Dividend Stocks Investing in dividend stocks is a powerful and safe method for building wealth. Then practice what you’ve learned with our free stock market simulation. A stock dividend is essentially a dividend payment made in the form of additional shares instead of the typical cash payout. If a company’s tight on liquid cash, advantages of investing in stocks may decide to distribute dividend stocks to shareholders instead.
They’re typically acknowledged in the form of fractions paid per existing share owned. The shareholder can keep the shares and hope that the company will be able to use the money not paid out in a cash dividend to earn a better rate of return. Alternatively, the shareholder could sell some of the shares for cash. The biggest benefit of a stock dividend over a cash dividend is that shareholders don’t have to pay tax on it. A stock dividend is kind of similar to a stock split, in that a company will issue new shares to shareholders in proportion to their shares outstanding. Stock splits simply reduce the par value per share of stock outstanding.
After the dividend is paid out, a shareholder with 100 shares will then own 110 shares. Finding Dividend Stocks to Buy Dividend stocks are appealing to both passive and active traders. A good dividend stock has a high yield but can also be bought at a good price. If you can’t get the stock at the price you want, wait. Stock prices are constantly fluctuating, so new opportunities arise every few weeks.
Anyone can buy shares, and investing in the sharemarket can grow your wealth better than any other investment. Understanding how the stock market works, researching companies, assessing the risk and using a good broker will help you buy shares wisely and build a robust, diversified share portfolio. Avoid picking stocks at random: Find a good broker, do your research and buy shares that will grow your wealth for you. Your first requirement is some spare money.
You don’t need much to get started. You can invest any amount in the sharemarket, but because of the buying costs, the more money you have to invest, the cheaper the brokerage fees. Brokers work for firms that simply take your order and enter it in the market, or firms that take you on as a client and provide advice, research and financial planning to help with your investments. The former is cheaper, but if you think you’ll need advice, the dearer fees of the latter may be money well spent.