Dividend Stocks Explained for Beginners - Investing 101

we will be discussing what our dividend stocks what our dividend stocks that's a good question that many people who are new to this stock market are asking I know there's a lot of intermediate level videos out there and they assume that you know what dividend stocks are you know what dividends are in this video I will be talking to you as if you knew nothing about dividend stocks about dividends if you're completely new to the stock market we're gonna be talking about dividends and dividend stocks as if you're starting from scratch from the very basics I will be explained to you very clearly what are dividend stocks so that you can apply this information to your portfolio and to your investment activity and the stock market so let's begin when you're buying a stock you're buying a piece of the company so if you buy one share of Microsoft if you buy any shares of stock and Microsoft and technically you are an owner of Microsoft so you can go walking around saying I'm an owner of Microsoft it's it's very true it's technically correct because you bought a share stock which is a representation of ownership in Microsoft so if you buy a stock you're an owner of the company this is important this will tie in later if that company is making a ton of money in Microsoft for example if they're making a ton of money and they don't need that money for operational purposes they don't need it for operations then they'll be like we have all this money we don't need it let's reward the stockholders let's reward the shareholders this money let's give them cash you know let's give them money in the form of a dividend that's what a dividend is so basically the company is just sending money to your brokerage account they're sending money to your investment account in the form of cash just because you own the stock in that company because technically you own the stock of the company that you're an owner of the company so they're just rewarding you for being a shareholder they're rewarding you for being an owner of Bini to give you cash that's called dividend you need to know that companies will have different amounts of stock some companies they'll have a million shares of stock other companies will have a billion shares of stock so it just depends on the company let's go over this scenario let's say a company has a million shares of stock let's say they have a million shares of stock and they want to give away a million dollars you just do simple math million shares of stock and they want to give away a million dollars of cash so for each share of stock if you own one stock of that company you will receive $1 of cash because a million dollars of cash divided by a million shares of stock will equal one dollar of cash per stock so if you own one stock in that company they all send you a dollar of cash to your brokerage account to your investment account if you own five shares of that company they will send you a dollar per share so they'll send you five dollars of cash to your investment account it's gonna appear in your cash balance in your investment account that's the dividends you need to know that not all companies pay a dividend it's totally up to the company that's why when someone says it's a dividend stock it just means that that company or that stock is paying a dividend there are three key dividend dates that you need to know there's a declaration date there's the ex-dividend date and then there's the payment dates the declaration date that's the day when the company just announces hey there's gonna be a dividend you know they're declaring that there's going to be a dividends as simple as that that's the declaration date is when the company announces that there's going to be a dividend the ex-dividend dates is the day that you just - boom you need to be in the stock before that dates you need to hold the stock before that date the ex-dividend date in order for you to qualify for you to receive the dividends so if you're like oh that company is gonna pay a big dividend if you get it if you buy that stock before the ex-dividend dates and your holder on record on that date before that date then you will get the dividend if you buy it that stock on the ex-dividend date or after you will be disqualified from receiving that dividend because it's too late so the ex-dividend date is a very important dates the payment dates that's the date that you will actually receive the dividend that's the date that you'll actually receive the cash in your investment accounts so going in order the company would declare dividends if you hold the stock before the ex-dividend dates then you'll get paid that dividends on the payment date so those are the key dates so you need to know regarding dividends you are going to get taxed on your dividends because that dividend is taxable income even if you reinvest the dividends or if you leave that money that dividend money in your brokerage account in other words you don't withdraw it back to your bank account in either scenario you're still gonna get taxed on that dividends the amount of taxes you will pay on dividends it depends on whether they are ordinary dividends or qualified dividends ordinary dividends they're gonna get taxed at your regular rates qualified dividends will receive better tax treatments in order for your dividends to be qualified events it's gonna depend on the company from where the dividends are coming from so things like that that's out of your control it also depends on if you held the stock for more than 60 days before the ex-dividend date so you're holding period when you look up a stock that pays a dividend you'll see in the stock summary it's gonna say yield the yield that just means the rates of how much of a dividend that stock is paying the yield helps you picture basically the rates of how much you'll be earning you know for example if the stock says I yield a 4% that means if you put in if you bought $100 worth of that stock and you held it for a year you would with you would receive four dollars of dividends because if the yield is four percent just think about it just think about it like a savings account so if you put a hundred dollars into savings accounts and the yield is four percent then you would receive four dollars an interest income it's the same concept with dividend yield for a stock so if you bought $100 worth of stock in that company then you can expect four dollars worth of dividends for the year if the yield is four percent that's the easier way to conceptualize it so a good question a good question is should you go and try to buy dividend stocks with the highest yield you know for example you're gonna see you're gonna see given us some dividend paying stocks they're gonna have yields of 20% honestly in my opinion if you see a dividend stock with the yield of a 20 percent 25 percent 30 percent I see red flags it's not that it's a scam or anything the thing is that it just means to me in most situations that the dividend is unsustainable at that level when it sounds too good to be true it usually is usually when the dividend yield is like 20 percent 25 percent 30 percent that's very temporary and usually what will happen is that they will reduce the a lot of times it will be reduced substantially or many times they'll just cut it to zero they'll completely remove the dividends it usually is a signal of something's going wrong or something's going bad with the company that's just from experience so when you see something like a 20 percent dip then you'll just be careful a lot of times most of the times it's just too good to be true a good question is how often do companies paint dividends it depends on the company's most dividend most dividend stocks they will be paying dividends quarterly so they're going to be paying dividends every three months it's kind of like a set a regular schedule so it's very predictable other stocks such as REITs real estate investment trusts real estate investment trusts they will pay a dividend monthly so each month they will pay a dividend other stocks other dividend paying stocks will pay an annual dividends other stocks they will pay a discretionary dividend just whenever they feel like it so it just depends on the company our dividend stocks the best type of stocks not necessarily it just depends on your investing goals if you're trying to go for maximum gains dividend stocks they're usually more mature stocks so they're gonna offer you less risk but they're also at the same time they're gonna offer you less reward in that situation if you're just trying to Maxim if you have a very long investment horizon and you're trying to maximize growth the prioritized growth in that situation you would not want to go too heavy on dividend stocks so it just depends on your situation you know if you're trying to go for more stable companies or more profitable companies that dividend stocks would probably be a better fit for you in that scenario if you are new to this channel please consider subscribing so that you can follow along with our portfolio and see what dividend stocks that we are investing in and what we are buying with our $500 investment portfolio and all our other investment accounts if you like to get started in the stock market you can also use the affiliate links that we do have if you do use those links when you sign up for account you will receive a sign up bonus it could be in the form of cash or it could be form in the form of free stocks you can also see our other tutorial videos those videos are really crafted for the people who are very new to the stock market you know they're starting from zero we're also going to be making intermediate level videos about the stock market and investing as well as well as advanced videos but we want to build from the bottom up and help you become a better investor thank you so much for tuning in and we'll see you in the next video

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Id: kjeosZuC7Uw

Length: 11min 57sec (717 seconds)

Published: Thu Jun 04 2020