So, you have researched dividend investing, you love the idea and want to try it out. Now what? Just google top paying dividends and invest in the top five that show up? No! Finding the perfect stocks is both an art and a science. One must look at the history of the company, look at the future prospects, and weigh growth potential VS payout. Here are three ways to get started in smart dividend investing.
- Increasing Dividend.
Focus on stocks that have shown a history of increasing dividends. Look back five, ten, or even twenty years at a company and see if they regularly increase their payouts. Not only does this show that one is looking at a strong company that is likely to be around for a while, it also shows that you are likely to get payed even more in the future.
- Above Average yields.
In addition to looking for stocks with a strong history, look for stocks with above average yields. The whole point in dividend investing is to maximize ones dividend after all! What is the point if you go and invest in any old company and hope it pays a decent dividend? Most stocks that yield more than 4% or 5% annually are often safe bets in this case.
- Exchange Traded Funds
Exchange Traded Funds (ETFs) are more often than not much safer than just investing in a stock or two. They diversify your portfolio and so if one company crashes, you don’t lose all of your money. There are a variety of ETFs that focus on dividend income and often payout 4% to 5% annually. While they might not pay as much as some stocks, they are much less risky and provide a more stable base income from dividends.