Dividends for Beginners: Get Started and Grow Your Portfolio

so I said this before when you invest in  a dividend-paying stock or ETF you give   yourself a raise for every share that you buy  so in this video today we're going to explore   dividends what they are and how you can use them  to grow your Investment Portfolio Dividends are   a share of a company's profit paid out to the  shareholders are typically paid in cash but can   also be paid in the form of additional shares of  stock NOW Dividends are usually paid on a regular   basis such as quarterly and can provide a steady  stream of income for investors what's really cool   about that is anytime that you pick like your  favorite company to invest in and that company   pays dividends you ultimately become an owner of  that company by way of being a shareholder if the   company profits a lot of money and they're able  to pass those profits onto you in the form of a   dividend that's how you can make money on top of  your investment simply for just being invested   in the first place now that does mean that  companies that pay dividends are often mature   companies they've been around for a long time  they're very stable and they have a long track   record of growth these companies are generally  considered less risky than non-dividend paying   companies and are often sought after by income  seeking investors but let's talk about how you   can use these dividends to grow your Investment  Portfolio see dividend investing involves   investing in those companies that pay dividends  and then what you do is you take those dividends   and you reinvest it back into the company every  time those Dividends are paid out this is known   as the dividend reinvestment plan otherwise known  as drip Now by reinvesting your dividends you can   take advantage of compounding returns which can  significantly increase your long-term wealth so   dividend reinvestment is a powerful tool that  can help you achieve your investment goals over   time so with that in mind how do we actually  identify dividend paying stocks well there are   a few things that you're going to want to look  for first you need to look for companies that   have a consistent record of paying dividends  every quarter or every month second look for   companies with a high dividend yield which can be  calculated by taking the dividend payout divided   by the stock price and third look for companies  with a sustainable dividend which means that they   can continue to pay those dividends long into  the future sure based on their past performance   now if we're talking individual stocks some very  popular dividend paying stocks include but are not   limited to Blue Chip companies such as Coca-Cola  Johnson and Johnson and Procter and Gamble these   companies have a long history of paying consistent  and sustainable dividends and are often sought   after by income seeking investors now of course  I got to pull up Seeking Alpha to show you some   of these companies because it takes you behind  the scenes it is my favorite investing research   tool in fact you can get a discount if you want  to get this as well link down in the description   below but let me pull up one of those companies  as an example let's start with Coca-Cola so KO   you know a lot of people drink Coca-Cola products  so let's take a look at that now right now up here   is the share price at sixty dollars and fourteen  cents we're not so worried about that we're more   worried about the three things that we just talked  about the very first thing is what is the dividend   yield so right over here on the right hand side  you can see the dividend yield which is right here   is 2.97 and again that can be calculated by taking  the dividend rate right here of 1.76 and then then   you divide that by the current share price at  sixty dollars and 10 cents and that equals if you   convert this decimal into a percentage by moving  the decimal over two places that's about 2.93   percent very close to what we see here at 2.97  now of course that rate will adjust based on the   current stock price of whatever day you're looking  at the share price of the particular Stocker   company but how do we know if it pays consistent  dividends and how do we know if it has that growth   potential in the future well what you want to do  on whatever stock that you decide to pull up here   on secant Alpha hop over here to the dividends tab  it's about the fifth one in right at the very top   we're going to click on that and then it's going  to give us a wealth of data we're going to see   things such as the dividend safety the dividend  growth yield and consistency we're looking for   of course b and a rated grades in this particular  category but also we want to look at a few more   things we see our dividend yield we see the annual  payout per share and we see the five-year growth   rate of 3.53 percent with dividend growth over  the last 60 years now that is of course because   Coca-Cola is one of those Champion dividend stocks  probably one of the Stellar students the fact that   they've continued to grow their profits and grow  their dividends paid out to shareholders for the   last 60 years with a five-year growth rate of 3.53  percent that is great those are the type of things   you'll want to look for if you're interested in  dividend investing now you can see right here they   pay out no dividends every quarter which means  every three months based on however many shares   you own and the amount was 44 cents per share of  Coca-Cola so if you owned 100 shares of Coca-Cola   you multiply that by 44 cents which means you're  going to get 44 dollars in addition to whatever   your growth is on that particular investment and  then if you buy another share you get another 44   cents two shares you get 88 cents every share that  you buy you're giving yourself a dividend raise   but let's do a little bit of math to see the power  of dividend investing now let's say you invest ten   thousand dollars into a dividend payment stock  that has a four percent dividend yield that means   you're going to receive four hundred dollars in  dividends every single year that you stay invested   and if you take that money and you reinvest  it back into the company with the dividend   reinvestment plan assuming a seven percent annual  return your investment will be worth twenty eight   thousand dollars in twenty years and that assumes  that you're only reinvesting the dividends and   you're not investing any more money out of your  normal investing strategy now assuming that you're   younger and you have plenty of investing years  ahead of you let's take a look at the portfolio   visualizer if we invest in Coca-Cola for example  and we invested for the last 15 years from the   Year 2007 until the end of 2022 and we only put  in ten thousand dollars on the very first day of   2007 but we didn't invest any more money and we're  not going to actually reinvest the dividends which   means anytime that Coca-Cola pays you dividends  you're gonna take those dividends and you're going   to run with them that's what you're going to do  so you're not going to reinvest at all let's see   what happens over the course of 15 years we're  going to analyze the portfolio and you can see   your ten thousand dollar balance grows to twenty  five thousand four hundred and eighteen dollars   over 15 years now that's not too bad but let's  take a look at the difference if you decide to   reinvest those dividends because you don't need  those dividends you don't need that money you   want that to continue to pile on top of all  this growth that happens over that period of   time let's see the big difference now remember  this number twenty five thousand four hundred   and eighteen dollars I'm going to come up here  to the portfolio visualizer and I'm going to say   yes reinvest the dividends come down here and hit  analyze portfolio I hope you remember that number   because now look the difference of reinvesting  the dividends with the same amount of money that   you started with grows to now forty one thousand  four hundred and fifty Seven dollars as opposed   to that twenty five thousand dollars that we  looked at earlier so if you're not yet needing   the dividend income let that grow you money  because is when they reinvest the dividends   you're going to get additional shares which means  your Shares are going to earn you more dividends   and it becomes this big snowball and before you  know it you look back and you're like oh man   that's awesome so dividends provide that steady  stream of income that can help you achieve your   income goals now make sure you subscribe for more  dividend videos and the most important thing to   remember in any case is that dividend investing  is not a one-size-fits-all approach so you got   to make sure you do your own research don't just  go out and buy a bunch of Coca-Cola look into the   companies look into the ETFs and try to find the  best ways to do that now if you're looking for a   way to automatically diversify where you don't  have to put all of your money on a single stock   just in case like Coca-Cola goes like bankrupt or  something then what you want to do is look into   ETFs that'll give you an immediate diversification  in fact there's a few ETFs that pay you monthly   check out this video that'll tell you all  about it and we'll see you on the next video

Channel: Bob Sharpe

Views: 6,889

Keywords: bob sharpe, dividend investing, dividend investing for beginners, investing for beginners, dividend investing strategy, dividend stocks, stock market investing for beginners, investing for beginners guide, best dividend stocks, dividends, dividend growth investing, dividend income, dividend portfolio, top dividend stocks, how to start dividend investing, live off dividends, dividend stocks to buy, best dividend stocks 2023, dividend stocks 2023, how to live off dividends

Id: 0n3DvIpmopQ

Length: 8min 3sec (483 seconds)

Published: Sat Feb 18 2023