Dividend Stocks 101: A guide for Beginners

Just about everyone having some relationship with the stock market has watched Wall Street with great angst these last few years. Many have likely been left wondering if their stock portfolio will end up smelling like a rose or smelling more like the fertilizer in their gardens that help things grow.

Whether your stocks have bloomed or essentially wilted in recent years, there is always something to be learned from your investments.

For those investors, however, that are essentially newbies to the game, there can be quite a great deal to learn. Whether they be your everyday employee, starting their own small business or fresh out of college, many young investors essentially take a crash course in investing early on. By doing so, they run the risk of making some bad investments.

Those just starting their own small business are even at greater risk because there is a strong likelihood they invested a portion of their funds into getting the company going in the first place. If bad investments surface over a short period of time, it can be a financial blow to their hopes of supporting and growing their business.

So, what advice is out there for beginners in the stock market who are looking to come out on top when it comes to dividend stocks?

Look for Consistency in Dividend Stocks

First, scope out those high-paying dividend stocks that demonstrate a consistency to turn a profit.

One way to go about this is by reviewing a company’s performance history over the last decade, looking for any trends that appear noticeable. For those that have regularly earned profits at a strong pace and/or exceeded their targets, these are signs of a high dividend that will likely be around for some time to come. The company should have churned out positive earnings with no setbacks yearly for the past three years, at a minimum.

Secondly, give the company that perks your interest a thorough review, including any major debts, ratings, red flags, etc. If the company appears to be struggling, dealing with issues that could be drawn out over time, or has a lot of turnover within its ranks, then there is certainly reason on your end for financial concern.

Another feature to look for with strong dividend stocks is company performances indicating a history of growing dividends. You want to locate a company that seeks to return excess funds to the stockholder, not turn the company’s account fund into the size of a small country’s wealth.

Are You Dating the Right Dividend Stocks?

Finally, always keep in mind the dates that are of utmost importance for dividend holders.

The first is the declaration date, which is the day a company’s Board of Directors notes their plan to pay a dividend. At that time, the company forms a liability in its books, meaning it now owes the funds to the stockholders. As a result, the Board also puts forth a date of record and a date for payment.

Second is the date of record, the time whereby the stockholders of record are eligible for the ensuing dividend payment.

The third and last important date is the payment date, whereby the dividend will actually transfer to the company’s shareholders. In many cases, dividends are paid out four times yearly, on a quarterly schedule.

In the event that dividend stocks are new to you, taking the time to learn about them can certainly be seen as a wise investment. In today’s investment world, nothing is truly a sure bet; manage your investments wisely and always keep educating yourself on the latest happenings in the stock market.