Dividend investing is a powerful way to generate passive income and build wealth over time. Here's how to get started.
What are Dividends?
Dividends are regular payments companies make to shareholders from profits. Usually paid quarterly.
Key Metrics
- Dividend Yield: Annual dividend / stock price
- Payout Ratio: Dividends / earnings (lower is safer)
- Dividend Growth: Annual increase rate
Types of Dividend Stocks
- High Yield: Mature companies, slow growth
- Dividend Growth: Growing dividends, moderate yield
- Dividend Aristocrats: 25+ years of increases
Strategies
- Focus on quality companies with sustainable payouts
- Diversify across sectors
- Reinvest dividends (DRIP)
- Look for dividend growth over just high yield
Risks
Dividends can be cut if companies face financial trouble. Always check payout ratio and financial health.