beginners, stock market investing, dividend stocks

Id: wtGiAsS6JJs

Length: 7min 32sec (452 seconds)

Published: Thu May 23 2019